Beginning:

The commencement of modern General Insurance in India can be traced to early 19th century when general insurance business was undertaken by Indian agents of European insurance companies mainly for Britishers. In 1850 the first general insurance company came into being. It was in this year that Triton Insurance Company Ltd. was the set up at Calcutta in India. National Insurance Co. Ltd. was established in 1906 and is presently the oldest general insurance company in India which is still in operation.

Early Stages:

From humble beginnings, the total insurance business (including life) rose to Rs.22.44 crores shared by 44 companies at the time of enactment of first legislation in 1912. This increased to 176 companies with total business of Rs.298 crores in the year 1938 when Insurance Act came into being in 1938.

Nationalisation:

The life insurance business in India was nationalised in 1956 bringing together insurance business of 245 foreign & Indian insurers & provident societies, which created the monolith of Life Insurance Corporation of India (LIC).  This was followed by nationalisation of general insurance business in 1972. At this time, the adverse effect of absence of competition was becoming apparent and therefore the idea to create four companies for General Insurance (National Insurance, New India Assurance, Oriental Insurance & United India Insurance) under the single owner General Insurance Corporation of India came into operation. The four companies operating under the same rules & regulations were expected to give competition to each other in service parameters. 

Performance of Public Sector:

At the time of nationalisation, in 1972, the combined premium of all the general insurers was Rs.204 crores. This increased to Rs.9,800 Crores in 2001. This shows a healthy annual aggregated growth rate of around 15% during the entire period of almost three decades

Opening up of the Sector to Private Players:

With the passage of IRDA Act, 2000 at the change of century, the sector opened up and Private Insurance companies started operations in India. At the time of opening up the sector to private players, instead of forming a single unit to face the competition of private sector companies (as was the case in life section), the Government of India chose to let its four PSGICs also engage in fratricidal conflict with each other. For a substantial length of time this conflict was lesser and the PSGICs could manage to hold about 50% of the market share. However, with passage of time the competition became intense. Under such circumstances, while the private insurers would keep financial viability in mind in underwriting business as they are in the business to earn a profit, the PSGICs would even resort to unviable business underwriting under pressure to maintain growth rate.

All this led to a situation where the PSGICs started weakening financially. When a decision was taken to let the companies float in the market conditions by getting them listed on Stock Exchanges, even the strongest company New India, first to venture onto this path, got poor response and could get subscribed only though support of LIC.  It became clear that the other three would not be successful in selling their shares in the market.  Continued poor performance has presently brought the three PSGICs into an existential crisis and the Government has not only infused fresh capital to maintain their required solvency ratio but is also considering merging them into a single unit.

The combined aggregated growth of general insurance business (PSGICs and Private players combined) from the year 2001 (Rs.9,800 crores) to 2010 (Rs.34,620 crores) and 2010 to 2019 (Rs.1,69,448 crores) has been around 15% (The same rate that prevailed during the period of nationalisation). This shows that there has not been any significant contribution of the private players in expanding the business and they have merely gnawed at the business being underwritten by PSGICs.

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