From the writings of Manu, Yajnavalkya that the carrier in India was also an insurer in a restricted sense; yet is “not certain if the ancient Hindus also had a system of life insurance and practiced it, though it seems highly problematical as legal codes do not reveal traces of any such system. Insurance against death was regarded till very recently, as want of belief in God which was not very fertile soil for the growth of the insurance. Let’s know the history of insurance legislation in India.
Up to the end of the nineteenth century, the insurance was in its inspectional stage. Therefore, no legislation was required until that time. Usually, the Indian Companies Act 1883 was applicable in business concerns, banking, and insurance companies.
Insurance legislation in India
New Indian Insurance companies and Provident. Societies started at the time of the national movement, but most of them were financially unsound. It was asserted passed in 1912, namely, provident insurance Societies Act V of 1912 and Indian life Insurance Companies Act VI of 1912. These two Acts were in pursuit of the English Insurance Companies Act of 1909 with the difference that the Indian Life Insurance Companies related to Life insurance only and excluded the non-life business from its fold.
The act put the life insurance business in India on a sounder footing and resulted in creating a healthier atmosphere than before. It was also instrumental in the dissolution of some unsound Indian as well as non-Indian life offices or in the merging of some of them with the others.
The legislation in India was confining some of them with the others. The legislation in India was confined to live business because there were very few general insurance companies and did not call for any legislation. To prevent financial weakness the insurance was required to keep certain stated deposits.
The Indian insurers were required to submit returns giving particulars of their business. The foreign insurers were exempted from submitting separate particulars regarding the business done in India. Some English companies ceased to underwrite further business with a view to avoiding submission of reports to the Government of India Insurance Legislation in India.
Some Indian Companies which conducted business on assessments or on the actuarially unsound basis either dropped or mortgaged them to conform to actuarial requirements. The policies issued by these companies were not less than Rs. 1,000.
The aim of the Provident insurance Societies Act 1912 was to govern Provident Insurance Societies which were engaged in issuing life policies worth Rs. 1,000 or less and marriage and disease policies, of the very nominal amount. This act was purely based on the Friendly societies Act.
These two enactments were government only life insurance there was no control on general insurance since such businesses were not so developed besides there were the following defects of these acts.
Defects of Act 1912
1. There were no regulations pertaining to the investment they need for restriction on investments was felt in India because the unenlightened public was not able to judge the position of a company but simply because there was no instruction on investment in England no restriction was placed in India.
2. The control and inquiry were slight non-compliance of rules and regulation was not strictly penalized.
3. The foreign companies were to submit a report of their total business both in India and outside India but separate particulars regarding business done in India were not demanded and the absence of these made it impossible to get an idea of the cost of procuring business in India for foreign companies and comparing them with similar data from the Indian companies.
4. The government actuary was not vested with the power to order the investigation into the conduct of a company even when it appeared that the company was insolvent under the power of exemption several new underwriters were granted exemption even from submitting reports to the government although the business transacted continued to be in force.
5. Anyone can start a life insurance business only with the sum of Rs 25,000 it was too low to prevent the mushroom growth of compares foreign insurance was not bound to deposit a certain sum of life policy issued in India. Thus it was not sufficient to check the floatation of unhealthy concerns and provided discrimination in Indi.
These defects were compelling the above acts to be replaced public was aware of the fact that the Indian companies in foreign countries or in England were directed to have a certain sum in the shape of the reserve as contrary to the above regulation.
The law in India in was not in line with the law in force in other countries persistent demands was made by various important public bodies in the country for the statutory provision which would provide for disclosure and publication of the business carried on in India by foreign companies after a few years it was realized that there should be another efficient and adequate at.
Reason for replacement act of 1912
1. The above defects compel the replacement
2. Persistent demands were made by various important public bodies and Swadeshi movements.
3. The general insurance business should also be controlled
4. The insurance companies particularly fire marine and accident insurance companies developed very fast during 1914-18 due to First World War, therefore, it was essential to control such new companies and to provide them with some proper guidance.
5. The important underwriter and business units demanded that there should be a fully-fledged insurance act.
6. The foreign underwriter should also be governed by Indian legislation.
7. Some guiding principles for starting the new business or for completing the jobs were required.
So, the Government placed a bill for the essential amendment of the Act, in 1924. The bill was containing a wide scope of the insurance business. The bill comes to the legislative assembly after thorough comments by different bodies.
During the time, an important thing happened miraculously about the enactments of the insurance business in England. The Government of India thought it fit to watch the course of new legislation on insurance Law in England.
Great Britain appointed Clauson (under the chairmanship of Mr. A.C. Clauson) Committee to report the possible and required changes in the Legislation.
Therefore, the Government of India thought it wise to postpone the bill to include the reports of the Clauson Committee. The clause committee submitted its report in February 1927, but no action was taken on its recommendations by the Government of England.
The Government of India in 1928 passed stop-gap legislation with the main object of collecting statistics regarding insurance matters so that the information collected would be of value when the time would come to pass a comprehensive Act. This act was not very comprehensive.
The Government of India wanted to wait for the English Legislation which was expected to be passed in 1929 or so and base the law for India on the British model but the legislation was not passed in Britain.
The slow progress of events in Britain again revived the agitation for amendment of the law of insurance in India.
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