Content

Concept Of Insurance History Of Insurance Insurers Business Model Insurance Sector In India Company Profile Research Methodology Main Competitors Of LIC Comparison Findings And Conclusion Bibliography

Concept Of Insurance

Human life is subject to risk Loss of Human life means loss of income Risk has element of unpredictability 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 insurancerefers to the development of a modern laws and market ininsuranceagainst risks. In some sense we can say that insurance appears simultaneously with the appearance of human society. It has its origins in ancient Rome As European civilization progressed, its social institutions and welfare practices also got more and more refined Insurance as we know it today owes its existence to 17th century England. Insurance in India can be traced back to the Vedas Bombay Mutual Assurance Society, the first Indian life assurance society, was formed in 1870.

Insurers Business Model

Profit =earned premium+ investment income incurred loss - underwriting expenses. Insurers make money in two ways: (1) Throughunderwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks (2) Byinvestingthe premiums they collect from insured parties. Most complicated aspect of the insurance business is the underwriting of policies.

Insurance Sector In India

Some of the important milestones in the life insurance business in India are:

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.

Cont The overall business growth has been more than 36%.
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. Upto 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.

Fire

Deat h Disabili ty

Marine

Accident Moto r Sickne ss Accide nt

Misc

Old age

Cont

The IRDA which is Insurance Regulatory and Development Authority has Provided three levels in the Insurance sector. Insurance Company (insurer) Insurance Broker Insurance Agent.

Cont
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.

SR.no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Reg. 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.,

Life Insurance

It is insurance on human being Human life cannot be valued Monetary sum determined based on loss of future income Individual can also protect his old age with life insurance

Life insurance procucts

Term insurance Endowment assurance Money back assurance Annuity Linked 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.

Why Is It Superior To Other Forms Of Savings?

Protection Aid to thrift Liquidity Tax relief Money when u need it

Company Profile

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

Cont

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 8 zonal offices and the Corporate office.

Cont
Mission: "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. Vision: "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."

4 Tier Structure of LIC

Central Office

NZ

NCZ

CZ

EZ

SCZ

SZ

WZ

EZ

100 Divisional offices

2048 Branch Offices

Research Methadology
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 chairpersons report of last 4 years and an intranet site of LIC and IRDA to gather information that I needed. 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

1. 2. 3.

4.

5. 6. 7. 8.

Policies Premium Expenses 3.1 Commission Expenses 3.2 Operating Expenses Ratios 4.1 Commission Expense Ratio 4.2 Operating Expense Ratio Market Share Claims Paid Profit Of year 2007-08 Life Fund

Comparison

New Policies Issued

LIC 40000000 35000000
38229292 37612599

Privace Players

30000000
31590707

25000000 20000000 15000000

13261558

10000000
7922274 3871410

5000000 0

2005-06

2006-07

2007-08

Premium First year premium

LIC 60000
59996.57

Private players

50000 40000 30000

28515.87

56223.56

33715.95

20000 10000 0

19425.65

2005-06

10269.67

2006-07

2007-08

Single Premium
LIC 35000 30000
33774.56

Private Players

25000 20000 15000 10000 5000 0

2742.78 3921.1 26337.21

5049.8

2005-06

14787.84

2006-07

2007-08

Regular Premium
LIC 30000
29886.35 28666.15

Private Players

25000 20000 15000

13728.06

26222

15474.83

10000 5000 0

2005-06

7526.88

2006-07

2007-08

Renewal Premium
L IC 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 2005-06 2006-07 2007-0 8
88 .0 25 5 481 3.86 1 45.4 78 7 71599.27 89793.42 62276.35

P rivate P ers lay

Total Premium
LIC 160000 140000
149789.99

Private Players

120000
127822.84

100000
99792.22

80000 60000 40000

51561.42

28218.75

15083.53

20000 0

2005-06

2006-07

2007-08

Commission Expenses First Year Premium Expenses

LIC Private Players 6000 5000
5203.75 4963.81

4000
3630.33

4511.15

3000 2000 1000 0

2802.69

2005-06

1362.91

2006-07

2007-08

Single Premium Commission

L IC 600 500
504.33

Private Play ers

400
411.42

300 200
162.08

100 0

50.85

42.51

2005-06

29.33

2006-07

2007-08

Regular Premium Commission

LIC 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Private players
4792.32 4459.48 4460.49

2005-06

3468.25 1333.57

2006-07

2760.17

2007-08

Renewal Premium Commission

LIC Private players 5000 4500
4650.89

4000
3969.82

3500
3469.85

3000 2500 2000 1500 1000 500 0

578.46 180.19 306.96

2005-06

2006-07

2007-08

Total Premium Commission

LIC Private players 10000 9000
9173.58 9614.69

8000 7000 6000 5000 4000 3000 2000 1000 0

1543.1 7100.19

5089.61

3109.65

2005-06

2006-07

2007-08

Operating Expenses
LIC 14000 12000 10000 8000
7080.86 8309.32 12032.46

Private play ers

6000 4000 2000 0

6520.04

2005-06

6041.65 3569.48

2006-07

2007-08

Commission Expense Ratio Commission 100 X

Expense Premium Underwritten

Operating Expense Ratio Operating Expense X 100

Premium Underwritten

Commission Expense Ratio 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

Private players

Single Premium
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

Private players
1.57 1.49

Regular Premium
LIC 30 25 20 15 10 5 0 2005-06 2006-07 2007-08 25.26 Private players

17.72

17.68 16.03

17.01 15.56

Renewal Premium
LIC Private players 5.54 5.18 6 5 4 3 2 1 0 3.74 5.57

3.48

3.24

2005-06

2006-07

2007-08

Total Premium
LIC Private Players 10.98 9.42 7.18 12 10 8 6 4 2 0 2005-06 2006-07 2007-08 10.23 7.82

6.42

Operating Expense Ratio

LIC 25 23.66 Private players 23.01 23.34 20

15

10 6.65 5 5.54 5.55

0 2005-06 2006-07 2007-08

Market share Fist year Premium

LIC Private Players
Private Players, 33715.97, 35.98%

LIC, 59996.57, 64.02%

Single Premium
LIC Privatte players Privatte players, 5049.8, 13.01%

LIC, 33774.56, 86.99%

Regular Premium
LIC Private players

Private players, 28666.15, 52.23%

LIC, 26222, 47.77%

Renewal Premium
LIC Private Players Private Players, 17845.47, 16.58%

LIC, 89793.42, 83.42%

Total Premium
LIC Private Players Private Players, 51561.42, 25.61% LIC, 149789.99 , 74.39%

Claims Paid By life Insurers

C im P i la s ad C im Wi nB c la s rtte a k 10 0 9 5 9 0 8 5 8 0 7 5 7 0 6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0
9 .7 6 1

C im R p d te la s e u ia d C im P n in la s e d g

7 .9 8 3

1 .1 0 7

1 .8 0 8

1 3 .1

0 6 .0

2 .1

0 1 .0

L IC

P iv teP y r r a la e s

Market share* from 2000-01 to 2007-08

LIC Private Players
9.33%
100%

0.54% 2.01% 4.68%

90%

14.25%

18.01% 25.61%

80%

70%

60%

50%

100% 99.46% 97.99% 95.32%

90.67%

40%

85.75%

81.90%

74.39%

30%

* In Terms of Total Premium

20%

10%

0% 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Poit o y a 2 0 - 8 r f f e r 0 70 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 0 10 0 0 -0 10 -0 20 -0 30 -0 40 -0 50 -0 60 -0 70 -0 80 -0 90 - 00 10 - 10 10 - 20 10 - 30 10 - 40 10 - 50 10
B
85 4

3 4

2 1

5 -0 3 -6 2

-8 7 -9 11 -4 24 -5 27 -9 27 -3 39 -4 45 -0 22

-4 22

-6 78

lif e

S bi ot lif ak e m ah in d

V ys ya

ta nd a

- 35 19

vi va ah ar a lif e S hr ira m lif e B ha rt i A F ut xa ur e G e ne ra ID li B I F or t ie s S

en t ia l

rd

ew yo rk

nc e

ra A ig

su n

aj aj

et lif

ru d

lia

T at a

IN G

R e

irl

fc

Ic ic i

H d

ax

LI C

Life Fund Of LIC

2005-06 700000 600000 500000 400000 300000 200000 100000 0 2005-06 2006-07 2007-08 463147.62 560806.33 686616.45 2006-07 2007-08

Findings And Conclusion

There is only 1 public company exist in Indian life insurance market which is LIC and there are 21 other private company 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--vis its competitors. To retain its market leader status the LIC needs to acquire competitiveness.

Cont.

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.

Cont.

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%, which is increase of 41.50%. 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.

Bibliography

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