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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 CONTENT
Concept of insurance History of Insurance Insurer’s Business Model Insurance sector in India Life Insurance LIC (company profile) Research Methodology Main Competitors Of LIC comparison New policies Issued Premium Expenses Ratios Market share Claims paid Market share profit Life fund Findings and conclusion
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Concept of Insurance
Human life is subject to various risks—risk of death or disability due to natural or accidental causes. Humans are also prone to diseases, the treatment of which may involve huge expenditure. On the other hand, property owned by man is exposed to various hazards, natural and man-made. 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. When it comes to property, loss or damage to property results in either whole or partial loss in income to the person or entity. Risk has the element of unpredictability. Death/disability or loss/damage could occur at anytime. Losses can be mitigated through insurance. Insurance is a commodity which offers protection against various contingencies. Insurance products available for life and non-life are many. In non-life, apart form personal covers such as accident covers and health insurance, there are products covering liabilities under a particular law and or common law. The various products are designed to cater to different needs of an individual or industry such as fire insurance policy on multi-storeyed building, householder’s policy.
An insurance contract promises to make good to the insured a certain sum in consideration for a payment in the form of premium from the insured.
Human life cannot be valued. Hence the sum assured ( or the amount guaranteed to be paid in the event of a loss ) is by way of a ‘benefit’ in the case of life insurance. Life insurance products provide a definite amount of money to the dependants of the insured in case the life insured dies during his active income earning period or becomes disabled on account of an accident causing reduction/complete loss in his income earnings. An individual can also protect his old age when he ceases to earn and has no other means of income by purchasing an annuity product. A Personal Accident cover is also for protection. In the event of death or disability, permanent or temporary, of the insured, it provides for compensation which is either the whole or a percentage of the Capital Sum Insured depending on the kind of loss. In the case of Health Insurance, the policy seeks to cover expenses towards of treatment of diseases and or injury upto the Sum Insured opted for by the insured. In respect of insurance relating to property, there are many products available. Property may be covered against fire and perils of nature including flood, earthquake etc. Machinery may be insured for breakdown. Goods in transit can be insured under a marine cargo insurance cover. Insurance covers are also available for ships and other vessels. A motor insurance policy covers third party damage as well as damage to the vehicle. Insurance of property is based on the principle of indemnity. The idea is to bring the insured to the same financial position as he /she was before the loss occurred. It safeguards the investment in the property. Where there is no insurance, losses can mar a project or an industry. General Insurance offers stability to the economy and to the society.
Insurance offers security and so peace of mind to the individual. The concept of insurance is that the losses of a few are made good by contribution from many. It is based on the law of large numbers. It stemmed from the need of man to find a solution for mitigation of losses. It also reflects the nature of man to find a solution collectively. It is important for all to understand the various products that life and general insurance companies offer before they make a choice as to the product they want to buy. As per regulations, insurers have to give the various features of the products at the point of sale. The insured should also go through the various terms and conditions of the products and understand what they have bought and met their insurance needs. They ought to understand the claim procedures so that they know what to do in the event of a loss.
The concept of insurance is that the losses of a few are made good by contribution from many. It is based on the law of large numbers. It stemmed from the need of man to find a solution for mitigation of losses. It also reflects the nature of man to find a solution collectively.
History of Insurance
History of insurance refers to the development of a modern laws and market in insurance against risks. In some sense we can say that insurance appears simultaneously with the appearance of human society. Early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen. Life insurance had its origins in ancient Rome, where citizens formed burial clubs that would meet the funeral expenses of its members as well as help survivors by making some payments. As European civilization progressed, its social institutions and welfare practices also got more and more refined. With the discovery of new lands, sea routes and the consequent growth in trade, Medieval guilds took it upon themselves to protect their member traders from loss on account of fire, shipwrecks and the like. Since most of the trade took place by sea, there was also the fear of pirates. So these guilds even offered ransom for members held captive by pirates. Burial expenses and support in times of sickness and poverty were other services offered. Essentially, all these revolved around the concept of insurance or risk coverage. That's how old these concepts are, really.
Insurance as we know it today owes its existence to 17th century England. In fact, it began taking shape in 1688 at a rather interesting place called Lloyd's Coffee House in London, where merchants, ship-owners and underwriters met to discuss and transact business. By the end of the 18th century, Lloyd's had brewed enough business to become one of the first modern insurance companies. Back to the 17th century, In 1693, astronomer Edmond Halley constructed the first mortality table to provide a link between the life insurance premium and the average life spans based on statistical laws of mortality and compound interest. In 1756, Joseph Dodson reworked the table, linking premium rate to age. The first stock companies to get into the business of insurance were chartered in England in 1720. The year 1735 saw the birth of the first insurance company in the American colonies in Charleston, SC. In 1759, the Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America for the benefit of ministers and their dependents. However, it was after 1840 that life insurance really took off in a big way. The trigger: reducing opposition from religious groups. The 19th century saw huge developments in the field of insurance, with newer products being devised to meet the growing needs of urbanization and industrialization.
Insurance in India can be traced back to the Vedas. For instance, yogakshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practised by the Aryans. Burial societies of the kind found in ancient Rome were formed in the Buddhist period to help families build houses, protect widows and children.
Bombay Mutual Assurance Society, the first Indian life assurance society, was formed in 1870. Other companies like Oriental, Bharat and Empire of India were also set up in the 1870-90s. It was during the swadeshi movement in the early 20th century that insurance witnessed a big boom in India with several more companies being set up. As these companies grew, the government began to exercise control on them. The Insurance Act was passed in 1912, followed by a detailed and amended Insurance Act of 1938 that looked into investments, expenditure and management of these companies' funds. By the mid-1950s, there were around 170 insurance companies and 80 provident fund societies in the country's life insurance scene. However, in the absence of regulatory systems, scams and irregularities were almost a way of life at most of these companies. As a result, the government decided nationalise the life assurance business in India. The Life Insurance Corporation of India was set up in 1956 to take over around 250 life companies. For years thereafter, insurance remained a monopoly of the public sector. It was only after seven years of deliberation and debate - after the RN Malhotra Committee report of 1994 became the first serious document calling for the re-opening up of the insurance sector to private players -- that the sector was finally opened up to private players in 2001. The Insurance Regulatory & Development Authority, an autonomous insurance regulator set up in 2000, has extensive powers to oversee the insurance business and regulate in a manner that will safeguard the interests of the insured.
Insurer’s Business Model
The business model can be reduced to a simple equation: Profit = earned premium + investment income - incurred loss - underwriting expenses. Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured parties. The most complicated aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are "winners" and some are "losers" insurance companies essentially use actuarial science to attempt to underwrite enough "winning" policies to pay out on the "losers" while still maintaining profitability. An insurer's underwriting performance is measured in its combined ratio. The loss ratio is added to the expense ratio to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. The Association of British Insurers has almost 20% of the investments in the London Stock Exchange. In the United States, the underwriting loss of property and casualty
insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the United States, due to unpredictable natural catastrophes, have exacerbated this trend.
Insurance Sector In India
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
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1818: Oriental Insurance company first insurance company in India. 1870: Bombay mutual life assurance company first Indian Insurance company. 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 taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
India's share in the global life insurance business rose to 1.97% in 2007 as compared to 1.68% considerably in the in 2007 to 2008 2006. period. However, the business volume in 'new life insurance products' have slowed down But the overall business growth has been more than 36% (measured in dollar terms).
One reason for this has been rupee appreciation (in terms of the US dollar). Another factor has been the premium renewal factor. As per a report from Swiss Re, the global life insurance market experienced a real growth rate of 5.4%. This is the inflation adjusted growth. The comparable figure for India was 14.2% for the 2007-08 period. This was two-and-half times over the global average. Swiss Re predicts a robust life insurance sector for 2008 but quite the opposite scenario for the non -life sector. A modest growth is fore-casted for 2008 in view of the stock market and capital market volatility. Before year 2001 private sectors were not allowed to enter in Life insurance business. Lic was having 100% market share but after 2001 IRDA allows private sector to enter into insurance business. On October 23, the Insurance Regulatory Development Authority (IRDA) issued certificates of registration to three private companies to undertake insurance business. Two of them - Reliance General Insurance and Royal Sundaram Alliance - will be in the non-life sector while the third - HDFC Standard Life Insurance - will do life insurance business. To date (end of April 2001), the following companies had thus been granted licenses: ICICI -Prudential, Reliance General, Reliance Life, Tata-AIG General, HDFCStandardLife, Royal-Sundaram, Max-New York Life, IFFCO-Tokio Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life, ING-Vyasa, Bajaj-Allianz Life, SBICardiff Life. All of these companies were either in the life insurance business or in the non-life insurance business. No license was granted for reinsurance business There are two type’s players in the India Insurance Sector, which is described below
The heavy capital investments in terms of the distribution networks, hiring of agents and the long gestation period of 7-10 years provide entry barriers for the industry. The IRDA which is Insurance Regulatory and Development Authority has Provided three levels in the Insurance sector.
1. Insurance Company (insurer) 2. Insurance Broker 3. Insurance Agent.
Registration Of Private Companies With IRDA For Life Insurance Business.
SR.no. Reg. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 no 101 104 105 107 109 110 111 114 116 117 121 122 127 128 130 133 135 136 138 140 142 Date of reg. 23.10.2000 15.11.2000 24.11.2000 10.01.2001 31.01.2001 12.02.2001 30.03.2001 02.08.2001 03.08.2001 06.08.2001 03.01.2002 14.05.2002 06.02.2004 17.11.2005 14.07.2006 04.09.2007 19.12.2007 08.05.2008 27.06.2008 27.06.2008 Name of the company HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. ICICI Prudential Life Insurance Company Ltd. Kotak Mahindra Old Mutual Life Insurance Limited Birla Sun Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. SBI Life Insurance Company Limited . ING Vysya Life Insurance Company Private Limited Bajaj Allianz Life Insurance Company Limited Metlife India Insurance Company Ltd. Reliance Life Insurance Company Limited. Aviva Life Insurance Co. India Pvt. Ltd. Sahara India Insurance Company Ltd. Shriram Life Insurance Company Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali India Life Insurance Company Limited IDBI Fortis Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. Aegon Religare Life Insurance Company Ltd. DLF Pramerica Life Insurance Company Ltd. Star Union Dai-ichi Life Insurance Co. Ltd.,
Insurance business is divided into four classes : 1) Life Insurance 2) Fire Insurance 3) Marine Insurance and
4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. No composites are permitted as per law.
Legislation (as on 1.4.2000):
Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.
Insurance Products :
(Participating). More than 80% of the life insurance business is from these products. General Insurance: Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory. Tariff Advisory Committee (TAC) lays down tariff rates for some of the general insurance products
Sickness Accident Misc Old age
When any types of market going on with out control then some processor handling by the government. So that Government had appointed to MALHOTRA COMMITTEE who have make some rules and create some new regulations for the insurance sector. Malhotra committee was established in 1993 by Indian Financial system and Reserve Bank of India. Committee was set up with the objective of complementing the reforms initiated in the financial sector.
Insurance Industry has Ombudsmen in 12 cities. Each Ombudsmen is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of LIC and other Insurers.
The Grievance Redressal Cell of the Insurance Regulatory and Development Authority looks into complaints from policyholders. Complaints against Life and Non-life insurers are handled separately. This Cell plays a facilitative role by taking up complaints with the respective insurers.
Policyholders who have complaints against insurers are required to first approach the Grievance / Customer Complaints Cell of the concerned insurer. If they do not receive a response from insurer(s) within a reasonable period of time or are dissatisfied with the response of the company, they may approach the Grievance Cell of the IRDA. The complaints need to be addressed to the Non-life insurance Grievance Cell of the IRDA and forwarded to the address given below.
Only cases of delay/non-response regarding matters relating to policies and claims are taken up by the Cell with the insurers for speedy disposal.
As claims/policy contracts in dispute require adjudication and the IRDA does not carry out any adjudication, insureds are advised to approach the available quasi-judicial or judicial channels, i.e., the Insurance Ombudsmen, Consumer fora or the Civil courts for such complaints. The list of Insurance Ombudsmen along with their contact details are available on this website under the heading ‘Ombudsmen’.
Only complaints from the insureds themselves or the claimants shall be entertained. The Cell shall not entertain complaints written on behalf of policyholders by advocates or agents or any third parties.
Where complaints are being sent through e-mail, complainants are requested to submit complete details of the complaint as required in the complaints registration form. Without this the Cell will not be in a position to register the complaint.
The Indian insurance industry is governed by the Insurance Act 1978, the General Insurance Business Act 1972, Life Insurance Corporation Act 1956 and Insurance Regulatory and Development Authority Act, 1999. The capital requirement for starting a general or Life Insurance Company is equity paid-up capital of Rs. 100 corer and for starting a reinsurance company it is Rs. 200 corer. The solvency margin requirements have been laid down in section 64VA of the Act. It has been stated that the required solvency margin shall be the highest of 1) Rs. 50 cr and Rs. 100 cr in case of reinsurance, 2) a sum equivalent to 30% of net incurred claims. The supervisory controls on insurance companies are exercised by Insurance Development and Regulatory Authority (IRDA) and these powers flow from Insurance Act, 1938 as well as IRDA Act 1999. Regulatory and supervisory powers of the authority are wide and pervasive. These controls are exercised through grant of licence to an insurance to an insurance company, approving its product and pricing, guiding deployment of investment funds, prescribing solvency margin, making it obligatory to appoint an actuary by the companies and approving the appointment of chief executives of the companies. The authority has also got the powers of investigation and inspection, monitoring the activities of intermediaries, making it obligatory on the part of insurance companies to prepare a balance sheet, a profit and loss account, a separate account of receipts and payments and a revenue account in respect of each class of business. It also has the power to issue licenses to surveyors and loss assessors and guiding reinsurance programs to insurance companies.
Till date insurance agents still remain the main sources through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. It therefore makes sense to look at well-balanced, alternative channels of distribution. LIC has already well established and have an extensive distribution channel and presence. New players may find it expensive and time consuming to bring up a distribution network to such standards. Therefore they are looking to the diverse areas of distribution channel to have an advantage. At present the distribution channels that are available in the market are: Direct selling Corporate agents Group selling Brokers and co-operative societies
What Is Life Insurance
Human life is subject to risks of death and disability due to natural and accidental cause. When human life is lost or a person is disabled parentally 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 dependents. Risks are unpredictable. Death/disability may occur when one least expects it. An individual can protect him/herself against such contingencies through life insurance. Life insurance is insurance on human beings. Though Human Life cannot be valued, a monetary sum could be determined which is based on loss of income in future years. Hence in life insurance, the sum assured is by way of a ‘benefit’ in the case of life insurance. Life insurance products provide a definite amount of money to the dependents of the insured in case the life insured dies during his active income earning period or becomes disables on account of an accident causing reduction/complete loss in his income earnings. An individual can also protect his old age when he ceases to earn and has no other means of income – by purchasing an annuity product. 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 amount 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. 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. There are a variety of life insurance product to suit the needs of various categories of people- children, youth, women, middle age person, old people; and also rural people, film actors and unorganised labourers. Life insurance product could be purchased from registered life insurers notified by the IRDA. Insurers appoint insurance agents to sell their products. Public who are interested to buy life insurance products should receive proper advice from insurance agents/insurer so that a right product could be suit particular financial needs. Thus life insurance policies offer protection and security to families and provide happiness to society.
Life Insurance Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our country as they ought to be. What follow is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to LIC. It should, however be clearly understood that the following narration is by no means an exhaustive description of the terms and conditions of LIC policy or its benefits or privileges.
Why Is It Superior To Other Forms Of Savings?
Protection: Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable where as in other savings, only the amount saved is payable. Aid to thrift: Life insurance encourages “thrift”. Long term savings can be made in a relative ‘painless’ manner because of the ‘easy instalments’ facility built into the scheme. Liquidity: Loans can be raised on the sole security of a policy which has acquired loan value. Besides, a life insurance policy is also generally accepted as security for even a commercial loan. Tax relief: Tax relief in income tax and wealth tax is available for amounts paid by way of premium for life insurance subject to income tax rates in force. Assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his insurance than he would have to pay otherwise. Money when you need it.: A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future, such as children’s education, start in life or marriage provision or even periodical needs for cash over a stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one’s retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. Subject to certain conditions, loans are granted to policyholders for house building or for purchase of flats.
Tax Savings Through Insurance: Insurance is generally purchased for tax saving which may be or bane for the insurance sector. Tax planning is affected by the choice of the insurance product. Insurance is one of the investment option which privies income tax exemptions are rebates per the income tax act, 1961. some of the sections under which tax relates and exemptions can be availed are sec 88, sec 80D, sec 80 DDA, sec 80CCA(I) and sec 10D. this act make no difference between private and public sector insurance companies. Hence, tax benefits can be availed by purchasing polices from either companies.
Life Insurance Corporation Of India
The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the 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-organisation 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 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-organisation 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. LIC’s 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. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres 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.
Objectives Of LIC
Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. Act as trustees of the insured public in their individual and collective capacities. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.
"Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."
"A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."
The 15 member of the life insurance corporation of India are appointed by the central government. One of the members is also appointed by the central government as the chairman. The LIC of India has a 4 tire structure, the central office at Mumbai, 8 Zonal Offices, 100 Divisional Offices and 2048 Branch Offices in India. Foreign branches report directly to the central office Mumbai. All offices clearly demarcated geo-graphical areas of operations, excepts branch offices in big cities which have common areas. Almost 99% of the activities relating to policy holders are done at the level of the branch offices. Investments are done at the central office. Thus, this is the big and giant organization structure of LIC of India ltd. This organization can be shown through the chart also as under.
The Chart of Organization Structure
Four tier structure
(8 Zonal Offices)
(100 Divisional Offices)
(2048 Branch Offices)
Objective: The objective of study is to know the market position and financial position
of LIC compare to other Private Players.
Types of Data: I have used secondary data, as the nature of the project is study approach.
Data collection tools: I have used various internal reports. As well as I have used chairperson’s
report of last 4 years and an intranet site of LIC and IRDA to gather information that I needed. 4. Type of Study: The type of study is comparative analysis of LIC and other Private Players.
Main competitors of LIC
SBI Life Insurance Company
ICICI Prudential Life Insurance Company Birla Sun Life Insurance Company HDFC Standard Life Insurance Company Reliance Life Insurance Company
Sbi Life Insurance Company
SBI Life Insurance is a joint venture between the State Bank of India and BNP Paribas Assurance. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the country, arguably the largest in the world. BNP Paribas Assurance is the insurance arm of BNP Paribas - Euro Zone’s leading Bank. BNP Paribas, part of the world’s top 10 group of banks by market value and part of Europe top 3 banking companies, is one of the oldest foreign banks with a presence in India dating back to 1860. BNP Paribas Assurance is the forth largest life insurance company in France, and a worldwide leader in Creditor insurance products offering protection to over 50 million clients. BNP Paribas Assurance operates in 41 countries mainly through the bancassurance and partnership model. SBI Life Insurance’s mission is to emerge as the leading company offering a comprehensive range of Life Insurance and pension products at competitive prices, ensuring high standards of customer service and world class operating efficiency. SBI Life has a unique multi-distribution model encompassing Bancassurance, Agency and Group Corporates.
SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBI’s access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country ensuring true financial inclusion. Agency Channel, comprising of the most productive force of more than 63,000 Insurance Advisors, offers door to door insurance solutions to customers.
"To emerge as the leading company offering a comprehensive range of life insurance and pension products at competitive prices, ensuring high standards of customer satisfaction and world class operating efficiency, and become a model life insurance company in India in the post liberalisation period".
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Trustworthiness Ambition Innovation Dynamism Excellence
ICICI Prudential Life Insurance Company
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%. We began our operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of 2099 branches (inclusive of 1,116 micro-offices), over 276,000 advisors; and 18 bancassurance partners. ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold our commitment to deliver world-class financial solutions to customers all over India. The ICICI Prudential edge comes from our commitment to our customers, in all that we do - be it product development, distribution, the sales process or servicing. Here's a peek into what makes us leaders.
1. Our products have been developed after a clear and thorough understanding of customers' needs. It is this research that helps us develop Education plans that offer the ideal way to truly guarantee your child's education, Retirement solutions that are a hedge against inflation and yet promise a fixed income after you retire, or Health insurance that arms you with the funds you might need to recover from a dreaded disease. 2. Having the right products is the first step, but it's equally important to ensure that our customers can access them easily and quickly. To this end, ICICI Prudential has an advisor base across the length and breadth of the country, and also partners with leading banks, corporate agents and brokers to distribute our products . 3. Robust risk management and underwriting practices form the core of our business. With clear guidelines in place, we ensure equitable costing of risks, and thereby ensure a smooth and hassle-free claims process. 4. Entrusted with helping our customers meet their long-term goals, we adopt an investment philosophy that aims to achieve risk adjusted returns over the long-term. 5. Last but definitely not the least, our team is given the opportunity to learn and grow, every day in a multitude of ways. We believe this keeps them engaged and enthusiastic, so that they can deliver on our promise to cover you, at every step in life.
To be the dominant Life, Health and Pensions player built on trust by world-class people and service.
This we hope to achieve by:
Understanding the needs of customers and offering them superior products and service Leveraging technology to service customers quickly, efficiently and conveniently Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders Providing an enabling environment to foster growth and learning for our employees And above all, building transparency in all our dealings
The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundaryless, Ownership and Passion. Each of the values describe what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth.
Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundaryless, Ownership, and Passion. These values shine forth in all we do, and have become the keystones of our success.
Birla Sun Life Insurance Company
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.
Known for its innovation and creating industry benchmarks, BSLI has several firsts to its credit. It was the first Indian Insurance Company to introduce “Free Look Period” and the same was made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life Insurance plans amongst the private players in India. To establish credibility and further transparency, BSLI also enjoys the prestige to be the originator of practice to disclose portfolio on monthly basis. These category development initiatives have helped BSLI be closer to its policy holders’ expectations, which gets further accentuated by the complete bouquet of insurance products (viz. pure term plan, life stage products, health plan and retirement plan) that the company offers. Add to this, the extensive reach through its network of 600 branches and 1,75,000 empanelled advisors. This impressive combination of domain expertise, product range, reach and ears on ground, helped BSLI cover more than 2 million lives since it commenced operations and establish a customer base spread across more than
1500 towns and cities in India. To ensure that our customers have an impeccable experience, BSLI has ensured that it has lowest outstanding claims ratio of 0.00% for FY 2008-09. Additionally, BSLI has the best Turn Around Time according to LOMA on all claims Parameters. Such services are well supported by sound financials that the Company has. The AUM of BSLI stood at Rs. 8165 crs as on February 28, 2009, while as on March 31, 2009, the company has a robust capital base of Rs. 2000 crs.
To be a leader and role model in a broad based and integrated financial services business.
To help people mitigate risks of life, accident, health, and money at all stages and under all circumstances
Enhance the financial future of our customers including enterprises
Integrity Commitment Passion Seamlessness Speed
HDFC Standard Life Insurance Company
HDFC Limited, India’s premier housing finance institution has assisted more than 3.3 million families own a home, since its inception in 1977 across 2400 cities and towns through its network of over 250 offices. It has international offices in Dubai, London and Singapore with service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist NRI’s and PIO’s to own a home back in India. As of December 2008,
the total asset size has crossed more than Rs. 95,000 crores including the mortgage loan assets of more than Rs. 82,800 crores. The corporation has a deposit base of Rs. 17,551 crores, earning the trust of more than 9,00,000 depositors. Customer Service and satisfaction has been the mainstay of the organization. HDFC has set benchmarks for the Indian housing finance industry. Recognition for the service to the sector has come from several national and international entities including the World Bank that has lauded HDFC as a model housing finance company for the developing countries. HDFC has undertaken a lot of consultancies abroad assisting different countries including Egypt, Maldives, and Bangladesh in the setting up of housing finance companies.
Standard Life Group (Standard Life plc and its subsidiaries) The Standard Life Group has been looking after the financial needs of customers for over 180 years. It currently has a customer base of around 7 million people who rely on the company for their insurance, pension, investment, banking and healthcare needs. Its investment manager currently administers £125 billion in assets. It is a leading pensions provider in the UK, and is rated by Standard & Poor's as 'strong' with a rating of A+ and as 'good' with a rating of A1 by Moody's. Standard Life was awarded the 'Best Pension Provider' in 2004, 2005 and 2006 at the Money Marketing Awards, and it was voted a 5 star life and pension’s provider at the Financial Adviser Service Awards for the last 10 years running. The '5 Star' accolade has also been awarded to Standard Life Investments for the last 10 years, and to Standard Life Bank since its inception in 1998. Standard Life Bank was awarded the 'Best Flexible Mortgage Lender' at the Mortgage Magazine Awards in 2006.
'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'. 'The most obvious choice for all'.
• • • • • •
Integrity Innovation Customer centric People Care “One for all and all for one” Team work Joy and Simplicity
Reliance Life Insurance Company
Reliance Life Insurance offers you products that fulfill your savings and protection needs. Our aim is to emerge as a transnational Life Insurer of global scale and standard. Reliance Life Insurance is an associate company 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, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital
has interests in asset management and mutual funds, stock broking, life and general insurance, proprietary investments, private equity and other activities in financial services. Reliance - Anil Dhirubhai Ambani Group also has presence in Communications, Energy, Natural Resources, Media, Entertainment, Healthcare and Infrastructure.
Empowering everyone live their dreams.
Create unmatched value for everyone through dependable, effective, transparent and profitable life insurance and pension plans.
Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:
• • •
Emerge as translational Life Insurer of global scale and standard Create best value for Customers, Shareholders and all Stake holders Achieve impeccable reputation and credentials through best business practices
New Policies Issued
LIC 40000000 35000000
30000000 25000000 20000000 15000000 10000000
As in the chart we can see here that in 2005-06 new policies issued by LIC is 31590707, and in year it is 38229292 with rise of 21.01% and in year 2007-08 it is 37612599 which is 1.61% decrease than year 2006-07. While private players have continuously growth. In year 2005-06 3871410 new policies were issued by private players in year private players gain rise of 104.64% with 7922274 policies and in year 2007-08 new policies issued by private players are 13261558 which is 67.40% more than year 2006-07.
First year premium
50000 40000 30000
20000 10000 0
In year 2005-06 first year premium of LIC including single premium was 28515.87 corers. It increases by 97.17% in year 2006-07 with amount of 56223.56 corers. And in year 2007-08 single premium of LIC is of Rs. 59996.57 corers. which is 6.71% more than 2006-07. while private players have single premium of Rs. 10269.67 corers and in year 2006-07 it increase by 88.84% which amounted Rs. 19425.65 and in year 2007-08 they achieve increase of 73.56% amounted Rs. 59996.57 corers.
Amount in corers
LIC 35000 30000
25000 20000 15000 10000 5000 0
2742.78 3921.1 26337.21
Amount in corers There are a number of options available when choosing life insurance.
A single premium policy is an option that allows a person to invest a lump sum so that the policy is always paid up. This eliminates the need to be concerned with periodic payments, or the negative outcome that can result from missing periodic payments with other types of policies. In year 2005-06 LIC had single policy business of Rs. 14787.84 corers. In year 2006-07 it increased with 78.10% with amount of Rs. 26337.21 and in year 2007-08 LIC gain rise of 28.24% with amount Rs. 33774.56 corers.
While in single premium business Private players had business of Rs. 2742.78 corers and it rise in year 2006-07 by 42.96% which amounted 3921.1 corers and in year 200708 private players did single premium business of Rs. 5049.8 corers which is 27.82% more than year 2006-07.
25000 20000 15000
10000 5000 0
In year 2005-06 LIC had regular premium of 13728.06 corers and in year 2006-07 it gain sharp rise of 117.70% with Rs. 29886.35 corers but in year 2007-08 LIC had a decrease of 12.26% in Regular Premium with Rs. 26222 corers which is lesser than year 2006-07 by 3664.35 corers. While in regular premium Private players performed well. In year 2005-06 private players earned regular premium of 7526.88 corers. And in year 2006-07 it was sharply increase by 105.59% with Rs. 15474.83 corers and in year 2007-08 it also
Amount in corers
increase by 85.24% amounted Rs. 28666.15, while LIC has a decrease of 12.26%. in Regular premium Private Players perform well.
LIC 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2005-06 2006-07 2007-08
8825.05 4813.86 17845.47 71599.27 89793.42 62276.35
Amount in corers Term life insurance policy offering the policyholder the option to renew for a specific period of time-frequently one year-for a particular length of time. Some term life policies stipulate a maximum age benefit. Some policies offer fixed premium rates for a certain number of years, usually ten, after which they are renewable at a higher premium rate. Other term policies are renewable every year, and charge escalating premium rates as the policyholder ages.
So in this renewal premium business LIC is far better than private players. In year 2005-06 LIC has renewal premium business of 62276.35 corers which increases 14.97% and RS. 71599.27 corers and in 2007-08 LIC has good rise in Renewal premium that is 25.41% amounted to Rs. 89793.42 corers. While Private players have Rs. 4813.86 corers which has a sharp increase of 83.33% in year 2006-07 which is RS. 8825.05 corers and in year 2007-08 again it has a big increase of 102.16% of rs 17845.47%
LIC 160000 140000
80000 60000 40000
LIC has Rs. 99792.22 corers as total premium in year 2005-06 which increases by 40.79% in year 2006-07 which is 127822.84 corers. And in year 2007-08 it has rise of 17.19% which amounted to 149789.99corers. Private players has 15083.53 corers as total premium in year 2005-06 and it increased by 87.08% which amounted to Rs. 28218.75 and it again become almost double in year 2007-08 increased by 82.50% amounting Rs. 51561.42 corers.
Amount in corers
Commission Expenses Operating Expenses
First year premium commission
LIC 6000 5000
3000 2000 1000 0
Amount in corers
Single premium commission
LIC 600 500
Amount in corers
Regular premium commission
LIC 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Private players
Amount in corers
Renewal premium commission
LIC 5000 4500
3000 2500 2000 1500 1000 500 0
578.46 180.19 306.96
Amount in corers
Total premium commission
LIC 10000 9000
8000 7000 6000 5000 4000 3000 2000 1000 0 2005-06
Amount in corers
LIC 14000 12000 10000 8000
7080.86 8309.32 12032.46
6000 4000 2000 0
Amount in corers
Comparison of ratios
Commission Expense Ratio
Commission expense × 100 Premium underwritten
Operating Expense Ratio
Operating expense × 100 Premium underwritten
Commission Expense Ratios
First year Premium
LIC 16 14 12 10 8 6 4 2 0 2005-06 2006-07 2007-08
9.26 8.27 14.3 12.73 13.27 13.38
Amount in Percentage
LIC 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-06 2006-07 2007-08
1.1 1.07 1.08 1
Amount in Percentage
LIC 30 25 20 15 10 5 0 2005-06 2006-07 2007-08 25.26 Private players
Amount in Percentage
LIC 6 5 4 3 2 1 0 3.74 5.57 Private players 5.54 5.18
Amount in Percentage
LIC 12 10 8 6 4 2 0 2005-06 2006-07 2007-08 10.23 7.82 Private Players 10.98 9.42 7.18
Amount in Percentage
Operating Expense Ratios
LIC 25 23.66 Private players 23.01 23.34
10 6.65 5 5.54 5.55
0 2005-06 2006-07 2007-08
Amount in Percentage
Market share of Life Insurers In Year 2007-08
First Year Premium
LIC Private Players
Private Players, 33715.97, 35.98%
LIC, 59996.57, 64.02%
Amount in corers
LIC Privatte players
Privatte players, 5049.8, 13.01%
LIC, 33774.56, 86.99%
Amount in corers
LIC Private players
Private players, 28666.15, 52.23%
LIC, 26222, 47.77%
Amount in corers
LIC Private Players
Private Players, 17845.47, 16.58%
LIC, 89793.42, 83.42%
Amount in corers
LIC Private Players
Private Players, 51561.42, 25.61% LIC, 149789.99 , 74.39%
Amount in corers
Claims Paid By Life Insurers
Claims Paid Claims Written Back 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0
Claims Repudiated Claims Pending
Market share of LIC and Private Players In Terms of Total Premium From year 2000-01 to 2007-08
0 0.54% 2.01%
4.68% 9.33% 14.25% 18.01% 25.61%
95.32% 90.67% 85.75% 81.90% 74.39%
0% 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Profit Of Life Insurers In year 2007-08
Profit of year 2007-08 900 800 700 600 500 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900 -1000 -1100 -1200 -1300 -1400 -1500
5 -30 -26
-78 -191 -244 -257 -297 -339 -445 -202
B ir la s un life iP rud ent ING ial Vy Hd sya fc S tan da Ma rd xN ew y or k Re lia n ce Ba jaj Sb Ko i lif tak e ma hin d ra Tat aA ig Me t lif e Avi va Sa har a lif e Sh rira ml if e Bh ar t iA Fut xa ure Ge n IDB era li IF ort ies Icic
Life Fund Of LIC
2005-06 700000 600000 500000 400000 300000 200000 100000 0 2005-06 2006-07 2007-08 463147.62 560806.33 2006-07 2007-08 686616.45
Findings And Conclusion
There is only public company exist in the Indian Life Insurance market which is Life Insurance Corporation Of India and there are 21 private insurance companies role playing as life insurer in the Indian life insurance market. Like as , Sbi life insurance company, HDFC Standard life Insurance company, ICICI Prudential company, Reliance Life Insurance company, Birla sunlife Insurance company etc, Since, 1958 LIC is playing role as life insurance so that it has created its monopoly in the Indian Life Insurance Market. As things stand today LIC is still on strong footing vis-à-vis its competitors. However, to retain its market leader status the LIC needs to acquire competitive ness. With new contenders entering the fray there is need to act more market savvy. Rather than getting bogged down by competition the LIC needs to see the challenge as an opportunity. Insurance in India was largely misconstrued as an investment or a tax saving device rather than a security hedge. In fact, insurance agents were promoting policies on life as instruments of returns and tax saving. Insurance consciousness as such was largely missing from the market. The new entrants with their aggressive penetration strategies are at least contributing to the cause of LIC by creating insurance consciousness in the minds of a wide cross section of consumers. Privileged by its monopoly status LIC did not bother much about creating an insurance consciousness, as its objective was to insure any how that was happening. This complacency now has to go and LIC must opt for marketing insurance as insurance. The insurance consciousness is creating the market is evident from the fact that there was a spurt in business underwritten in March 2008 at Rs. 201351.41 corer which was
growth of 29.01%. Private sector increased their total premium from 28253.01 to 51561.42 that is 82.50% increase while LIC increased its premium income from 127822.84 to 149789.99, which is increase of 17.19%. Private players also increased their market share from 18.1% to 25.61%. However, LIC needs to worry about the fact that the new entrants have increased their share by almost 26% during 2007-08. in the year 2007-08 market share of private players increased by 41.50% than year 2006-07. No mean performance given the fact that the new players are still in the process of finding their feet. If the trend continuous the LIC needs to take guard and prepare for strike.
Research Methodology – Kothari C.R.2007, Research Methodology, Techniques and Methods, New Delhi, 2007 www.licindia.com www.birlasunlife.com www.sbilife.co.in www.reliancelife.co.in www.hdfcinsurance.com www.iciciprulife.com www.irda.org
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