PROJECT REPORT ON

A COMPARITIVE ANALYSIS OF LIFE INSURANCE CORPORATION AND PRIVATE INSURANCE COMPANIES

PROJECT GUIDE
Mrs.ALKA MITTAL (Lecturer) DEPTT. OF BUSINESS ADMINISTRATION

SUBMITTED BY
MADHURI SURANA (BBA-B&I) 0481491808

SUBMITTED TO

MAHARAJA SURAJMAL INSTITUTE AFFLIATED TO GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

CERTIFICATE
This is to certify that the project titled A COMPARITIVE ANALYSIS OF LIFE INSURANCE CORPORATION AND PRIVATE INSURANCE COMPANIES is an original work of the student (MADHURI SURANA ROLL NO.:0481491808) And is being submitted in partial fulfillment for the reward of the BBA (Banking and Insurance) from Maharaja Surajmal Institute, GGSIPU. She was working under my supervision and successfully completed her project work.

MRS. ALKA MITTAL

(PROJECT GUIDE)

ACKNOWLEDGEMENT
Project work is never the work of an individual. It is more a combination of views, ideas, suggestions, contributions and work involving many individuals. This project report forms an integral part of our curriculum. I would like to pay my sincere regards to Mrs.Alka Mittal (My Project Guide) whose wisdom words and teaching had guided me during the preparation of this report. This could not have been possible without her guidance. I express my gratitude for her continuous support without which this project could not have reached a successful completion. Last but not the least; I am thankful to all my friends for their continuous encouragement and support.

MADHURI SURANA BBA (B&I)

TABLE OF CONTENTS
Page no.
Chapter1. Introduction Concept of Insurance Industry Overview Research Methodology Significance of Study Limitations of Study

Chapter2. Company Profile Chapter3. Analysis and Interpretation Chapter4. Findings & Conclusions Bibliography

CHAPTER-1 INTRODUCTION
Concept Of Insurance What is Insurance? Insurance Act,1938 Types Of Insurance Life Insurance Or Life Assurance Life Insurance Business Purpose And Need Of Insurance How Insurance Works? Role of Insurance in Economic Development Criticism Of Insurance Companies Indian Insurance Industry: New Avenues for Growth 2012 Research Methodology Significance Of The Study Limitations Of The Study

INTRODUCTION CONCEPT OF INSURANCE:

Life has always been an uncertain thing. To be secure against unpleasant possibilities, always requires the utmost resourcefulness and foresight on the part on man. To pray always requires the utmost resourcefulness and foresight on the part of man. To pray or to pay for protection is the spirit of the humanity. Man has been accustomed to pray God for protection and security from time immemorial. In modern days Insurance Companies want him to pay for protection and security. The insurance man says "God helps those who help themselves"; probably he is correct. Risk has become central to one's life. It is within this background life insurance policy has been introduced by the insurance companies covering risks at various levels. Life insurance coverage is against disablement or in the event of death of the insured, economic support for the dependents. It is a measure of social security to livelihood for the insured or dependents. This is to make the right to life meaningful, worth living and right to livelihood a means for sustenance. Therefore, it goes without saying that an appropriate life insurance policy within the paying capacity and means of the insured to pay premium is one of the social security measures envisaged under the Indian Constitution. Hence, right to social security, protection of the family, economic empowerment to the poor and disadvantaged are integral part of the right to life and dignity of the person guaranteed in the constitution. Man finds his security in income (money) which enables him to buy food, clothing, shelter and other necessities of life. A person has to earn income not only for himself but also for his dependents, viz., wife and children. He has to provide legally for his family needs, and so he has to keep aside something regularly for a rainy day and for his old age. This fundamental need for security for self and dependents proved to be the mother of invention of the institution of life insurance.

What is Insurance?
The business of insurance is related to the protection of the economic values of assets. Every asset has a value. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefit from it. The benefit may be an income or some thing else. It is a benefit because it meets some of his needs. Every asset is expected to last for a certain period of time during which it will perform. After that, the benefit may not be available. The owner is aware of this and he can so manage his affairs that by the end of that period or life-time, a substitute is made available. Thus, he makes sure that the value or income is not lost. However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it non-functional. In that case, the owner and those deriving benefits from there would be deprived of the benefit and the planned substitute would not have been ready. There is an adverse or unpleasant situation. Insurance is a mechanism that helps to reduce the effect of such adverse situations. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is de fined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

INSURANCE ACT, 1938:

The Insurance Act, 1938, was the first comprehensive legislation governing not only life but also non- life branches of insurance to provide strict state control over insurance business. In subsections to dealt with provident companies, mutual offices and co-operative societies as well. The salient

features of the Act were as follows:

(A)Constitution of a Department of Insurance under a superintendent vested with wide powers of supervision and control over all kinds of insurance companies. (B) Regulation for the compulsory registration of insurance companies and for filing of returns of investment and financial conditions. (C) Provisions for deposit, to prevent insurers of inadequate financial resources of speculative concerns for commencing business. (D) Provisions that 55% of the net life fund of an Indian or non- Indian insurer should invested in Indian Government and approved securities with at least 25% in Indian Government Rupee securities. All other companies, i.e., foreign companies must invest 100% of their Indian liabilities in Indian Government and approved securities, with at least 33.3% Indian Government securities.

(E) Prohibition of rebating, restriction of commission, licensing of agents etc. Maximum rates of commission were fixed at 40% of the first premiums and 5% of the renewal premium in respect of life assurance business. The agent must be licensed, to improve the status of the profession.

(F) Periodical valuation of Indian Insurance business of foreign companies and the business of Indian companies. (G) Provision for policy holders' directors, making it possible for the re preventatives of policyholders to be on the Board of directors. (H) Standardization of policy conditions required all companies to file standard forms and tables of premium approved by an Actuary. Under this requirement, the initial deposit for life insurance business was raised from Rs. 25000 in Government securities to Rs. 50000 8

in cash approved securities, which was subsequently to be raised by installments to Rs. 2 lakh within a specified time limit.

Types of Insurance:
Any risk that can be quantified probably has a type of insurance to protect it. Among the different types of insurance are:

Automobile insurance, also known as auto insurance, car insurance and in the
UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself. Over most of the United States purchasing an auto insurance policy is required to legally operate a motor vehicle on public roads. Recommendations for which policy limits should be used are specified in a number of books. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to No Fault systems, which reduce or eliminate the ability to sue for compensation but provide automatic eligibility for benefits.

Casualty insurance insures against accidents, not necessarily tied to any specific
property.

Credit insurance pays some or all of a loan back when certain things happen to the
borrower such as unemployment, disability, or death.

Financial loss insurance protects

individuals and companies against various

financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category.

Health insurance covers medical bills incurred because of sickness or accidents. Liability insurance covers
legal claims against the insured. For example, a

homeowner's insurance policy provides the insured with protection in the event of a claim brought by someone who slips and falls on the property, and brings a lawsuit for her injuries. Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and/or monetary harm. The protection offered by a liability insurance policy is two-fold: a legal defense in the event of a lawsuit commenced against the policyholder, plus indemnification (payment on behalf of the insured) with respect to a settlement or court verdict.

Life insurance provides a cash benefit to a decedent's family or other designated

beneficiary, and may specifically provide for burial and other final expenses.

Annuities provide

a stream of payments and are generally classified as insurance

because they are issued by insurance companies and regulated as insurance. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance.

Total permanent disability insurance provides benefits when a person is

permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.

Locked Funds Insurance is a little known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. Terms of this type of insurance are usually very strict. As such it is only used in extreme cases where maximum security of funds is required.

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Marine Insurance covers the loss or damage of goods at sea. Marine insurance
typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.

Nuclear incident insurance -

damages resulting from an incident involving

radioactive materials is generally arranged at the national level. (For the United States, see Price-Anderson Nuclear Industries Indemnity Act.)

Political risk insurance can

a loss.

be taken out by businesses with operations in

countries in which there is a risk that revolution or other political conditions will result in

Professional Indemnity Insurance is normally a mandatory requirement for

professional practitioners such as Architects, Lawyers, Doctors and Accountants to provide insurance cover against potential negligence claims. Non licensed professionals may also purchase malpractice insurance; it is commonly called Errors and Omissions Insurance and covers a service provider for claims made against them that arise out of the performance of specified professional services. For instance, a web site designer can obtain E&O insurance to cover them for certain claims made by third parties that arise out of negligent performance of web site development services.

Property insurance provides

protection against risks to property, such as fire,

theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.

Terrorism insurance Title insurance provides

a guarantee that title to real property is vested in the

purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records done at the time of real estate transactions. 11

Travel insurance is an insurance cover taken by those who travel abroad, which
covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.

Workers' compensation insurance replaces all or part of a worker's wages

lost and accompanying medical expense incurred due to a job-related injury.

A single policy may cover risks in one or more of the above categories. For example, car insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident). A homeowner's insurance policy in the US typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property. Potential sources of risk that may give rise to claims are known as "perils". Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.

LIFE INSURANCE or LIFE ASSURANCE:

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Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is a loss of income to the household. The family is put to hardship. Sometimes, survival itself is at stake for the dependants. Risks are unpredictable. Death/disability may occur when one least expects it. An individual can protect himself or herself against such contingencies through life insurance. Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements There are a number of life insurance products which offer protection and also coupled with savings. A term insurance product provides a fixed amount of money on death during the period of contract. A whole life insurance product provides a fixed amount of money on death. An Endowment Assurance product provided a fixed amount of money either on death during the period of contract or at the expiry of contract if life assured is alive. A money back assurance product provides not only fixed amounts which are payable on specified dates during the period of contract, but also the full amount of money assured on death during the period of contract.

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An annuity product provides a series of monthly payments on stipulated dates provided that the life assured is alive on the stipulated dates. A linked product provides not only a fixed amount of money on death but also sums of money which are linked with the underlying value of assets on the desired dates. Thus life insurance policies offer protection and security to families and provide happiness to society.

LIFE INSURANCE BUSINESS:

The growth of Life Insurance in concrete terms could be said to being during the first two decades of twentieth century when most of the major companies were founded. They grew in terms of rise in the number of companies, in terms of number of policies and sum assured as well as total life fund. Indian Insurance Year Book, published for the first time in 1914, gives the figure of the total business-in -force as 22.44 crore which grew to Rs. 298 crore in 1938. In 1914, there were only 44companies transacting insurance business in India, and during the next 25 years their number rose to 176. The total progress on all the primary heads, viz. life fund (Rs. 50.50 crore), premium income (Rs. 10.50 crore) and new business (Rs. 43.30 crore) indicate that Indian Insurance Business had been ma king a definite headway during this years. The inter-war -years thus saw rapid growth life insurance in India. The promotion of new life insurance companies continued to be almost a craze and insurance companies mushroomed. In this period, 176 insurance companies were formed and many of them failed. Thus unhealthy growth was harmful to the interest of the policy holders and insurance business in India. Feeling concerned about it, the All India Life Assurance Offices' Association urged upon the Government in 1932 to undertake the insurance legislation to: (a) Compulsorily register all Life Insurance companies. (b) Secure a deposit of Rs.2 lakh from all Life Insurance companies. 14

(c) Compel foreign companies doing business in India to keep sufficient funds in India securities to meet their liabilities under all policies issued in India.

Important milestones in the life insurance business in India:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Purpose and Need of Insurance:

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Assets are insured, because they are likely to be destroyed through accidental occurrences. Such possible occurrences are called perils. Fire, floods, breakdowns, lightening, earthquakes, etc, are perils. If such perils can cause damage to the asset, we say that the asset is exposed to that risk. Perils are the events. Risks are the consequential losses or damages. The risk to a owner of a building, because of the peril of an earthquake, may be a few lakhs or a few crores of rupees, depending on the cost of the building and the contents in it. The risk only means that there is a possibility of loss or damage. The damage may or may not happen. Insurance is done against the contingency that it may happen. There has to be an uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against. In the case of human being, death is certain, but the time of death is uncertain. In the case of person who is terminally ill, the time of death is not uncertain, though not exactly known. He cannot be insured. Insured does not protect the asset. It does not prevent its loss due to peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It only compensates the losses and that too, not fully. Only economic consequences can be insured. If the loss is not financial, insurance may not be possible. Examples of non-economic losses are love and affection of parents, leadership of managers, sentimental attachments to family heirlooms, innovative and creative abilities, etc.

How Insurance Works?

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The mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of them suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to the same risks, which are related to water damage, ship sinking, piracy, etc. Those owning factories are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquake, lightning, burglary, etc. Like this, different kinds of risks can be identified and separate groups made, including those exposed to such risks. By this method, the heavy loss that any one of them may suffer (all of them may not suffer such losses at the same time) is divided into bearable small losses by all. In other words, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all. If a Jumbo Jet with more than 350 passengers crashes, the loss would run into several crores of rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jets will crash at same time. If 100 airline companies flying Jumbo Jets, come together into an insurance pool, whenever one of the Jumbo Jets in the pool crashes, the loss to be borne by each airline would come down to a few lakhs of rupees. Thus, insurance is a business of sharing. There are certain principles, which make it possible for insurance to remain a fair arrangement. The first is that it is difficult for any one individual to bear the consequences of the risks that he is exposed to. It will become bearable when the community shares the burden. The second is that the perils should occur in an accidental manner. Nobody should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of an arrangement put into place to protect people from risks they are exposed to. The occurrence has to be random, accidental, and not the deliberate creation of the insured person. The manner in which the loss is to be shared can be determined before-hand. It ma y be proportional to the risk that each person is exposed to. This would be indicative of the benefit he would receive if the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares ma y be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid. The collection to be made from each person in advance is determined on assumptions. While it may not be possible to tell beforehand, which person will suffer, it ma y be possible to tell, on the basis of past experiences, how many persons, on an 17

average, ma y suffer losses. The following two examples explain the above concept of insurance: EXAMPLE-1 In a village, there are 400 houses, each valued at Rs. 20000. Each year, on the average, 4 houses get burnt, resulting into a total loss of Rs. 80000. If all the 400 owners come together and contribute Rs. 200 each, the common fund would be Rs. 80000. This is enough to pay Rs. 20000 to each of the 4 owners whose houses got burnt. Thus, the risk of 4 owners is spread over 400 house-owners of the village.

EXAMPLE-2 There are 1000 persons who are all aged 50 and are healthy. It is expected that of these, 10 persons may die during the year. If the economic value of the loss suffered by the family of each dying person is taken to b e Rs. 20000, the total loss would work out to Rs. 200000. If each person in a group contributed Rs. 200 a year, the common fund would be Rs. 200000. This would be enough to pa r Rs. 20000 to the family of each of the ten persons who die. Thus, the risks in the case of 10 persons are shared by 1000 persons.

Role of Insurance in Economic Development:

For economic development, investments are necessary. Investments are made out of savings. A 18

life insurance company is a major instrument for the mobilization of savings of people, particularly from the middle and lower income groups. These savings are channeled into investments for economic growth. As on 31.3.2002, the total investments of the LIC exceeded Rs. 245000 crores, of which more than Rs. 130000 crores were directly in Government (both State and Centre) related securities, more than Rs. 12000 crores in the State Electricity Boards, nearly Rs. 20000 crores in housing loans and Rs. 4000 crores in water supply and sewerage systems. Other investments included road transport, setting up industrial estates and directly financing industry. Investments in the corporate sector (shares, debentures and term loans) exceeded Rs.30000 crores. These directly affect the lives of the people and their economic well-being. A life insurance company will have large funds. These amounts are collected by way of premiums. Every premium represents a risk that is covered by that premium. In effect, therefore, these vast amounts represent pooling of risks. The funds are collected and held in trust for the benefit of the policyholders. The management of life insurance companies is required to keep this aspect in mind and make all its decisions in ways that benefit the community. This applies also to its investments. That is why successful insurance companies would not be found investing in speculative ventures. Their investments, as in the case of the LIC, benefit the society at large. Apart from investments, business and trade benefit through insurance. Without insurance, trade and commerce will find it difficult to face the impact to major perils like fire, earthquake, floods, etc. Financiers, like banks, collapse if the factory, financed by it, is reduces to ashes by terrible fire. Insurers cover also the loss to financiers, if their debtors default.

Criticism of Insurance Companies:

Some people believe that modern insurance companies are money-making businesses which have little interest in insurance. They argue that the purpose of insurance is to spread risk so the 19

reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to flooding, or young drivers) runs counter to the principle of insurance. Other criticisms include: A) Insurance policies contain too many exclusion clauses. For example, some house insurance policies do not cover damage to garden walls. B) Most insurance companies now use call centre and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge.

Indian Insurance Industry: New Avenues for Growth 2012:

With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to government sources, the insurance and banking services contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the 20

Indian market and 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The life insurance industry in India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. This report, Indian Insurance Industry: New Avenues for Growth 2012, finds that the market share of the state behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. There are presently 12 general insurance companies with four public sector companies and eight private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life insurance market. Though the focus of this market research report is on the potential growth on the Indian Insurance Sector, it also talks about the market size, market segmentation, and key developments in the market after 1999.

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RESEARCH METHODOLOGY
RESEARCH OBJECTIVES:
1. To compare the performance of LIC and private insurance companies in India. 2. To find out the performances of LIC and private insurance companies in each category size. (Growth, productivity and efficiency.) 3. To compare grievance management of LIC and private insurance companies.

RESEARCH DESIGN:
(A) Type of research design (B) Data collection (C) Statistical tools

: : :

Analytical Research Secondary Sources Bar Graphs

RESEARCH PROCESS:
In this research, my research objective was to compare the performance of LIC and Private insurance companies. For this purpose I decided the four broad categories under which I have compared the LIC and Private insurance companies. These are: 1. Size 2. Growth 3. Productivity 4. Grievance Handling Under these Broad Categories I have analyzed 13 factors which are:

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1. Size Total Premium Total Income Size of Balance Sheet Total number of Policies Total number of Branches 2. Growth Growth in Premium Growth in Income Growth in number of Policies Growth in Market share 3. Productivity Business per Branch Income per Branch New Premium per Branch 4. Grievance Handling I have used the Secondary data of last five financial years. I have collected data from the various balance sheets of LIC and other private insurance companies and web sites. I tried to find out most of the information required to compare the LIC and private insurance companies. In Analysis I have found all the required data and on the basis of performance gave the rank to LIC and Private Insurance Companies on each factor and then points. Now these Points have been multiplied with the weightage of that factor. And then after the analysis of each factor a consolidated point tab le has been prepared to know that which sector is performing better than other. The Weightage for different categories are:

FACTORS
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WEIGHTAGE

SIZE A. Total Premium B. Total Income C. Balance Sheet Size D. Total No. of Policies E. Total No. of Branches GROWTH A. First Premium B. Growth in Income C. Increase in No. of Policies D. Growth in Market Share PRODUCTIVITY A. Business per Branch B. Income Per Branch C. First Premium per Branch GRIEVANCE HANDLING

25% 5% 5% 5% 5% 5% 40% 10% 10% 10% 10% 15% 5% 5% 5% 20%

SIGNIFICANCE OF THE STUDY:

The Detailed Study has been done with the purpose of finding out the relative share of LIC and Private Insurance in India. It is useful for the people associated with the Insurance Industry and the research associates related to the Insurance Sector in India. This study will acquaint them with the data of all the banks complied at one place along with the findings, conclusion and recommendations.

LIMITATIONS:

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1. Could reach to a limited number of documents of different insurance companies in regard to the management and other policies and resultant figures so as to identify the exact cause of their lag in performance. 2. Due to the limited time could not study all the insurance companies original documents individually. 3. Non-Proficiency in technical aspects of insurance companies might have hindered the best analysis of the findings.

CHAPTER-2 PROFILE OF THE COMPANY

LIC:Life Insurance Corporation Private Life Insurance Companies Market Share

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LIC: LIFE INSURANCE CORPORATION

Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 26

200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organization happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies. Today, LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office. LICs Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centers have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future. LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families.

PRIVATE LIFE INSURANCE COMPANIES

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Kotak Mahindra Old Mutual Life Insurance Ltd is a joint venture between
Kotak Mahindra Bank Ltd., its affiliates and Old Mutual plc. A company that combines its international strengths and local advantages to offer its customers a wide range of innovative life insurance products, helping them in taking important financial decisions at every stage in life and stay financially independent. The company is one of the fastest growing insurance companies in India and has shown remarkable growth since its inception in 2001. Kotak Life Insurance employs around 5,565 people in its various businesses and has 197 branches across 141 cities.

ICICI Prudential Life Insurance Company

is a joint venture between ICICI

Bank - one of India's foremost financial services companies-and Prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. It began our operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of 2074 branches (inclusive of 1,116 micro-offices), over 225,000 advisors; and 7 banc assurance partners.

Established in 2000,

Birla Sun Life Insurance Company Limited (BSLI) is a

joint venture between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers future. With an experience of over 9 years, BSLI has contributed significantly to the growth and development of the life insurance industry in India and currently ranks amongst the top 5 private life insurance companies in the country.

28

Max New York Life Insurance Company Ltd. is a joint venture between Max
India Limited, one of India's leading multi-business corporations and New York Life International, the international arm of New York Life, a Fortune 100 company. The company has positioned itself on the quality platform. In line with its vision to be the most admired life insurance company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The Company's paid up capital as on 30th April, 2009 is Rs 1782 crore.

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest
Insurance Company and Bajaj Finserv. Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in the world, managing assets worth over a Trillion (Over INR. 55, 00,000 Crores). Allianz SE has over 115 years of financial experience and is present in over 70 countries around the world. At Bajaj Allianz Life Insurance, customer delight is our guiding principle. Our business philosophy is to ensure excellent insurance and investment solutions by offering customised products, supported by the best technology.

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint
venture company, formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life combines the Tata Groups pre-eminent leadership position in India and AIGs global presence as one of the worlds leading international insurance and financial services organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26 per cent. Tata AIG Life provides insurance solutions to individuals and 29

corporates. Tata AIG Life Insurance Company was licensed to operate in India on February 12, 2001 and started operations on April 1, 2001

HDFC Standard Life Insurance Company Limited

Is one of India's leading

private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others.

MetLife India Insurance Company Limited (MetLife)

is an affiliate of

MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife is one of the fastest growing life insurance companies in the country. It serves its customers by offering a range of innovative products to individuals and group customers at more than 600 locations through its bank partners and company-owned offices. MetLife has more than 50,000 Financial Advisors, who help customers achieve peace of mind across the length and breadth of the country. Established in India in September 2001,

ING Vysya Life Insurance Company

Limited

is a joint venture between Vysya Bank, which is one of the largest private sector

banks in India, and ING Insurance Co., which is the world's second largest life insurance company. This private life insurance company has around 140 branches all over India, with head office in Bangalore. ING Vysya Life Insurance Co. has around 3000 employees with over 21,000 sales insurance agents and brokers. ING Vysya Life presently has around 4.5 lakh customers, and is making a total income of Rs. 400 crore.

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd., a

part of Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India's leading private sector financial services companies, which ranks among the top 3 private sector financial services and banking companies. Reliance Life Insurance is not only one of India's fastest

30

growing life insurance companies, but also counts among the top 4 private sector insurers. In just 2 years, the Company has crossed the mark of 1.7 Million policies.

SBI Life Insurance offers a slew of products designed for various segments of society.
These include money back products, pension products, protection cum savings products, and unit linked products. All these products cater to various requirements of its end users.

Bharti AXA Life Insurance Co. Ltd.

is a joint venture between Bharti - one of

Indias leading business groups with interests in telecom, agri business and retail, and AXA global leader in financial protection and wealth management. Bharti has recently entered into the retail business under a company called Bharti Retail Pvt. Ltd. AXA's operations are diverse geographically, with major operations in Western Europe, North America and the Asia/Pacific area. It also has operations in Australia, New Zealand, Hong Kong, Singapore, Indonesia, Philippines, Thailand, China, India and Malaysia.

IDBI Fortis Life Insurance Co. Ltd is a joint venture of IDBI Bank, Federal Bank
(India) and Fortis Insurance International. The Certificate of Registration has been issued by the Insurance regulator IRDA to this Insurance Company on 19th December 2007. According to the agreement, IDBI will have a 48-per cent stake in the venture, while Fortis and Federal Bank would have 26-per cent stake each. While IDBI and Federal Bank are major Indian banks, Fortis has the expertise of bancasurance across global markets. It is one of the best names in the insurance business in Europe and has successful joint ventures in various Asian countries. IDBI Fortis Life Insurance has become 18th life insurer in India.

AEGON Religare Ltd is a joint venture of AEGON, Religare and Bennett, Coleman &
Company. AEGON in one of the world's leading life insurance and pension groups. Religare is a prominent player in the field of integrated financial services in India. On the other hand, BennettColeman & Company is Indias largest media house. The insurance company began its operation in July 2008. Within a short span of time, it has spread across India, by opening over 30 branches in the country.

31

Future Generali India Life Insurance Co. Ltd. is one of the rapidly growing
Insurance companies in India. The Company is a joint venture between the India-based Future Group and the Italy-based Generali Group. Future Generali group is present in both the Life and Non-Life businesses in India as Future Generali India Life Insurance Co. Ltd. and Future Generali India Insurance Co. Ltd.

MARKET SHARE OF LIFE INSURANCE COMPANIES:

MARKET SHARE (%) LIFE INSURERS LIC ICICI Prudential Bajaj Allianz HDFC Standard Birla Sun life Tata AIG SBI Life Max New York Aviva Kotak Mahindra Old Mutual ING Vysya AMP Sanmar Met Life 32

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

76.07 6.91 4.75 2.98 1.72 1.66 1.46 1.28 1.08 0.71 0.54 0.46 0.37

14.

Sahara Life Private total Public total Grand total

0.03 23.93 76.07 100.00

In the above table shows, the private players in the life insurance business have increased their market share to 23.93 per cent. Among them ICICI prudential is ranked first in capturing the market followed by Bajaj Allianz and HDFC Standard. Moreover, private insurers have planned to increase their market share in the next five years. The public insurers have to enrich its approach to withhold its share.

CHAPTER-3 ANALYSIS AND INTERPRETATION

33

ANALYSIS AND INTERPRETATION 1. SIZE:

(A) TOTAL PREMIUM:
(Rs.In crores)

YEARS FIRMS

03-04 (1)
63533 3120 160000 140000 66653 120000

04-05 (2)

05-06 (3)

06-07 (4)
127822 28253 149789 5 127822

07-08 (5)
149789 51561 201350

LIC Private Insurers TOTAL

75127 90792 TOTAL PREMIUM 7727 15083 90792 82854 63533 75127 105875

156075

3120

20000 0 1 LIC Private

2 34

7727

40000

3 YEARS

15083

Insurers

28253

PREMIUM 100000 AMOUNT 80000 (In crores) 60000

51561

Premium (in crores) LIC Private Insurers 101412.20 21148.80 nk 1 2

Ra oints 1 0.5

Points after multiplying by weightage (7.5%) 7.5 3.75

Average premium of LIC is much more than that of all insurance companies altogether. LIC is average premium of the last five years is nearly five times the average premium of the all other private insurance companies. It can be said that up to that time their were less number of private players in the field of insurance but then also undoubtedly LIC is the king.

(B) TOTAL INCOME:

(Rs.In crores)

35

YEARS FIRMS

03-04 (1)
93089 4323 97412

04-05 (2)
112393 9049 121442

05-06 (3)
132147 18863 151010

06-07 (4)
174425 24242 198667

07-08 (5)
206363 52648 259011

LIC Private Insurers TOTAL

weightage 18863 24242 1 2 2 3 YEARS 9049 1 (7.5%) 7.5 3.75 4 5

LIC Private Insurers LIC

50000 143683.40 21825.00 0 1 Private

4323

0.5

Insurers

All over income of LIC is much more than of private players. It is due to the fact that LIC being a government agency is being trusted by lot of companies and has large number of shares in big 36

52648

Average 150000 INCOME Income (In crores) 100000 (in crores) 93089

112393

Rank

132147

200000

Points

174425

250000

Points multiplying

206363

TOTAL INCOME

after by

corporate.

(C) SIZE OF BALANCE SHEET:

(Rs.In crores)
YEARS FIRMS

03-04 (1)
346022 6585 352607

04-05 (2)
416910 13653 430563

05-06 (3)
531390 28910 560300

06-07 (4)
625956 53048 679004

07-08 (5)
776904 100774 877678

LIC Private Insurers TOTAL

700000 500000 SIZE 400000 (In crores) 300000 200000 100000 0 1 LIC Private Insurers 2 346022 600000 416910

531390

800000

625956

776904 5 100774

SIZE OF BALANCE SHEET

13653

3 YEARS

28910

6585

37

53048

Average Balance Sheet Size (in crores) LIC Private Insurers 539436.40 40954.00 1 2 1 0.5 Rank Points

Points after multiplying by weightage (7.5%) 7.5 3.75

Total average size of balance sheet of LIC in the last five years is certainly higher than that of private insurance companies. There is a huge gap in this value. It is obvious that LIC has bigger balance sheet as being working in the insurance field for quite large time. As compared to average balance sheet size of 40,594 crores of private insurance companies, LIC s average balance sheet size goes to much high as that of 5,39,436.4 crores.

(D) TOTAL NUMBER OF POLICIES:

YEARS FIRMS

03-04 (1)
26968069 1658847 28626916

04-05 (2)
23978123 2233075 26211198

05-06 (3)
31590515 3871410 35462117

06-07 (4)
38229292 7922294 46151586

07-08 (5)
37612599 13261558 50874157

LIC Private Insurers TOTAL

38

10000000 5000000 0 1
LIC Private Insurers

1658847

2233075

15000000

3 YEARS

3871410

7922294

NUMBER 20000000

Average Number Of Policies LIC Private Insurers 31675670 5789437 1 2 1 0.5 Rank Points

Points after multiplying by weightage (7.5%) 7.5 3.75

LIC is an undoubted leader in the field of average number of policies per year in the last five years. It is seen that private insurance companies are gaining momentum and are trying to defeat LIC in case of new insurances. Main reason behind LIC having such a large number of policies is the trust of a common man. LIC being a government agency has got a faith of Indian mass. People are not yet prepared to give their savings in the hands of private players.

39

13261558

NUMBER OF POLICIES ISSUES 38229292 40000000 31590515 35000000 26968069 30000000 23978123 25000000

37612599

(E) NUMBER OF BRANCHES: 03-04

YEARS FIRMS

04-05 (2)
2197 804 3001

05-06 (3)
2220 1645 3865

06-07 (4)
2301 3072 5373

07-08 (5)
2522 6391 8913

(1)
2196 416 2612

LIC Private Insurers TOTAL

NUMBER OF BRANCHES
7000 6000 5000 2196 2197 2301 6391 3072 2220 1 416 2 804 3 1645 4

NUMBER

3000 2000 1000 0

LIC

Private

Insurers

YEARS

40

2522 5

4000

Average Number Of LIC Private Insurers Branches 14.84 1436.29

Rank

Points

Points after multiplying by weightage (7.5%) 7.5 3.75

1 2

1 0.5

2. GROWTH:
(A) FIRST PREMIUM:
(Rs.In crores)

03-04
YEARS FIRMS

04-05 (2)
20653 5564 26217

05-06 (3)
28515 10270 38785

06-07 (4)
55934 19425 75359

07-08 (5)
59996 33715 93711

(1)
17347 2440 19787

LIC Private Insurers TOTAL

41

55934

FIRST PREMIUM 60000 50000 40000 PREMIUM ANOUNT 30000 (In crores) 20000 10000 0 1 LIC Private Insurers 2 3 YEARS 28515

59996 19425 5 Points after multiplying by weightage (10%) 33715 5 10 1

17347

20653

2440

5564

10270 4 Rank 2 1

Growth in First Premium (In %) LIC Private Insurers 245.85 1281.76

Growth in First Premium (In absolute terms) (in crores) 42649 31275

Points

0.5

42

Though LIC has attained more growth in absolute terms i.e. Rs.42649 crores but private players being so less in number five years back has achieved a dream come true growth of 1281.76 % which is certainly a matter of pride for them.

(B) GROWTH IN INCOME:

YEARS FIRMS

(Rs.In crores)

03-04 (1)
12101 2692 14793

04-05 (2)
19303 4725 24028

05-06 (3)
19754 9814 29568

06-07 (4)
42277 5379 47656

07-08 (5)
31988 28406 60394

LIC Private Insurers TOTAL

% GROWTH IN INCOME:

43

YEARS FIRMS

03-04 (1)
14.9 165 17.8

04-05 (2)
20.7 109.3 24.6

05-06 (3)
17.5 108.4 24.3

06-07 (4)
32 28.5 31.5

07-08 (5)
18.3 117 30.3

LIC Private Insurers TOTAL

180 160 140 120 100 80 60 40 20 0 1 14.9

165

% GROWTH IN INCOME

109.3

108.4

32

20.7

17.5

28.5

2 Insurers

3 YEARS

LIC

Private

44

18.3 5

117

Growth in Income (In %)

Growth in Income (In absolute terms) (in crores) 19887 25714

Rank

Points

Points after multiplying by weightage (10%)

LIC Private Insurers

164.34 955.20

2 1

0.5 1

5 10

Here LIC has neither attained more growth in absolute terms i.e. Rs.19887 crores as compared to 25714 crores of private players nor has got more growth in terms of percentage. This shows that private players are doing great job in enhancing their business.

(C) INCREASE IN NUMBER OF POLICIES:

YEARS FIRMS

03-04 (1)
1475992 804696 2280688

04-05 (2)
-2989946 574228 -2415718

05-06 (3)
7632584 1638335 9270919

06-07 (4)
6638585 4050884 10689469

07-08 (5)
-616693 5339264 4722571

LIC Private Insurers TOTAL

45

YEARS FIRMS

03-04 (1)
5.79 94.21 8.6

04-05 (2)
-11.09 34.62 -8.4

05-06 (3)
31.75 73.37 35.3

06-07 (4)
21.01 104.64 30.1

07-08 (5)
-1.6 67.4 10.2

LIC Private Insurers TOTAL

% GROWTH IN NO.OF POLICIES

120 100 80

94.21

73.37

104.64 21.01
4

14.9

-11.09

40 20 0 -20

34.62

60

31.75

LIC

Private

Insurers

YEARS

46

-1.6
5

67.4

Growth in no. of policies (In %) LIC Private Insurers 39.47 699.44

Growth in no. of policies (In absolute terms) 10644530 11602711

Rank

Points

Points after multiplying by weightage (7.5%) 5 10

2 1

0.5 1

Private players are doing extremely well as they are increasing their customer base rapidly.

(D) MARKET SHARE: 03-04

YEARS FIRMS

04-05 (2)
78.8 25.8 78.8

05-06 (3)
73.5 26.5

06-07 (4)
74.2 21.2

07-08 (5)
73.9 12.3

(1)
87.7 26.1 87.7

LIC Private Insurers

90 80 70 60 % 50 40 30 20 10 0

MARKET SHARE 74.2 73.5 73.9 21.2

5

26.1

25.8

26.5

47 LIC Private Insurers

YEARS

12.3

LIC is still the market leader in insurance industry with 73.9 % share. But we cannot forget that in last five years market share of LIC has decreased. It was 87.7 % in year 2003-04 which came down to 73.9 % in 2007-08.

3. PRODUCTIVITY:
(A) BUSINESS PER BRANCH:
(Rs.In crores)

03-04
YEARS FIRMS

04-05 (2)
34.20 9.61

05-06 (3)
40.9 9.17
40.9

06-07 (4)
55.55

07-08 (5)
59.2 5

(1)
28.93
60 7.5 50 28.93 40 BUSINESS 30 (In crores) 20 10

LIC Private Insurers

BUSINESS PER BRANCH

55.55 9.2

59.20 8.07

34.2 9.61

9.17

9.2

48
0 1 2 3 YEARS 4

8.07

7.5

Average Business Per Branch (In crores) LIC Private Insurers 43.756 8.71 1 2 1 0.5 Rank Points

Points after multiplying by weightage (5%) 5 2.5

Average business per branch of LIC is much higher than that of whole private insurance companies.

(B) INCOME PER BRANCH:

(Rs.In crores)

49

03-04
YEARS FIRMS

04-05 (2)
51.16 11.25

05-06 (3)
59.52 11.47

06-07 (4)
75.80 7.89

07-08 (5)
81.80 8.23

(1)
42.39 10.41

LIC Private Insurers

INCOME PER BRANCH

60 INCOME (In 50 crores) 40 30 20 10 0

42.39

51.16

90 80 70

59.52

10.41

11.25

11.47

75.8

81.8 7.89

1 LIC Private Insurers

3 YEARS

50

8.23

Average Income Per Branch (In crores) LIC Private Insurers 62.134 9.864 1 2 1 0.5 Rank Points

Points after multiplying by weightage (5%) 5 2.5

Average income per branch of LIC is much more than that of private insurance companies. Its almost six times the total value of all the private companies.

(C) NEW PREMIUM PER BRANCH:

(Rs.In crores)

03-04
YEARS FIRMS

04-05 (2)
9.40

05-06 (3)
12.84

06-07 (4)
24.30 23.78 5 24.3

07-08 (5)
23.78 5.28

(1)
7.90 5.86 25 20 15 7.9

LIC Private Insurers

NEW PREMIUM PER BRANCH 6.92 6.24 6.32

6.92

5.86

6.32

5 0 LIC Private 1 Insurers 2 51

3 YEARS

5.28

10

6.24

PREMIUM (In crores)

9.4

12.84

Average Income Branch (In crores) LIC Private Insurers 15.644 6.124 1 2 1 0.5 Per Rank Points

Points multiplying

after by

weightage (5%) 5 2.5

This value tells us about increase in the business of an insurance company in a period. Here we see that LIC is ahead of private insurance companies in case of increasing their business.

4. GRIEVANCE HANDLING:
(A) TOTAL NUMBER OF GRIEVANCES:

52

03-04
YEARS FIRMS

04-05 (2)
704 195

05-06 (3)
851 540

06-07 (4)
354 507

07-08 (5)
651 1406

(1)
474 45

LIC Private Insurers

TOTAL NO.OF GRIEVANCES 1600 1400 1000 NUMBER 800 (In crores) 600 400 200 0 1 LIC Private Insurers 2 3 YEARS 4 5 45 704 851 1200 1406 474 540 195 53 354 507 651

(B) NUMBER OF GRIEVANCES RESOLVED:

03-04
YEARS FIRMS

04-05 (2)
123 83

05-06 (3)
215 216

06-07 (4)
313 450

07-08 (5)
80 1103

(1)
39 26

LIC Private Insurers

TOTAL NO.OF GRIEVANCES RESOLVED 1200 1000 800 NUMBER RESOLVED 600 (In crores) 400 39 200 0 1 LIC Private Insurers 2 3 YEARS 4 5 26 1103 215 123 216 313 450 54 83 80

(C) % OF GRIEVANCES RESOLVED:

03-04
YEARS FIRMS

04-05 (2)
17.5 42.6

05-06 (3)
25.3 40

06-07 (4)
88.4 88.7

07-08 (5)
12.2 78.4

(1)
8.2 57.7

LIC Private Insurers

%OF GRIEVANCES RESOLVED 88.4 88.7 90 80 70 60 57.7 78.4 12.2 3 YEARS 4 5 55

20 10 0 LIC Private

8.2

1 Insurers

17.5

NUMBER 50 RESOLVED (In crores) 40 30

42.6

25.3

40

Points % Grievances resolved LIC Private Insurers 25.37 69.70 Rank Points multiplying weightage (7.5%) 2 1 0.5 1 3.75 7.5

after by

Grievance Handling is one of the major issues in any organization. It plays an important role in Insurance sector. People do attract towards companies who handles their grievances. Here we see that private players are much ahead of LIC when the matter comes to grievance management. In the last five years LIC has resolved only 25.37 % of cases brought in front of them while the percentage of cases resolved in case of private players is 69.7 %. This shows that private players are very serious about their image and are working hard to provide the solution of the problems of the people as early as possible.

TOTAL POINTS TABLE

56

FACTORS
SIZE A. Total Premium B. Total Income C. Balance Sheet Size D. Total No. of Policies E. Total No. of Branches GROWTH A. First Premium B. Growth in Income C. Increase in No. of Policies D. Growth in Market Share PRODUCTIVITY A. Business per Branch B. Income Per Branch C. First Premium per Branch GRIEVANCE HANDLING TOTAL SCORE

LIC
7.5 7.5 7.5 7.5 3.75

PRIVATE INSURERS
3.75 3.75 3.75 3.75 7.5

5 5 5 10

10 10 10 5

5 5 5 3.75 77.50

2.5 2.5 2.5 7.5 72.50

57

CHAPTER-4 FINDINGS AND CONCLUSIONS

58

FINDINGS & CONCLUSIONS:

LIC is the giant of the insurance sector. The overall size of LIC is much more than that of all private insurance companies. Private insurers are in expansion mode and are increasing their size but are still much behind LIC. A total premium deposit in LIC is much higher than the private insurance companies. Total premium of LIC in FY 07-08 was Rs.149789 crores which three times more than that of private insurance companies. Income of LIC is much greater than private insurance companies. Last year total income from investments of LIC was Rs.48244.14 crores which was nearly equal to the total income of the all private insurance companies. By this we can imagine how big the LIC is. Size of balance sheet of private insurance companies are lagging much behind LIC. Balance sheet of LIC is seven times bigger than that of private insurance companies. If we see the total number of policies issued by LIC and private insurance companies, we find that there is a huge gap between them. No doubt that LIC is a well established player in the field of insurance and many private companies have just started their business. Hence it is obvious that LIC is having large number of policyholders. Number of branches of private insurance companies is increasing as the new players are entering in this market. Also the established players are in expansion phase and hence are expanding there 59

business. There are many private insurance companies and hence there total number of branches has gone past LIC in the last financial year. But offices of private insurance companies are mostly in urban areas and still it is LIC which covers most of the area. Hence we see that LIC is leading when it comes to size. It is a giant in insurance sector having huge network and customer base. We see that due to excellent service quality and attractive offers private insurance companies have started getting a number of customers. They are growing rapidly. Though LIC is also increasing its customer base but private insurance companies are moving at a fast pace. Though the income of private insurance companies is negligible when compared with LIC but then also the pace with which they are increasing their income is tremendous. Private insurance companies are expanding their business and will certainly going to give a tough competition to LIC in the coming days. LIC is certainly having a large customer base. Private insurance companies are not having that much number of customer base but they are increasing it rapidly. They have registered a decent growth of 104.64 % in number of new policies in the year 2006-07. Last year also their growth rate was 67.4 %. LIC, being the oldest player in the existing insurance market, has the biggest market share of 73.9 % which was 87.3% five years earlier. We see that private insurance companies are penetrating in the customer base of LIC. Overall we can see that private insurance companies are giving a tough competition to the LIC and will certainly create a good business for themselves in the coming days. There are many new entrants in this sector. There are many private insurance companies who have reported loss in this and previous years. This is the main reason why private insurance companies lag behind LIC in case of business per branch. There is a big difference between them. Same is the case when it comes to income per branch. LIC is much ahead of private insurance companies in this field. They are undoubted champions in insurance when it comes to profit 60

earning. New business is increasingly going towards private insurance companies but still the customer base of LIC is very strong. In issuing new policies per branch also, they are ahead of private insurance companies though not by very large margin. Customer base of LIC is very strong and still business per branch, profit per branch or premium per branch, they are leading much ahead of private insurance companies. LIC ha s not shown their good concern when the matter of grievance handling comes. Private insurance companies are far ahead in this matter. LIC has just resolved 25%cases in the last five years while private insurance companies have resolved nearly70% cases. This is a matter from where customer shift starts. We have seen the rapid increase in customer base of private insurance companies which ca n be very much affected by this factor.

Overall we have seen that still LIC is very famous but private insurance companies are growing at exceptionally fast pace. Private companies show due concern in grievance management and brings innovative schemes to attract the customers. Right now they are giving good competition to LIC and very soon they will give very tough competition to Life Corporation of India.

61

62