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DIST. THANE 421305


I Mr. SHADIL KHALIL MOMIN, Exam No. student of B.N.N College,

Bhiwandi of T.Y. B.M. S {FINANCE}, Semester V, hereby declare that I have
AND PRIVATE INSURANCE COMPANIES is a record of independent
research work carried by me during the academic year 2017-2018 under the
guidance of Ms. NEELAM PATIL. The information submitted is true and
original to the best of my knowledge.



To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr Ashok D. Waghfor providing the necessary

facilities required for completion of this project.

I take this opportunity to thank our Coordinator Dr. Suvarna T. Rawal, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide Ms.
NEELAM PATILwhose guidance and care made the project successful.

I would like to thank my CollegeNirlon Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.




Since 1991, Indian economy and industry has moved away from a state controlled to a
competitive market with integrated financial services to the global economy. The
financial sector, particularly, the Insurance has opened up to all competition. A revamp in
tightly regulated and monopolis insurance sector was brought about by the passage of the
Insurance Regulatory and Development Authority Act (IRDA) in 1999. The present
paper analysis the performance of public and private life insurance companies in India.
As per the total premium income, in FY 201 4-15, LIC with 73% of business share still
holds a significant market share. 24 private insurance companies have established
footholds in the market leading to intense competition. Private Insurance companies have
a higher growth rate as compared to public sector. Today, Insurance penetration is better.
The Insurance companies are competing in terms of policies sold, collection of premium
income and other

Life Insurance is a professional service which is characterized by high involvement of the

consumers, due to the importance of tailoring specific need, the variability of the
products available, the complexity involved in the policies and processes and ultimately
the need to involve the consumer in every aspect of the transaction. Life insurance more
fondly known as Life Assurance has, in recent times ceased to be only a Protection or
'Legacy' for the family and has turned into an important investment outlet. India
economic development made it a most lucrative Insurance market in the world. Before
the year 1999, there was monopoly state run Life Insurance Corporation of India (LIC)
transacting life business. Today, there are 24 private life insurance companies operating
insurance business in India. The competition from these companies were threatening to
the existence of LIC. Since the liberalization of the industry the insurance industry has
never looked back and today stand as the one of the most competitive and exploring
industry in India. In this paper, an attempt is made to analysis
the performance of public andprivate life insurance companies in India.

. During the mushrooming of insurance companies many financially The story of

insurance is probably as old as the story of mankind. The same instinct that prompts
modern businessmen today to secure themselves against loss and disaster existed in
primitive men also. They too sought to avert the evil consequences of fire and flood and
loss of life and were willing to make some sort of sacrifice in order to achieve security.
Though the concept of insurance is largely a development of the recent past, particularly
after the industrial era past few centuries.

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 1938unsound 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-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 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, 113 divisional offices,
8 zonal offices, 1381 satelite offices and the Corporate office. LICs Wide Area Network
covers 113divisional 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 Centre 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.

Life has always been an uncertain thing. To be secure against unpleasant

possibilities,always requires the utmost resourcefulness and foresight on the part of man.
To prayer to pay for protection is the spirit of the humanity. Man has been accustomed
topray God for protection and security from time immemorial. In modern daysInsurance
Companies want him to pay for protection and security. The insurance mansays "God
helps those who help themselves"; probably he is correct.Too many people in this
country are not in employment; and work for too many nolonger guarantees income
security. Several millions are part-time, self employedandlow-earning workers living
under pitiable circumstances where there is no securitycover against risk. Further the
inherent changing employment risks, the prospect of continual change in the work place
with its attendant threats of unemployment andlow pay especially after the adoption of
New Economic Policy and the imminent lifecycle risks - a new source of insecurity
which includes the changing demands of family life, separation, divorce and elderly

are tormenting the society Risk has become central to one's life. It is within this
background life insurance policyhas been introduced by the insurance companies
covering risks at various levels. Lifeinsurance 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 live hoodfor the insured or dependents. This is to make the right to life
meaningful, worthliving and right to livelihood a means for sustenance. Therefore, it goes
without saying that an appropriate life insurance policy within the paying capacity and
meansof the insured to pay premium is one of the social security measures envisaged
underthe Indian Constitution. Hence, right to social security, protection of the family
economic empowerment to the poor and disadvantaged are integral part of the right tolife
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.
At the end of the financial year 2015-16 we have 10 plans for sale under individual
business.The product satisfy the different needs of various segments of society.The plans
are Endowment type. Money Back type, Heath, pension type plans etc.

Different Plans

1. LICs Jeevan Aarogya(Plan No.904)

2. LICs Jeevan Akshay (Plan No.189)
3. L LICs Single Premium Endowment Plan (Plan No.817)
4. LICs New Endowment Plan (Plan No814)
5. LICs New Jeevan Anand (Plan No.815)
6. LICs New Money Back-20 years(Plan No.820)
7. LICs Need Money Back -25years(Plan No.821)
8. LICs New Bima Bachat (Plan No.816)
9. LICs New Jeevan Managal(Plan No.819)
10. LICs New Jeevan Nidhi (Plan No.818)

To perform the functions of tile Life Insurance Corporation of India, a committee

consisting of 15 members is appointed by the Central Government. One of these
members is also appointed as the chairman. The organization structure of Life
Insurance Corporation of India has four-tier structure. They are (A) Central Office (B)
Zonal Offices (Seven) (C) Divisional Offices (100) (D) Branch Offices (2048). The
Central Office is to perform the activities relating to investments, framing and
administering the rules and laws of the corporation. Branch Offices carryout almost
90% of the functions related to policyholders. There are seven Zonal Offices and 100
Divisional Offices, which are established on the basis of geographical areas. They are
discharging their co-ordinating functions relating to the Central Offices and Zonal
Offices. The Central Office of Life Insurance Corporation of India is located in
Mumbai. There are several executive committees appointed by the Government of
India from time to time to review the activities of the Life Insurance Corporation of








(HOT 50)

LaxmiInsurance Co. Similarly, Andhra Insurance was started in Masulipatnam, with the
initiative of stalwarts like Dr. PattabhiSitaramaiah. From political platforms also, national
leaderssupported this cause. It is duty to every Indian to support only Indian Insurance.
The keynoteof our Swaraj is in placing all our insurance with our Indian companies", said
MahatmaGandhi in his message. "I hope Indians will realize the importance of patriotism
only throughIndian insurance institution", stated Pandit Jawaharlal Nehru. Thus, the
cause of Indianinsurance became a national issue. The pursuit to boost Indian insurance
represented acrusade to extricate the Indian economy from foreign domination.

The growth of Life Insurance in concrete terms could be said to being during the first
twodecades of twentieth century when most of the major companies were founded. They
grew in terms of rise in the number of With the advent of the 20th century, the glorious
renaissance of swadeshi days dawned. Atthe same time, well- to do Indians realized the
potentiality of Indian Insurance business. TheSwadeshi movement of 1905-1907 gave
rise to more insurance companies. The United Indian Madras, National Indian and
National Insurance in Calcutta and the Co-operativeAssurance at Lahore were established
in 1906. In 1907, Hindustan Co-operative InsuranceCompany took its birth in one of the
rooms of the Jorasanko House of the great poetRabindranath Tagore, in Calcutta. The
Indian Mercantile (1907) was started in Bombay,

General Assurance (1908) at Ajmer and the Swadeshi Life (Later Bombay Life) in
Bombayin 1908.The end of the First World War (1914-18) witnessed an influx of
insurance companies inIndia. Famous Indian business houses started new insurance
companies. Industrial andPrudential Bombay, Western India, Satara, were floated before
the war, but by 1919,companies like Jupiter General, New India, Vulcan Insurance
Company etc. came into being.PanditK.Santhanam with blessing of LalaLajpatRai and
PanditMotilal Nehru start companies, in terms of number of policies and sum assured
aswell as total life fund. Indian Insurance Year Book, published for the first time in 1914,
givesthe 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 thenext 25 years their number rose to 176. The total progress on all the
primary heads, viz. lifefund (Rs. 50.50 crore), premium income (Rs. 10.50 crore) and
new business (Rs. 43.30 crore)indicate that Indian Insurance Business had been making a
definite headway during thisyears. 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 insurancecompanies 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 andinsurance business in India.


This was the first step taken towards the nationalization of life insurance business in India
On 20th January, 1956 all life insurance companies were taken over by 43
nominatedcustodians. The custodians were experienced senior executives of private
insurancecompanies, reporting directly to the Finance Ministry. From the word go, the
complex task of running the industry on a permanent basis and continuing the services to
policy holderswithout interruption were their major concerns. The actual work of
integration had to awaitlegislation. The custodians managed the insurance companies till
1-09-1956, when LifeInsurance Corporation was established under the general direction
and control of the Ministryof Finance The Ordinance provided for the transfer of the
control of 154 Indian insurers, 16 non Indianinsurers and 75 provident societies. These
arrangements were designed to ensure that nonconvenience whatsoever was caused to the
policy holders. With the Government take overthe management aimed towards the
evolution of a common uniform premium rate, policyconditions and service and working
procedures and above all to help promote team spirit The corporation, a body corporate
shall consist of not more than 15 members appointed bythe Central Government, one of
them being appointed by the government as chairman The capital of the corporation
was at Rs 5 crore provided by the central government.
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N Malhotra was formed to evaluate the Indian Insurance industry and recommended its
futuredirection.TheMalhotra committee was set up with the objective of complementing
the reforminitiated in the financial sector The reforms were aimed at "creating a more
efficient and competitive financial systemsuitable for the requirements of the economy
keeping in mind the structural changes currentlyunderway and recognizing that insurance
is an important part of the over all financial systemwhere it was necessary to address the
need for similar reforms...".In 1994, the committee submitted the report and some of the
key recommendations included:


Government stake in the Insurance Companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.

All the insurance companies should be given greater freedom to operate


Private Companies with minimum paid up capital of Rs.1 bn should be allowed toenter
the industry.

No Company should deal in both Life and General Insurance through a single entry.

Foreign Companies may be allowed to enter the industry in collaboration with

thedomestic companies.

Postal Life Insurance should be allowed to operate in the rural market.

Only one State Level Life Insurance Company should be allowed to operate in eachstate.


The Insurance Act should be changed

An Insurance Regulatory Body should be set up.

Controller of Insurance (Currently a part from the Finance Ministry)should be


Mandatory Investments of LIC Life Fund in government securities to be reduced

from75% to 50%.

GIC and its subsidiaries are not to hold more than 5% in any company (There
currentholdings to be brought down to this level over a period of time).


LIC should pay interest on delays on payments beyond 30 days.

Insurance Companies must be encouraged to set up unit linked pension plans

Computerization of operations and updating of technology to be carried out in the

insurance industry The committee emphasized that in order to improve the customer
service and increase thecoverage of insurance industry should opened up to competition.
But at the same time, thecommittee felt the need to exercise caution as any failure on the
part of new players couldruin the public confidence in the industry Hence, it was decided
to allow competition in a limited way by stipulating the minimumcapital requirement of
Rs. 100 crores. The committee felt the need to provide great autonomy to insurance
companies in order to improve their performance and enable them toact as independent
companies with economic motives. For this purpose, it had proposedsetting up an
independent regulatory body.



Reforms in the Insurance sector were initiated with the passage of the IRDA Bill
inParliament in December 1999. The IRDA since its incorporation as a statutorybody in
April 2000 has fastidiously stuck to its schedule of framing regulations andregistering the
private sector insurance companies The other decision taken simultaneously to provide
the supporting systems to theinsurance sector and in particular the life insurance
companies was the launch of the IRDA's online service for issue and renewal of licenses
to agents The approval of institutions for imparting training to agents has also ensured
thatthe insurance companies would have a trained workforce of insurance agents inplace
to sell their products, which are expected to be introduced by early next year Since being
set up as an independent statutory body the IRDA has put in aframework of globally
compatible regulations. In the private sector 14 lifeinsurance companies have been

Under the IRDA Act, private companies can now operate in India's insuranceindustry.
However, they must obtain a license from the IRDA before being permitted to write
business To have its license application considered, a domestic private company must
beregistered in accordance with the Companies Act of 1956 and have approximatelyUS$
20 million of investment capital. The specific licensing requirements thatPrivate Indian
Companies must fulfill are set forth in the Registration on IndianInsurance Companies
Regulations, published by the IRDA 2000.


The IRDA Act also lifts certain barriers to foreign direct investment in Indianinsurance
industry Global insurers are now permitted to set up and register a domestic company
inorder to write business in India. However, regulations stipulate that they have a capital
base of at least US $ 20 million, and their investment in such company iscapped at 26
percent. Thus, to participate in the market, they must form a jointventure with an Indian
partner that is able to invest the remaining funds The equity investments limit is the same
for global reinsures seeking to writebusiness in India, but they are required to put up a
capital of approximately US$ 45million in order to establish a domestic company.
Since the IRDA first enacted these rules, 13 new life insurance companies haveentered the market On
the other hand, no global reinsurer has established a domestic company.Instead, most of
the top international reinsurance companies operate from theiroverseas offices by sharing
the reinsurance risks picked up by the GIC. A recentproposal has been put forward to
increase foreign direct investment to 49 percent.In addition, global companies are
pushing for the right to establish branch officesin India. These changes are likely to
substantially increase the presence of international insurers, reinsurers, and brokers in
India.The IRDA Insurance Brokers Act in India 2002 permitted overseas insurance
andreinsurance brokers to enter the market, but with the same equity cap as thatgoverning
the operations of foreign insurers and reinsurers. Thus, foreign brokersmust also form a
joint venture with an Indian partner in order to establish an Indianbroking house.The
2002 IRDA legion established four broker categories, one of whichbrokers must select
when applying for a license:1.Category 1A : Direct General Insurance
Broker2.Category 1B : Direct Life Insurance Broker3 . C a t e g o r y 2
: R e i n s u r a n c e B r o k e r 4 . C a t e g o r y 3 : C o m p o s i t e B r o k e r 5.Category4:
Others, for example Insurance Consultants and Risk Management
Consultants.Each category has different solvency margins and capital adequacy ratios,
and allcategories need to carry professional indemnity insurance at different
minimumlevels.In the years since market liberalization was initiated, the insurance sector
haswitnessed some impressive changes. The needs of insurance and reinsurancebuyers
have grown; the market is introducing new products to address these needsand the
services of brokers are now seen as critical to making informed insuranceand reinsurance

1 Aviva life ins. Co. India Pvt.Ltd: It offers GrameenSuraksha for the over income

2] Bajaj Allianz Life Insurance Co. Ltd: It offers products like

3] Bajaj Allianz Jana VikasYojana.

4] Bajaj Allianz SaralSurakshaYojana.

5] Bajaj Allianz Alp NiveshYojana.

6] Birla Sun life ins. Co. LTD: The Birla insurance has introduced some life insurance
products like

7] Birla Sun Life Insurance BimaSuraksha Super.

8] Birla Sun Life Insurance BimaDhanSanchay.

9] DLFPramerica Life InsuranceCo. Ltd. It offers a single micro insurance policy called

10] ICICI Prudential Life Insurance Co. Ltd; The company provides insurance known as
ICICI Prud. Sarv Jana Suraksha

11] IDBI Fortis Life Insurance Co.Ltd: The name of the product is IDBI Fortis
Group Micro in-surance Plan

12] Vysya Life Insurance Co.Ltd: It also provides a single policy called ING

13] Life Insurance Corporation of India: It is biggest company in the Insurance

sector. The LIC offers certain products like LIC's JeevanMadhur.

14] LIC'sJeevanMangal.

15] Met Life India; The single policy of the Met Life is Met Vishwas

16] Sahara India Life Insurance Co. Ltd; The Sahara Sahayog (Micro Endowment
Insurance without profit plan) is one innovative policy of the company.
17] SBI Life Insurance Co. Ltd.: The SBI Life Gramin Shakti and SBI Life Grameen
Super Su-raksha are the two products offered by SBI.

18] Shriram Life Insurance Co. Ltd: the two policies are Shriram life insurance
are ShriSahay and Sri Sahay (AP).

19] Star Union Dai-ichiLifeInsurance Co. Ltd.: The product offered by the
company is SUD Life ParasparSuraksha Plan.

20] TATA AIG Life Insurance Co.Ltd: There are four policies offered by TATA.
They are;
Tata AIG SumangalBimaYoja

So at present there are 24 insurance companies who provide micro insurance products to
the low income group people. All these companies are registered under the IRDA Act
Private companies that are in life insurance sector are as under

AEGON Religare Life Insurance

Edelweiss Tokio Life Insurance Co. Ltd
Aviva India
Shriram Life Insurance
Bajaj Allianz Life Insurance
Bharti AXA Life Insurance Co Ltd
Birla Sun Life Insurance
Canara HSBC Oriental Bank of Commerce Life Insurance
Star Union Dai-ichi Life Insurance
DLF Pramerica Life Insurance
Future General Life Insurance Co Ltd
HDFC Standard Life Insurance Company Limited
ICICI Prudential Life Insurance Company Limited
IDBI Federal Life Insurance
IndiaFirst Life Insurance Company
ING Life Insurance
Kotak Life Insurance
Max Life Insurance
PNB MetLife India Life Insurance
Reliance Life Insurance Company Limited
Sahara Life Insurance
SBI Life Insurance Company Limited
TATA AIA Life Insurance

reports of LIC. Secondary data were collected from annual reports of IRDA, IRDA
journal and Life Insurance Today.
Besides, a few websites have also been consulted. For the analysis of data, statistical
tools like percentages, ratios, growth
rates and coefficient of variation were used.
The study aimed to examine the financial performance of Indian life insurance companies
through analyzing the determinantsof their profitability. Measuring the performance of
insurance companies has gained the relevance because they are not the mechanism of
saving money and transferring risk but also helps to channel funds in an appropriate way
surplus economic units to deficit economic units so as to support the investment activities
in the economy. Performance of
companies can affect economy as a whole and therefore it requires empirical analysis to
judge the performance. For
measuring financial performance, financial ratios such as current ratio, solvency ratio,
return on assets ratio and insurance

In the years since the IRDA Act initiated market reforms, the insurance sector
hasexperienced some remarkable changes.The entry of a large number of Indian and
Foreign private companies in life insurance business has to lead greater choice in terms of
products and services.Increased consumer awareness of the benefits and importance of
insurance andreinsurance has generated many more buyers; and new distribution
channels_among them brokers, bank assurance, the Internet, and corporate agents_
haveprovided additional ways of getting products and services to customers.


The mechanism of insurance is very simple. People who are exposed to the same risks
cometogether and agree that, if any one of them suffers a loss, the others will share the
loss andmake good to the person who lost. All people who send goods by ship are
exposed to thesame risks, which are related to water damage, ship sinking, piracy, etc.
Those owningfactories 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 beidentified 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 thesame time) is divided into bearable small losses by all. In other
words, the risk is spreadamong the community and the likely big impact on one is
reduced to smaller manageableimpacts on all.If a Jumbo Jet with more than 350
passengers crashes, the loss would run into several croresof rupees. No airline would be
able to bear such a loss. It is unlikely that many Jumbo Jetswill crash at same time. If 100
airline companies flying Jumbo Jets, come together into aninsurance pool, whenever one
of the Jumbo Jets in the pool crashes, the loss to be borne byeach 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
fairarrangement. 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 theburden. The second is that the perils should occur in an accidental
manner. Nobody should bein a position to make the risk happen. In other words, none in
the group should set fire to hisassets 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. Theoccurrence 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 may beproportional to the risk that each person is exposed
to. This would be indicative of the benefit the would receive if the peril befell him. The
share could be collected from the members afterthe loss has occurred or the likely shares
may be collected in advance, at the time of admission to the group. Insurance companies
collect in advance and create a fund from whichthe losses are paid.The collection to be
made from each person in advance is determined on assumptions. Whileit may not be
possible to tell beforehand, which person will suffer, it may be possible to tell,on the
basis of past experiences, how many persons, on an average, may suffer losses.
Thefollowing two examples explain the above concept of insurance:

Example 1In a village, there are 400 houses, each valued at Rs. 20000. Each year, on the
average, 4houses get burnt, resulting into a total loss of Rs. 80000. If all the 400 owners
come together rand 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 spreadover 400 house-owners of the village.Example 2There are 1000
persons who are all aged 50 and are healthy. It is expected that of these, 10persons may
die during the year. If the economic value of the loss suffered by the family of each dying
person is taken to be 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 par Rs. 20000 to the family of each of the ten persons
who die.Thus, the risks in the case of 10 person, are shared by 1000 persons.

Insurance of Human Asset

A human being is an income generating asset. One

s manual labour, professional skills andbusiness acumen are the assets. This asset also
can be lost through unexpectedly early deathor through sickness and disabilities caused
by accidents. Accidents may or may not happen.Death will happen, but the timing is
uncertain. If it happens around the time of one

retirement, when it could be expected that the income will normally cease, the
personconcerned could have made some other arrangements to meet the continuing
needs. But if ithappens much earlier when the alternate arrangements are not in place,
there can be losses tothe person and dependents. Insurance is necessary to help those
dependent on the income.A person, who may have made arrangements for his needs after
his retirement, also wouldneed insurance. This is because the arrangements would have
been made on the basis of someexpectations like, likely to live for another 15 years, or
that children will look after him. If any of these expectations do not become true, the
original arrangement would becomeinadequate and there could be difficulties. Living too
long can be as much a problem as dyingtoo young. Both are risks, which need to be
safeguarded against. Insurance takes care.
Role of Insurance in Economic Development
For economic development, investments are necessary. Investments are made out of
savings.A 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 intoinvestments for economic growth.As on 31.3.2002, the total investments
of the LIC exceeded Rs. 245000 crores, of which morethan Rs. 130000 crores were
directly in Government (both State and Centre) relatedsecurities, more than Rs. 12000
crores in the State Electricity Boards, nearly Rs. 20000 croresin housing loans and Rs.
4000 crores in water supply and sewerage systems. Otherinvestments included road
transport, setting up industrial estates and directly financingindustry. Investmentsin the
corporate sector (shares, debentures and term loans) exceededRs. 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 interest for the
benefit of the policyholders. The management of life insurance companies arerequired to
keep this aspects in mind and make all its decisions in ways that benefit thecommunity.
This applies also to its investments. That is why successful insurance companieswould
not be found investing in speculative ventures. Their investments, as in the case of
theLIC, benefit the society at large.Apart from investments, business and trade benefit
through insurance.


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 eachcategory (size. growth, productivity and efficiency)3.To compare grievance
management of LIC and private insurance companies.

a.Type of research design : Analytical Researchb . D a t a c o l l e c t i o n : S e c o n
d a r y S o u r c e s c . S t a t i s t i c a l T o o l s : R a t i o A n a l ys i s Bar Graph

In this research my research objective was to compare the performance of LIC and
Privateinsurance companies. For this purpose I decided the four broad categories under
which I havecompared the LIC and Private insurance companies. These are:

Total Premium

Total Income

Size of Balance Sheet

Total number of Policies

Total number of Branches2 . G r o w t h

Growth in Premium

Growth in Income

Growth in number of Policies

Growth in Market share3 . P r o d u c t i v i t y

Business per Branch

Income per Branch

New Premium per Branch4 . G r i e v a n c e h a n d l i n g I have used the Secondary data

of last five financial years. I have collected data from thevarious balance sheet of LIC and
other private insurance companies, web sites and in somecases I personally met some
employees of some insurance companies. I tried to find out mostof the information
required to compare the LIC and private insurance companiesIn 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 Pointshave been
multiplied with the weightage of that factor. And then after the analysis of eachfactor a
consolidated point table has been prepared to know that which sector is performingbetter
than other.


LIC is the giant of the insurance sector. The overall size of LIC is much more thanthat of
all private insurance companies. Private insurers are in expansion mode andare
increasing their size but are still much behind LIC. Total premium deposits inLIC is
much higher than the private insurance companies. Total premium of LIC inFY 07-08
was 149789 crores which three times more than that of private insurancecompanies.

Income of LIC is much greater than private insurance companies. Last year totalincome from
investments of LIC was 48244.14 crores which was nearly equal to thetotal income of the
all private insurance companies. By this we can imagine how bigthe 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 establishedplayer in the field
of insurance and many private companies have just started theirbusiness. Hence it is
obvious that LIC is having large number of policyholders.

Number of branches of private insurance companies is increasing as the new playersare

entering in this market. Also the established players are in expansion phase andhence are
expanding there business. There are many private insurance companies andhence there
total number of branches has gone past LIC in the last financial year. Butoffices of
private insurance companies are mostly in urban areas and still it is LICwhich covers
most of the area.
Hence we see that LIC is leading when it comes to size. It is giant in insurancesector
having huge network and customer base.

We see that due to excellent service quality and attractive offers private
insurancecompanies have started getting a number of customers. They are growing
rapidly.Though LIC is also increasing its customer base but private insurance companies
aremoving at a fast pace.

Though the income of private insurance companies is negligible when compared but
then also the pace with which they are increasing their income is tremendousPrivate
insurance companies are expanding their business and will certainly going togive a tough
competition to LIC in the coming days.

LIC is certainly having a large customer base. Private insurance companies are nothaving
that much number of customer base but they are increasing it rapidly. Theyhave registered a
decent growth of 104.64 % in number of new policies in the year2006-07. Last year also their growth rate
was 67.4 %.

LIC, being the oldest player in the existing insurance market, has the biggest marketshare
of 73.9 % which was 87.3% five years earlier. We see that private insurancecompanies are
penetrating in the customer base of LIC.

Overall we can see that private insurance companies are giving a toughcompetition
to the LIC and will certainly create a good business for them selves the coming days.

There are many new entrants in this sector. There are many private insurancecompanies
who have reported loss in this and previous years. This is the main reasonwhy 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
privateinsurance companies in this field. They are undoubted champions in insurance
when itcomes to profit earning.

New business is increasingly going towards private insurance companies but still
thecustomer base of LIC is very strong. In issuing new policies per branch also, they
areahead of private insurance companies though not by very large margin.

Customer base of LIC is very strong and still business per branch, profit perbranch
or premium per branch, they are leading much ahead of privateinsurance

LIC has 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
rapidincrease in customer base of private insurance companies which can be very
muchaffected by this factor.

Overall we have seen that still LIC is very famous but private insurance companies
aregrowing at exceptionally fast pace. Private companies show due concern in
grievancemanagement and brings innovative schemes to attract the cu
Review of literature

In order to find out the gaps in research, the literature already available pertaining to
theproblem is to be reviewed. The literature on general Insurance Corporation in India
includes books, compendia, study reports and articles published by academicians and
researchers in different periodicals. The review of this literature gives an idea to
concentrate on the unexplored area and to make the present study more distinct from
other studies. The available is presented below:
1) Dr. S.M. TarjaqZafar ,Ms. RitikaAggarwal (March 2013) in their article on
financial performance of Indian General Insurance Companies in pre-recession
Period this particular paper analyze their qualitative and quantitative performance and
comparatively analyze insurance companies efficiency and profitability position.
2 Srivastava, D.C. and Srivastava, S (2001) in his article on Indian insurance industry-
transition and prospects discuss analytically the financial significance of insurance
industry, its contribution to Indian economy and also the transitory prospects and
challenges of insurance i
ndustry due to liberalization and the opening up of the sector to private players.

3 Dr. SonalNena (Dec 2013) in her Paper titled Performance Evaluation of LIC of
India has reviewed the importance, working, Operating Efficiency and Growth of LIC
of India.

4 Charles P Jones (2002) in his book on Investment analysis and Management

Explains clearly about the framework for evaluating portfolio performance through return
and risk considerations.

Company analysis

In December 1999, a bill was passed in the parliament with the passage of Insurance
Regulatory and Development Authority for its reform process. However with the setting
up of IRDA, the government has once again deregulated the sector by opening it for the
private players. Life Insurance Corporation of India (L.I.C.I) dominated the Indian Life
Insurance market. But the situation drastically changed since the beginning of the year
2000. With the development of the IRDA Act in 1999, private players started entering
into the life insurance market. At the end of March 2015, there are 53 insurance
companies operating in India; of which 24 are in the life insurance business including
one public sector company (L.I.C. of India) and 28 are in non-life insurance business. On
the basis of total premium income, the market share of LIC decreased from 75.39 per
cent in 2013-14 to 73.05 per cent in 2014-15. The market share of private insurers has
increased from 24.61 per cent in 2013-14 to 26.95 per cent in 2014-15. So, we can say
that the state-owned Life Insurance Corporation (LIC) still holds a significant majority of
market share, though, other companies have established footholds.

1.AyemPerumal S.,(2010), Impact of Economic Globalisation and Consumer

Expectation in Life Insurance, Southern Economist, Vol. 48, No. 21, March 1..

2.Ifran Ahmed, (2008), "Indian Insurance Industry: Challenges and Prospects", Monthly
Public Opinion Surveys, January.

3.MadhukarPalli,(2006) "A Study on Assessing Life Insurance Potential in India",

Bimaquest, Vol. 6, Issue 2, July

4. Kumar, M. and VimalPriyan, J.(2010),"Indian Life Insurance Industry: Prospect for

Private Sector", The Journal of Insurance Institute of India, No. XXXVI,January- June.

5. Rajendran, R. and Natarajan, B.(2009),The Impact of LPG on Life Insurance

Corporation of India (LIC),Asia Pacific Journal of Finance and Banking Research, Vol.

3, No. 3.