In the year 1818, a life insurance company was started in Kolkata by the Europeans in the name of ‘Oriental Life Insurance Company’, solely to cater to the needs of their community. There was therefore, discrimination in premium rating and the Indian lives were covered at a higher premium as compared to that charged for the Europeans. In the year 1870, the first Indian insurance company called, ‘Bombay Mutual Life Assurance Society’ started collecting normal premium for Indian lives as well. 

The initial stages were not ‘easy sail’ for the insurance companies and the various wars fought affected the country adversely and this triggered great depression. These developments world over resulted in the bankruptcy of the insurance companies and they were liquidated. This led to a situation where the public lost faith in these companies and did not utilize the life insurance cover.

This situation prompted the government to introduce certain enactments in order to regulate the mechanisms in the life insurance industry.

The Life Insurance Act and the Provident Fund Act were passed in 1912, providing the first regulatory mechanisms.

The Indian Insurance Companies Act enacted in the year 1928, authorized the government to obtain statistical information on various aspects, from companies operating in both life and non-life insurance areas.

Later, Insurance Act of 1938 introduced stricter measures and issued guide lines for carrying on the insurance business in India both life and general insurances.

The Government of India unearthed frauds played by some of the owners of the private insurance companies, which led to the nationalization of the life insurance industry in the year 1956. By an Act of parliament, the LIC of India Act was passed in the year 1956 and all the 245 private life insurance companies and other entities offering life insurance cover were consolidated into one single company called Life Insurance Corporation of India.

Nationalization of the life insurance business in India was a result of the Industrial Policy Resolution of 1956, which had created a policy framework for extending state control over at least 17 sectors of the economy, including the life insurance. The company began operations with 5 zonal offices, 33 divisional offices and 212 branch offices.

The organization today comprises 2048 branches, 100 divisional offices and 8 zonal offices, and employs over 1 million agents. It also operates in 12 other countries, primarily to cater to the needs of Non-Resident Indians (NRIs).

In the changing economic policies and the philosophy of the government, and due to the decision of the government to liberalize the investment policies in the industry, the monopoly of the LIC was diluted and the private players were permitted to enter the industry with whom the LIC also has to compete today.

In the fiscal year 2006–07, number of policy holders in LIC are said to have crossed a whopping 200 million (fourth in terms of population of the countries of the world).

Individuals also have the option of covering themselves for medical expenses by opting for the ‘Critical Illness (CI)’ rider available with life insurance policies. Life insurance companies have their own list of CIs as defined by them. In case of a CI rider, on the occurrence of a ‘critical illness’ during the policy tenure, an amount as proposed in the policy will be paid out to the individual. This is irrespective of the expenses incurred by the individual on hospitalization, medicines and other such costs.

LIC has introduced various plans to cater to the needs of different sections of people. Perhaps it is the first life insurance company. LIC of India is the first company to sponsor ‘LIC Pension Fund Company’ in the country for managing the pension fund of the Central Govt. employees.

The policies issued by the life insurer are for a fixed term and the policyholder keeps his policy alive by paying the premium regularly as per the terms and conditions of the contract.