Did You Know? British Racism Was The Reason Behind The Birth Of LIC

It's nearly 70 years since India¡¯s largest insurance company LIC (Life insurance corporation of India) was formed in 1956. Less than a decade after India gained independence from British rule, LIC was born. But did you know why and how LIC was started? What was the reason behind it?

How British Racism Led To LIC Being Born

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In the year 1818. Oriental Life Insurance Company, which was started by Europeans in Calcutta, was the first life insurance company on Indian Soil.

Indian natives were not covered by any of the insurance companies founded during that time because they were all founded with the intention of serving the needs of the European community. However, later on, foreign life insurance companies began insuring Indian lives thanks to the efforts of notable individuals like Babu Muttylal Seal. However, Indians were being charged exorbitant premiums and were being treated as inferiors. That is when the first Indian life insurance company was established in 1870 with the founding of Bombay Mutual Life Assurance Society, which provided coverage for Indian lives at standard rates.

Insurance companies began as highly patriotic Indian enterprises with the goal of using insurance to spread the word to different segments of society about social security and insurance. Of these, Bharat Insurance Company (1896) was another company drawn to nationalism. There are now more insurance companies as a result of the Swadeshi movement of 1905¨C1907. In 1906, three organizations were founded: United India in Madras, National Indian and National Insurance in Calcutta, and Co-operative Assurance in Lahore. The Hindustan Co-operative Insurance Company was founded in 1907 in one of the rooms of the renowned poet Rabindranath Tagore's Calcutta home, the Jorasanko. Among the businesses founded in the same time frame were General Assurance, Swadeshi Life (later known as Bombay Life), and Indian Mercantile.

Life Insurance Companies Act Passed In 1912

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India had no laws governing the insurance industry prior to 1912. That is when the Provident Fund Act and the Life Insurance Companies Act were passed in 1912.

The Life Insurance Companies Act of 1912 mandated that an actuary certify the premium rate tables and the companies' periodic valuations. However, the Act discriminated against Indian and foreign companies on numerous grounds, which was detrimental to Indian companies.

In the first two decades of the 20th century, the insurance industry experienced significant expansion. In 1938, there were 176 companies with total business-in-force of Rs. 298 crore, up from 44 companies with total business-in-force of Rs. 22.44 crore.

Many financially questionable ventures were also launched during the insurance industry's explosion, but they all failed spectacularly. The 1938 Insurance Act was the first piece of legislation to establish strict state control over the insurance business, governing both life and non-life insurance. The demand to nationalize the life insurance business had been made before, but it gained steam in 1944 after the Legislative Assembly considered a bill to amend the 1938 Life Insurance Act.

However, life insurance in India wasn't nationalized until much later, on January 19, 1956. At the time of nationalization, there were roughly 154 insurance companies based in India, 16 companies based outside of India, and 75 provident funds.

The Birth Of Life Insurance Corporation Of India In 1956

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Nationalization was carried out in two phases: first, by means of an ordinance, the companies' management was taken over, and later, by means of a comprehensive bill, the ownership was also taken over. With the aim of extending life insurance much more widely, especially to rural areas, in order to reach all insurable persons in the nation and provide them with adequate financial cover at a reasonable cost, the Indian Parliament passed the Life Insurance Corporation Act on June 19, 1956. The Life Insurance Corporation of India was established on September 1, 1956. In the last seven decades, LIC has gone on to become India's biggest insurance company, and also went public through its mega IPO in 2022.

Also Read: Unclaimed Money With LIC Is Higher Than Budget Of 4 Indian Ministry Budgets

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