Indian civilisation is more than 5000 years old. Ancient India was a strong country, both economically and spiritually. In the past, India was not too strong militarily, and that resulted in its being invaded by foreign powers in the medieval era. Moreover, India was a country fragmented by small kingdoms. No empire-building tradition existed in India. The country never believed in attacking others’ lands and building empires by looting the wealth of others. So, Indian kingdoms used their army for the purpose of peacekeeping and defending their territory from the attacks of invaders.
In ancient times, Indians were able to earn peace and prosperity due to their superior ability to manufacture quality goods, demand for these goods in China, the Middle East, and Europe, the creative minds of Indians in producing pieces of art, and the ability of Indians to reach the distant markets of the world. Indian art, culture, and educational institutions flourished everywhere in the country, and although much of it was later vandalised by invaders, remnants of the priceless creations still dazzle the world. All this could happen because people used to live with contentment and happiness, which was the result of communities being able to take care of themselves. There was poverty at times, and some Indian kingdoms were not too prosperous. But people managed to live happily. The reason is that there was some form of social security in various forms. Indian kingdoms were able to create inclusive societies that cared for the old, disabled, orphans, and widows needing financial support. Although modern commercial insurance did not exist at that time, what existed was nothing short of insurance, and that was enough to keep people happy and stress-free. In the following paragraphs, we shall see how these happened. When we look at the facts, we wonder why Indians do not care much to protect their own lives and properties now through a scientific and more structured institution like insurance.
What made the Indian society one of the most prosperous in ancient times? Most people will say that Indians, by and large, were very skillful in manufacturing high-quality goods, and these were in great demand in large parts of Asia and developed countries of Europe. India was a peaceful nation, and people valued peace, stability, and spirituality quite highly. Although there was little control by the state on what they should produce and consume, Indians lived in rural communities that were sensitive to the needs of every member of the communities. There were joint families, village assemblies, and community-based rituals that were enough to bind people throughout their lives. Festivals and religious practices gave people countless occasions for shared joy. This, in turn, created values that they should take care of each other in moments of emotional and financial stress. Since people grew up studying or knowing the stories of Ramayana, Mahabharata, and Jataka tales, they developed the intent of helping others to survive and grow.
Geeta is not just a treatise on what Lord Krishna advised Arjuna on the battlefield of Kurukshetra. It also contains principles of good governance. In one sloka, Lord Krishna touched upon the conceptual roots of social security. Verse 9.22 mentions the word “Yogakshema,” which is a combination of two distinct words, Yoga (meaning gaining of what people lack) and Kshema (meaning preservation of what they have). Now, this is precisely what insurance stands for. Therefore, we can understand that Lord Krishna tried to make Arjuna aware of the fact that the people living in a kingdom have a right to get what they can not acquire because of circumstances not within their control (Yoga). They also have a right to the protection of their existing wealth (Kshema). This protection is possible only if they are indemnified for the loss of property suffered because of various reasons, e.g., untimely death, loss of earning ability because of permanent disablement, and natural calamities. Ancient India understood well that without a well-structured social security system, people living in society can not live peacefully and engage themselves in their occupations with full commitment.
In ancient India and also in medieval India, the joint family system ensured that food, shelter, and medical care were provided to the elderly, widows, orphans, and the disabled. So, an element of retirement benefit and disability benefit was built into the system itself. There were hardly any families that disobeyed this system. Children were expected to take proper care of their ageing parents. Although this was considered a religious and moral duty, people discharged their responsibilities happily, and this became the norm of the society. Temples, monastic institutions, and dharmashalas provided free food, water, lodging, and medical assistance to the needy, travellers, and monks. So, some element of travel and health insurance was available for people unable to afford the healthcare expenses. Now, people without the capacity to pay for medical expenses are left to die. Ancient India was a more humane society because of the existence of social security.
People, quite unknowingly, built a system to ensure the financial protection of a few. Here also, the principle of insurance worked. The losses of a few were shared by many, thereby putting in place a sustainable system of mutual help. Every household must make regular contributions to a common fund, according to its paying capacity. Many Buddhist monasteries acted as Community Centres which provided relief materials to people in the event of natural disasters or famines. Here also, some people regularly donated money to the community centres (proxy of insurance organisations) to be used only in case of people suffering losses due to reasons beyond their control. In all such cases, we find that the state did not have to pay anything from its exchequer. People themselves were smart and wise enough to create a system of insurance to be of benefit to those in need. This is in sharp contrast to other contemporary civilisations of China and Rome, where the powerful state had to intervene to help the people in distress. Although China had something like a joint family, it was the State that had the responsibility to take care of its citizens in financial difficulties. Similar types of communities developed in some parts of Europe much later. Modern insurance was born out of the ideas of these communities in England sometime in the 16th century. Much of the concept of Group Insurance did indeed take root in India first and later in other parts of the world. The joint family system can be considered as a group insurance scheme in which all able-bodied individuals contribute some money every month, to be of use to the unfortunate members who are not in a position to earn their livelihood. This system was sustainable because not all members would be victims of incurable diseases or accidents. The principle of insurance worked fine at the community level. When some natural disasters or epidemics crippled the earning capacity of an entire neighbourhood, the king or the chieftain had to intervene and provide social security to a large number of people living in a community.
In the Mauryan era, Chanakya mentions the very word “Yogakshema” in his celebrated book on statecraft, “Arthashastra”. It was considered the King’s responsibility to provide economic security to the people living in the kingdom. Emperor Ashoka established hospitals and dispensaries everywhere in his kingdom to ensure that no people, rich or poor, suffer from diseases without medical attention. Medicinal herbs were planted everywhere, as in ancient India, most healthcare providers used these herbs to create medicines. Special officers, better known as Dhamma Mahamatras, were appointed just to ensure that the poor, elderly, and women do not suffer because of financial difficulties. Food used to be made available to all in times of famine and natural disasters. During the tenure of Chandragupta Maurya, begging was regulated, and it was replaced with state-aided work for the poor who had the ability to work. This ensured that the people who were able-bodied got financial support only if they worked. The old, the widows, and the orphans got social security support.
The Mauryan empire had a well-planned state-driven welfare model that granted social security to those who needed it the most. This was somewhat similar to the Chinese model of a state-powered social security system. The difference was that in ancient India, even when state support was missing for some reason or other, the community support was always available for the people in difficulties. Unlike Chinese or Roman systems of governance, the Indian system of social security was not fully centralised. The common people were driven by strong ethical and spiritual values. For example, orphans and widows were supported by families, temples, and caste/community funds. Community institutions like caste panchayats, guilds, and village councils were always there to lend a helping hand to their members in financial distress. That made Indian communities strong and interdependent. This, in turn, made people lead a more stress-free and productive life.
During the reign of the Gupta dynasty, the responsibility of granting social security was mostly shouldered by various communities. During the reign of Vikramaditya (Chandragupta II), the people were enjoying community-based care and state support to a minimum. People were deeply influenced by Hindu, Buddhist, and Jain ethics. They never imagined people suffering in neglect before their eyes, with them doing nothing. Free education in Gurukuls and Universities helped the poorer and the orphans to rise economically in course of time. Modern India has so many Children’s Education policies that ensure that a pre-determined sum is available for the children’s education at a future date, even when their parents are not around to finance their education. In ancient India, a system existed that took care of the education of poor and orphan children. Social security in the Gupta era was more decentralised, and this became the tradition in subsequent times, too. This system gave birth to noted mathematicians, astronomers, scientists, philosophers, educationists, and businessmen. In short, the social security system, which we try to offer today to people through various forms of commercial insurance products, was made available to people through an informal yet sustainable way for centuries in ancient India. It was destroyed by invaders who came to India to exploit this land economically, and they put in place a different system of governance that discouraged the existing system of social security. The age-old Indian structure of community-based support could not be destroyed completely, as joint families continued to exist and community-based social security continued to be offered to people even in medieval India, although in reduced intensity.
It’s a pity, Indians fail to understand Insurance today.
A large number of Indians do not understand insurance. Insurers and their intermediaries are no less responsible for this. They have failed to position properly in the space of personal finance. They are confused about what they are selling! Most of them are still under the impression that they are selling investment products in which people make profits out of their investments. They do not know that insurance is a social security-oriented product, and this product does not exist to make people earn a profit out of it. What people get as claim proceeds is nothing but the economic value of the losses suffered. Even when someone gets money on the maturity of a life insurance policy is what they had planned twenty or thirty years ago to save money contractually. It is unwise to compare returns under an insurance policy with the returns under mutual fund schemes.
Indians today should realise that what they have inherited from their forefathers is the concept of growing through mutual help and trust. Once, the family and community-based principles of social security helped people to stand up in life and outshine the world. This is the cultural ethos of India. This land has always believed in helping others to grow. If India is to rise again, it has to believe in the power of risk management tools like insurance and annuity, which alone can help it grow, individually and collectively. By not buying insurance or buying it inadequately, they are making themselves incapable of handling many already-existing and emerging risks.
What do insurers do? They create a community of people who are exposed to similar types of risks. The people living in this community help each other when something unfortunate happens to a few members of the community. The accident can befall me or anyone else in the community. One can predict who will be the next victims. But it is possible to predict how many will fall victim to that accident or that dreaded disease. Now, old age will come to everyone. At the time of attaining independence from British rule, the average longevity of Indians was close to 30 years. It is 74 years now. Very soon, the life expectancy at birth will exceed 80, for sure. The community life that existed in ancient India is no longer available to sustain you in your old age. But, insurers have created communities of policyholders who help each other to live with financial independence and dignity. We must understand that the community of insured public is helping each other to live long and peacefully. In ancient India, people living in a community knew each other well. Therefore, they also knew who the beneficiaries of the community-based social security system were in a particular period. Now, that is not possible. We don’t know who has expired in the last year out of 1000 people joining an insurance scheme. But the historical data shows that 5 people will almost surely pass away. Our wisdom and life experience should guide us to be a member of this community that helps its members financially. We belong to a country that once considered granting social security as one of the greatest responsibilities of a vibrant community. The same sense of responsibility should guide us in insuring our lives and properties for the benefit of our dependents and also for the benefit of the entire community we live in.