Public Sector Insurers: LIC Act, 1956 and GIC Act, 1972
Life Insurance Corporation Act, 1956
Nationalisation merged 245 Indian and foreign insurers and provident societies into a single corporation with effect from 1 September 1956. The LIC Act gave the Corporation the exclusive privilege of life insurance business, with capital subscribed by the Government of India, and made it subject to Central Government directions on policy matters. The monopoly ended when private insurers were licensed under IRDA from 2000; the LIC Act itself was not repealed. LIC remains governed by the LIC Act, its staff regulations and IRDAI's solvency, product and governance rules, and it listed on the stock exchanges in May 2022.
General Insurance Corporation of India
- The GIC Act, 1972 created GIC, which began business on 1 January 1973.
- It took over the shares of four subsidiaries - National, New India, Oriental and United India.
- Its original role combined reinsurance with supervising, controlling and regulating the subsidiaries.
- The 2002 amendment delinked the four subsidiaries (they became independent public sector insurers) and converted GIC into the national reinsurer.
- GIC is the "Indian reinsurer" recognised under Section 101A of the Insurance Act; Indian insurers cede a prescribed percentage of each risk to it (obligatory cession) before placing business abroad. IRDAI has progressively reduced that percentage.
Worked example
A PSU general insurer wants GIC to approve its reinsurance programme. That supervisory power ended in 2002. Approval now comes from the insurer's own board under IRDAI's reinsurance regulations; GIC is a reinsurance counterparty, not a regulator.
Traps
- Mixing 1956 (life) with 1972/1973 (general).
- Asserting GIC still controls the four PSU general insurers.
- Believing LIC still holds a statutory monopoly.