CHAPTER II

LIFE INSURANCE CORPORATION-

A PROFILE

Life Insurance Corporation of India (LIC) was established on 1

September 1956, to spread the message of life insurance in the
country and mobilise people’s savings for nation-building activities.
LIC with its central office in Mumbai and seven zonal offices at
Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and Bhopal,
operates through 100 divisional offices in important cities and 2,048
branch offices. LIC has 5.59 lakh active agents spread over the
country.

The Corporation also transacts business abroad and has offices in

Fiji, Mauritius and United Kingdom. LIC is associated with joint
ventures abroad in the field of insurance, namely, Ken-India
Assurance Company Limited, Nairobi; United Oriental Assurance
Company Limited, Kuala Lumpur; and Life Insurance Corporation
(International), E.C. Bahrain. It has also entered into an agreement
with the Sun Life (UK) for marketing unit linked life insurance and
pension policies in U.K.
In 1995-96, LIC had a total income from premium and investments of
$ 5 Billion while GIC recorded a net premium of $ 1.3 Billion. During
the last 15 years, LIC's income grew at a healthy average of 10 per
cent as against the industry's 6.7 per cent growth in the rest of Asia
(3.4 per cent in Europe, 1.4 per cent in the US).

LIC has even provided insurance cover to five million people living
below the poverty line, with 50 per cent subsidy in the premium rates.
LIC's claims settlement ratio at 95 per cent and GIC's at 74 per cent
are higher than that of global average of 40 per cent. Compounded
annual growth rate for Life insurance business has been 19.22 per
cent per annum.

The introduction of private players in the industry has added to the

colors in the dull industry. The initiatives taken by the private players
are very competitive and have given immense competition to the on
time monopoly of the market LIC. Since the advent of the private
players in the market the industry has seen new and innovative steps
taken by the players in this sector. The new players have improved
the service quality of the insurance. As a result LIC down the years
have seen the declining phase in its career. The market share was
distributed among the private players. Though LIC still holds the 75%
of the insurance sector but the upcoming natures of these private
players are enough to give more competition to LIC in the near future.
LIC market share has decreased from 95% (2002-03) to 82 %( 2004-
05).
The Life Insurance Corporation of India (LIC) is the largest state-
owned life insurance company in India, and also the country's largest
investor. It is fully owned by the Government of India. It also funds
close to 24.6% of the Indian Government's expenses. It has assets
estimated of 9.31 trillion (US$202.03 billion). It was founded in 1956
with the merger of more than 200 insurance companies and provident
societies.

Headquartered in Mumbai, financial and commercial capital of India,

the Life Insurance Corporation of India currently has 8 zonal Offices
and 101 divisional offices located in different parts of India, at least
2048 branches located in different cities and towns of India along with
satellite Offices attached to about some 50 Branches, and has a
network of around 1.2 million agents for soliciting life insurance
business from the public.

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."
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.

SWOT analysis of LIC:

Strengths:
• It is the oldest and most well experienced player having a Pan
India presence.
• LIC has a strong and very well developed distribution network.
• It is having a huge consumer base and is evolved as one of
the most powerful brands of the country.
• It has a large product portfolio and claim settlement is easier
to get.
• It has the advantage of its own as the government guarantee
is accompanied with it.

Weakness:
• Its employees and other staff are lethargic and least
motivated to render prompt and sincere customer service.
• Agents not taking into account the needs of people and
promote policies having high commissions only.
• Very slow decision making process and internal
problems between top management and lower cadre staff.
 • Large scale corruption in offices.

Opportunities:
• Emergence of a huge middle income consumer market
in the country.
• People becoming more aware and demanding so there
is scope for a whole lot of innovative products.
• Pension markets, health insurance and large real estate
portfolio.

Threats:
• There is too much internal discord.
• Entry of new private players in industry.

History:

The Oriental Life Insurance Company, the first corporate entity in

India offering life insurance coverage, was established in Calcutta in
1818 by Bipin Behari Dasgupta and others. Europeans in India were
its primary target market, and it charged Indians heftier premiums.
The Bombay Mutual Life Assurance Society, formed in 1870, was the
first native insurance provider. Other insurance companies
established in the pre-independence era included

• Bharat Insurance Company (1896)

• United India (1906)
 • National Indian (1906)
• National Insurance (1906)
• Co-operative Assurance (1906)
• Hindustan Co-operatives (1907)
• Indian Mercantile
• General Assurance
• Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic

conditions. It witnessed, India's First War of Independence, adverse
effects of the World War I and World War II on the economy of India,
and in between them the period of world wide economic crises
triggered by the Great depression. The first half of the 20th century
also saw a heightened struggle for India's independence. The
aggregate effect of these events led to a high rate of bankruptcies
and liquidation of life insurance companies in India. This had
adversely affected the faith of the general public in the utility of
obtaining life cover.

The Life Insurance Act and the Provident Fund Act were passed in
1912, providing the first regulatory mechanisms in the Life Insurance
industry. The Indian Insurance Companies Act of 1928 authorized the
government to obtain statistical information from companies operating
in both life and non-life insurance areas. The subsequent Insurance
Act of 1938 brought stricter state control over an industry that had
seen several financially unsound ventures fail. A bill was also
introduced in the Legislative Assembly in 1944 to nationalize the
insurance industry.
Nationalization:

In 1955, parliamentarian Amol Barate raised the matter of insurance

fraud by owners of private insurance companies. In the ensuing
investigations, one of India's wealthiest businessmen, Ram Kishan
Dalmia, owner of the Times of India newspaper, was sent to prison
for two years. Eventually, the Parliament of India passed the Life
Insurance of India Act on 1956-06-19, and the Life Insurance
Corporation of India was created on 1956-09-01, by consolidating the
life insurance business of 245 private life insurers and other entities
offering life insurance services. Nationalization of the life insurance
business in India was a result of the Industrial Policy Resolution of
1956, which had created a policy framework for extending state
control over at least seventeen sectors of the economy, including the
life insurance.

LIC of India is the one and only public sector life insurance
Company in India. Some of the important milestones in the life
insurance business inIndia are:

1818: Oriental Life Insurance Company, the first

l i f e i n s u r a n c e company on Indian soil started functioning.

1 8 7 0 : B o m b a y M u t u a l L i f e A s s u r a n c e S o c i e t y , t h e f ir s t
I n d i a n l i f e insurance company started its business.

1912: The Indian Life Assurance Companies Act enacted as the

first statute toregulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to
e n a b l e t h e government tocollect statistical information about both
life and non-life insurancebusinesses.

1938: Earlier legislation consolidated and amended to

b y t h e Insurance Act with the objective of protecting the interests of
the insuring public.

1956: 245 Indian and foreign insurers and provident societies

are taken over by the central government and
n a t i o n a l i s e d . L I C f o r m e d b y a n A c t o f Parliament,
viz. LIC A c t , 1 9 5 6 , w i t h a c a p i t a l c o n t r i b u t i o n o f
R s . 5 c r o r e f r o m t h e Government of India.T h e G e n e r a l
i n s u r a n c e b u s i n e s s i n I n d i a , o n t h e o t h e r h a n d , c a n trace
its roots to theTriton Insurance Company Ltd., the first general
insurance company established inthe year 1850 in Calcutta by the
British.

Current status
LIC building, at Connaught Place, New Delhi, designed by Charles
Correa, 1986.

Over its existence of around 50 years, Life Insurance Corporation of

India, which commanded a monopoly of soliciting and selling life
insurance in India, created huge surpluses, and contributed around
7 % of India's GDP in 2006.

The Corporation, which started its business with around 300 offices,
5.6 million policies and a corpus of INR 459 million (US$ 92 million as
per the 1959 exchange rate of roughly Rs. 5 for a US $, has grown to
25000 servicing around 180 million policies and a corpus of over 8
trillion (US$173.6 billion).

The recent Economic Times Brand Equity Survey rated LIC as the
No. 1 Service Brand of the Country. The slogan of LIC is "Zindagi ke
saath bhi, Zindagi ke baad bhi" in hindi. In english it means "with life
also, after life also.”
The Life Insurance Corporation of India popularly known as “LIC of
India” is the largest life insurance company in India and also the
country’s largest investor. It is fully owned by the Government of
India.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices,
apart from its corporate office in the year 1956.

The organization now comprises 2048 branches, 100 divisional

offices and 8 zonal offices, and employs over 1 million agents. It also
operates in 12 other countries, primarily to cater to the needs of Non
Resident Indians.