introduction to life insurance corporation

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Introduction to Life Insurance Corporation

The Life Insurance Corporation of India popularly knownas “LIC of India” was incorporated on September 1, 1956 by nationalizing 245

Indian as well as foreign companies. It was established 52 years ago with a view to provide an insurance cover against various risk in life.

The luminaries who spearheaded this move at that time visualized

an entity that will provide life insurance to Indians, especially the vast rural people,at an economical cost and channel the savings for the betterment of the nation. It is

the largest life insurance company in India and also the country’s largest investor.

It is fully owned by the Government of India and headquarter

is Mumbai. Today LIC function 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 aMetro area network. LIC has tied up with some Banks and service providers to

offer on- line premium collection facility in selected cities.LICs ECS and ATM premium payment facility is an addition to

customer convenience. Apart from on-line kiosks and IVRS, info centers have been commissioned at Mumbai, Ahmadabad, Bangalore, Chennai, Hyderabad,

Kolkata, New Delhi, 74 Pune and many other cities. With vision of providing easy

access to its policyholders, LIC has launched its SATELLITE SAMPARK offices.

The digitalized record of the satellite offices will facilitate anywhere to serve and

other convenience in the future. LIC has crossed many milestones and has setunprecedented performance records in various aspect 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 providingsecurity to their familie



Importance of LIC

1 Spread Life Insurance widely and in particular to the rural areas and to thesocially 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.

2 Maximize mobilization of people's savings by making insurance-linked

savings adequately attractive.

3 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 theinvestors as well as the community as a whole, keeping in view national priorities

and obligations of attractive return.

4, Conduct business with utmost economy and with the full realization that themoneys belong to the policyholders.

5, Act as trustees of the insured public in their individual and collective

capacities.

6 Meet the various life insurance needs of the community that would arise in the

changing social and economic environment.

OBJECTIVES

The objectives of the study are as follows:

1 To understand the conceptand mechanism of insurance.2 To compare and analyze the financial performance of private sector

life insurance companies andLife Insurance Corporation of India.

3 To predict the volume of new business and total premium of life

insurance companies in India.

4 To compare the cost efficiency of life insurance companies in India



SCOPE OF LIC MAINTAINANCE *

The scope defined herein is only illustrative. The contract shall be governed

by the Terms and Conditions which shall be entered into separately.

1. Maintenance of : a. Lawns b. Rose Gardens c. Flower Beds d. Potted Plantse.Trees f. Bushes

2. Maintenance and development of all the ornamentals and other plants in the

campus gardens.

3. Maintenance and multiplication of pot plants including relevant material.

4. Cleaning and sweeping the entire garden area andjogging track daily and

lifting of garbage on day-to-day basis. No dry leaves, etc. should be burnt inside

the premises.

5. Watering of plants, lawns with sprinklers and weeding on daily basis.

6. Additional area garden development and maintenance as and when required,within the premises.

7. Maintenance of garden and kitchen garden in and around Principal’s bungalowand Staff Quarters.

8. Maintenance of all indoor plants in office area.

9. Maintenance of jogging track.

10. The maintenance of garden includes watering the lawns, plants, roses etc.cutting the grass in the lawns, pruning of the roses and other ornamental plants,

cutting of the unwanted branches of trees, bushes and shrubs.



Vision“To emerge as a transnational competitive financial

conglomerate of significance to societies and be the pride of India”.

Mission

Explore and enhance the quality of life of people through financialSecurity by providing products and services of aspired attributes with competitive

returns and by rendering resources for economic development.

Departmental details in LIC

Zonal Office

Divisional Office

Branch office

Sales Department Claims Department

New Business Department

Office Service Department

Accounts Department Micro Department

Policy Service

Department



Research Methodology

Introduction

The core concept underlying research is its methodology. The methodology

controls the study, dictates the acquisition of the data, and arranges them inlogical relationships sets up a means of refining theraw data, contrives an

approach so that the meanings that lie below the surface of those data becomemanifest, and finally issue a conclusion or series of conclusions that lead to an

expansion of knowledge. The entire process is a unified effort as well as anappreciation of its component parts.

According to J.W.B. est

,

“Research is considered to be formal systematic, intensive process of carrying onthe scientific method of analysis. It involves a more systematic structure of

investigation usually resulting in some sort of formal record of procedures and

report of result or conclusions.”

According to P.M.Cook

,

“Research is an honest, exhaustive, intelligent searching for facts and their meanings or implications with reference to a given problem. It is the process of

arriving at dependable solutions to problem through planned and systematic

collection, analysis and interpretation of data. The best research is that which is

reliable, verifiable and exhaustive so that it provides information in which we have

confidence.”

Research STATEMENT

The research statement studied is entitled

“A comparative study of Life Insurance Corporation of India and Private Life

Insurance Companies in India”

The present study focuses on the analysis of the performance of public52and all private life insurance companies in India with the help of mean, percentage, ratios, ANOVA Data Envelopment Analysis and linear trend



RESEARCH DESIGN

A Research design is a plan of action to be carried out in connection

with a research project. It is the conceptual structure within which research is

conducted and it constitutes the blue print for the collection, measurement andanalysis of data. It is the specification of methods and procedures for acquiring the

information needed for solving the problem. Decisions regarding what, where,when, how much, by what means concerning an inquiry or a research study

constitute a research design.

Theoretical background

Brief History Of Insurance

The story of insurance is probably as old as the story of mankind.

The same instinct that prompts modern businessmen today to secure themselvesagainst 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 somesort 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 – pastfew centuries – yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to Indiafrom England in the year 1818. Oriental Life Insurance Company started byEuropeans in Calcutta was the first life insurance company on Indian Soil. All the

insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were

not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started

insuring Indian lives. But Indian lives were being treated as sub-standard lives andheavy extra premiums were being charged on them. Bombay Mutual Life

Assurance Society heralded the birth of first Indian life insurance company in theyear 1870, and covered Indian lives at normal rates. Starting as Indian enterprise

with highly patriotic motives, insurance companies came into existence to carry themessage of insurance and social security through insurance to various sectors of

society. Bharat Insurance Company (1896) was also one of such companiesinspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more

insurance companies. The United India in Madras, National Indian and NationalInsurance in Calcutta and the Co-operative Assurance at Lahore were established

in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one



of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, inCalcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later

Bombay Life) were some of the companies established during the same period.

Prior to 1912 India had no legislation to regulate insurance business. In the year

1912, the Life Insurance Companies Act, and the Provident Fund Act were passed.The Life Insurance Companies Act, 1912 made it necessary that the premium rate

tables and periodical valuations of companies should be certified by an actuary.But the Act discriminated between foreign and Indian companies on many

accounts, putting the Indian companies at a disadvantage.

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.22.44crore, 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 wasthe 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 wasintroduced 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 inIndia at the time of nationalization. Nationalization was accomplished in two

stages; initially the management of the companies was taken over by means of anOrdinance, and later, the ownership too by means of a comprehensive bill. TheParliament 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 thecountry, providing them adequate financial cover at a reasonable cost.

Types of PoliciesIntroduction

The Researcher, found the different types of

Life Insurance Plansin the market. As we know that Life Insurance is important for

everyone to protect family incase of their demise the insured money will save their

family for educating their children and marriage etc. According to your needs, one can

Choose Life Insurance Scheme of any form.



Term Insurance Policy

This policy is pure risk cover with the insured amount will be paid only if the

policy holder dies in the period of policy time. The intention of this policy is to

protect the policy holder’s family incase of death. For example, a person who takes

term policy of Rs.500000 for 20 ye ars, if he dies before 20

Whole Life Policy

As the name itself says, the policy holder has to pay the premium for

whole life till his death. This policy doesn’t address any other needs of the policy

holder. Because of these reasons this kind of policy is not very popular or insurance

company not suggesting to take this po licy.

Endowment PolicyIt is the most popular Life Insurance Plansamong other types of

policies. This policy combines risk cover with the savings and investment. If the

policy holder dies during the policy time, he will get the assured amount. Even if he

survives he will receive the assured amount. The advantage of this policy is if the

policy holder survives after the completion of policy tenure, he receives assured

amount plus additional benefits like Bonus, etc. In this kind of policy, policy holder

receives huge amount while completing the tenure. In addition to the basic policy,

insurers offer various benefits such as double endowment and marriage/ education

endowment plans The cost of such a policy is slightly higher but worth its value

Money Back PolicyMoney Back Policy is to provide money on the occasions

when the policy holder needs for his personal life. The occasions may be marriage,

education, etc. Money will be paid back to the policy holder with the specified

duration. If the policy holder dies before the policy term, the sum assured will begiven to his family. A portion of the sum assured is payable at regular intervals. On

survival the remainder of the sum assured is payable.

Annuities and PensionAn annuity is a series of periodic payments. An annuity contract is an



insurance policy, under which the annuity provider (insurer) agrees to pay the

purchaser of annuity (annuitant) a series of regular periodical payments for a fixed

period or during someone's life time. In an annuity, the insurer agrees to pay the

insured a stipulated sum of money periodically. The purpose of an annuity is toprotect

against risk as well as provide money in the form of pension at regular intervals. Over

the years, insurers have added various features to basic insurance policies in order to

address specific needs of a cross section of people.

SWOT analysis

involves an in depth study of the strength and weakness of the provided organization

and it also provides information to the promoter, consultant, other agencies and

helps in long term viability of the project.

STRENGTH

1. It is the oldest and most well experienced player h

aving a Plan India presence.

2. LIC has a strong and very well developed distribute on network.

3. It is has consumer base and evolved as one of the most powerful brands of the

country.

4. It has a large product portfolio and claim settlement is easier to get.

WEAKNESS

Its employees and other staff are lethargic and least motivated to render

1. prompt and sincere customer service.

2. After sales customer grievance redressal mechanism is inefficient.

3. Agents not taking into account the needs of people and promote policies

having high commissions only.

4 Very slow decision making and internal problems between top

management and lower cadre staff.

OPPORTUNITIES1. Emergency of a huge concern over average income consumers of market in

the country

2. People becoming more aware and demanding so there is scope for a whole lot

of innovative products.

3. Pension markets, health insurance and large real estate portfolio



THREATS

1. There is too much internal discord.

2. Entry of new private players in industry.

3. Red-tapism is very much persistent.

FINDINGSLIC 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 totalincomefrom 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 inexpansion phase andhence are expanding there business. There are many

private insurance companies andhence there total number of branches hasgone 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 ininsurancesector 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 withLIC but then also the pace with which they are increasingtheir income is tremendous.Private 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 policiesin the year2006-07. Last year also their growth rate was 67.4 %.

CONCLUSIONAfter overhauling the all situation that boosted a number of Pvt.

Companiesassociated with multinational in the Insurance Sector to give befittingcompetition tothe established behemoth LIC in public sector, we come at the

conclusion that1) There is very tough competition among the private insurance companieson

the level of new trend of advertising to lull a major part of Customers.

2) Lic Is Not Left Behind In The Present Race Of Advertisement.

3) The entry of the Pvt. Players in the Insurance Sector has expanded

the product segment to meet the different level of the requirement of

thecustomers. It has brought about greater choice to the customers.

4) Private insurers have restricted reach to the customers.

5) LIC has vast market and very firm grip on its traditional customers

andmonopoly of life insurance products.



6) Bank assurance - that allows life insurers to leverage on the risk

productthrough bank network, was adopted by private players. But LIC was

alsonot left behind as picking up majority stake in the corporation Bank

andlarge equity stake in the Oriental Bank of Commerce.

RECOMMENDATIONS

In the modernized well advanced hi-tech approach to the customer every possible facilities and effort to build up the confidence of the rising policy

holders towards. Insurance companies, to complete one another nothing is left to

recommend. But some recommendations that are intensely felt and highly required

for insures to sustain in the market. These are as follows:

a) More and more transparency should be ascertained between insurers

and policy holders.

b) Particularly, in the emerging boom in the insurance company, every

insurance company should be customer centered, and well versed in the handling

of problem and grievances of the policy holders.

c) Each and Every product launched by the Insurance Company should be

infamous of increasing need of policy holders.

IRDA should be more and more responsible to the insurance sector by

determining some standard. It should be mandatory to every insurer to make more

and more responsible and responsive to the policy holders so that comprehensiveunderstanding may be developed among policy holders. It may be beneficial on both sides



BIBLIOGRAPHY

BOOKS

Dr. Gupta S.P& Dr. Gupta M.P., Business Statistics by Addition 2004,

NewDelhi,

WEBSITES

w.w.w.liclndia.com

www.lrdaindia.org.com

www.indiainfoline.com

www.icici.com

www.hdfc.com72

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