The life insurance business/industry in the country was nationalised by the Government of India in 1956 and a fully government-owned company, the Life Insurance Corporation of India (LIC) was set up (at that time 245 Indian
and foreign companies were playing in the life segment of insurance). Opening of private life insurance companies was prohibited at that time.
The LIC was called an investment institution by the government. The nationalisation was motivated by twin objectives-first, to spread the message of life insurance for greater social security and secondly, to mobilise people’s savings (collected as premiums) for nation building. The LIC had been the biggest investor in the government’s procces of planned development purchasing government secure (G-Secs.) and equities of the big asset Public Sector Undertakings (PSUs).
In 1971, the government nationalised the private sector companies (107 Indian and foreign companies) playing in the general insurance segment and a government company, the General Insurance Corporation of India (GIC) was formed in 1972. The GIC started operation on January 1, 1973 with its four holding companies:
(i) National Insurance Company Ltd.
(ii) New India Assurance Company Ltd.
(iii) Oriental Fire and Insurance Comany Ltd.
(iv) United India Insurance Company Ltd.