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Questions and Answers
What was the primary purpose of the amendments made in GIBNA, 1972 concerning GIC?
What was the primary purpose of the amendments made in GIBNA, 1972 concerning GIC?
- To transfer back the share capital of subsidiary companies to the Central Government (correct)
- To enhance GIC's underwriting capabilities
- To transfer the share capital of GIC to private entities
- To link GIC back with its subsidiaries
What is the maximum foreign direct investment allowed in an Indian insurance company?
What is the maximum foreign direct investment allowed in an Indian insurance company?
- 100%
- There is no FDI allowed in insurance sector in India.
- 26% (correct)
- 74%
In which year was the General Insurance Corporation (GIC) established?
In which year was the General Insurance Corporation (GIC) established?
- 1975
- 1970
- 1972 (correct)
- 1980
How many public sector general insurance companies did GIC hold after its formation?
How many public sector general insurance companies did GIC hold after its formation?
Which entity conducts examinations for individuals wishing to become insurance agents?
Which entity conducts examinations for individuals wishing to become insurance agents?
What is the primary function of the General Insurance Council regarding expense limits?
What is the primary function of the General Insurance Council regarding expense limits?
What was one of the reasons for GIC being restricted to reinsurance operations?
What was one of the reasons for GIC being restricted to reinsurance operations?
Under which act was the General Insurance Corporation of India established?
Under which act was the General Insurance Corporation of India established?
What significant action took place with the passing of the Indian Life Assurance Companies Act, 1912?
What significant action took place with the passing of the Indian Life Assurance Companies Act, 1912?
Which of the following was an outcome of the General Insurance Business (Nationalisation) Act, 1972?
Which of the following was an outcome of the General Insurance Business (Nationalisation) Act, 1972?
Who are members of the Insurance Association of India?
Who are members of the Insurance Association of India?
What activity is specifically restricted for foreign investors in the insurance sector?
What activity is specifically restricted for foreign investors in the insurance sector?
Which insurance company established by an Indian was noted as the first general insurance company?
Which insurance company established by an Indian was noted as the first general insurance company?
When did the General Insurance Corporation of India commence its business?
When did the General Insurance Corporation of India commence its business?
What role did the Central Legislature play in the regulation of the insurance industry in India?
What role did the Central Legislature play in the regulation of the insurance industry in India?
What limitation does the Life Insurance Council impose on insurers?
What limitation does the Life Insurance Council impose on insurers?
What was the primary purpose of establishing GIC as a holding company?
What was the primary purpose of establishing GIC as a holding company?
Which function does GIC perform in regards to the setting up of standards in general insurance?
Which function does GIC perform in regards to the setting up of standards in general insurance?
What aspect of subsidiary companies does GIC oversee regarding expenses?
What aspect of subsidiary companies does GIC oversee regarding expenses?
Which directive regarding competition among subsidiaries is stated in the General Insurance Business (Nationalisation) Act?
Which directive regarding competition among subsidiaries is stated in the General Insurance Business (Nationalisation) Act?
How did the formation of GIC affect the shares of Indian insurance companies?
How did the formation of GIC affect the shares of Indian insurance companies?
What does GIC advise acquiring companies about regarding funds?
What does GIC advise acquiring companies about regarding funds?
What is one of the critical functions of GIC as a holding company?
What is one of the critical functions of GIC as a holding company?
What was a new concept introduced with the formation of GIC in the public sector?
What was a new concept introduced with the formation of GIC in the public sector?
In which year was the Indian Mercantile Insurance Company Ltd. established?
In which year was the Indian Mercantile Insurance Company Ltd. established?
What legislation regulated non-life insurance in India for the first time?
What legislation regulated non-life insurance in India for the first time?
What does general insurance include according to the definitions provided?
What does general insurance include according to the definitions provided?
What was formed in September 1956 to manage life insurance in India?
What was formed in September 1956 to manage life insurance in India?
Which act granted LIC the exclusive privilege to conduct life insurance business?
Which act granted LIC the exclusive privilege to conduct life insurance business?
When was the general insurance business in India nationalized?
When was the general insurance business in India nationalized?
How many insurance companies were taken over by the government during the nationalization of life insurance?
How many insurance companies were taken over by the government during the nationalization of life insurance?
Which exception was allowed in the Life Insurance Corporation Act, 1956?
Which exception was allowed in the Life Insurance Corporation Act, 1956?
What is the legal framework governing the insurance industry in India?
What is the legal framework governing the insurance industry in India?
When was the first statutory measure to regulate life insurance in India enacted?
When was the first statutory measure to regulate life insurance in India enacted?
Which company was the first general insurance company in India?
Which company was the first general insurance company in India?
What significant difference existed in premium charges between Indians and British until the establishment of the Bombay Mutual Life Assurance Society?
What significant difference existed in premium charges between Indians and British until the establishment of the Bombay Mutual Life Assurance Society?
Which insurance company was established first in India?
Which insurance company was established first in India?
Why were other classes of insurance business excluded from the Indian Life Assurance Companies Act of 1912?
Why were other classes of insurance business excluded from the Indian Life Assurance Companies Act of 1912?
Which of the following life insurance companies was established in 1829?
Which of the following life insurance companies was established in 1829?
What aspect of the Indian Constitution is related to the insurance industry?
What aspect of the Indian Constitution is related to the insurance industry?
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Study Notes
Development and Growth of Insurance Industry in India
- Insurance is governed by the Central Legislature under the Union List, ensuring uniform regulation across India.
- The evolution of life insurance in India began with the Oriental Life Insurance Company in 1818, followed by several other companies in the early 1800s.
- A significant milestone was the passing of the Indian Life Assurance Companies Act in 1912, marking the first legislative measure to regulate life insurance.
- Non-life insurance originated in the UK, with the first Indian general insurance company, Indian Mercantile Insurance Company, established in 1907.
- The Insurance Act of 1938 was enacted to regulate both life and general insurance businesses comprehensively.
Nationalisation of the Insurance Business
- On January 19, 1956, the management of life insurance was nationalised, forming the Life Insurance Corporation (LIC) of India in September of that year.
- LIC was granted exclusive rights to conduct life insurance in India, except for policies covering individuals residing outside India.
- General insurance was nationalised in 1973 under the General Insurance Business (Nationalisation) Act, 1972, initiating the GIC as the holding company for four subsidiaries.
- Current FDI norms allow for foreign investment up to 26% in Indian insurance companies.
Insurance Association of India
- The Insurance Association of India comprises all insurers and provident societies incorporated in India, with international firms as associate members.
- The organization has two councils: the Life Insurance Council and the General Insurance Council, which oversee regulations and standards within their sectors.
- The Life Insurance Council conducts examinations for prospective insurance agents and regulates expense limits for life insurance companies.
- The General Insurance Council manages expense limits for general insurance companies to ensure financial discipline.
General Insurance Business (Nationalisation) Act, 1972 (GIBNA)
- GIC was established as a government entity to supervise and manage general insurance operations effective January 1, 1973.
- The Act mandates GIC to support subsidiary companies in setting standards, managing expenses, and advising on fund investments.
- GIC encourages competition among its subsidiaries, fostering efficiency in customer service and insurance practices.
- All shares of Indian insurance companies previously held by the government were transferred to GIC, integrating various companies under its umbrella.
- GIC operates primarily in the reinsurance sector to prevent capital flight and promote domestic risk retention.
Key Milestones in Indian Insurance
- The history of insurance regulation began with the establishment of life insurance companies in the early 19th century.
- Major legislation like the Insurance Act of 1938 and GIBNA in 1972 shaped the modern insurance landscape in India.
- Nationalisation efforts in the mid-20th century centralized insurance management, leading to the formation of significant bodies like LIC and GIC.
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