Lic
Content
http://www.indianmba.com/Occasional_Papers/OP124/op124.html
ABSTRACT
It is worth interesting to note that the origin of the concept of insurance is v
ery old and dates back almost 4500 years ago in the ancient empire of Babylonia.
This concept prevailed and developed during the medieval period in Europe. The
emphasis of insurance was on traders' merchants and seafarers in marine industri
es at that time to provide them safety in terms of money against certain unseen
risks including death. The concept of insurance has its origin in Indian scriptu
res. The Vedas give the idea of 'Yougkshema' means a promise to provide communit
y insurance to the risk bearers as back as around 1000 B.C., which was practised
by the Aryans.
In 1956 a radical step was taken by the central govt. regarding nationalization
of insurance industries which emerged as the Life Insurance of India the major o
bjective of this corporation was to give maximum benefits to maximum citizens of
India by providing them wide range of benefits against a number of risks. The d
etails of Lick's business during last 5 years are given in the paper, which are
self
explanatory.
INTRODUCTION
Almost 4500 years ago, in the ancient Land of Babylonia, traders used to bear ri
sk of the caravan trade by giving loans that had to be later repaid with interes
t when the goods arrived safely. In 2100 B.C. the code of Hammurabi granted lega
l status to the practice. That perhaps, was how insurance made its beginning.
Life insurance had its origins in ancient Rome, Where citizens formed burial clu
bs that would meet the funeral expenses of its members as well as help survivors
by making some payments.
In 1347, in Genoa, European maritime nations entered into the earliest known ins
urance and decided to accept marine insurance as a practice. Back to the 17th ce
ntury, in 1693, astronomer Edmond Halley constructed the first mortality and com
pound interest. In 1756, Joseph Dodson reworked the table, linking premium rate
to age. The 19th century saw huge developments in the field of insurance, with n
ewer products being devised to meet the growing needs of urbanization and indust
rialization.
LIFE INSURANCE IN INDIA
Insurance in India can be traced back to the Vedas. For instance, Yougkshema, th
e name of Life Insurance Corporation of India's corporate headquarters, is deriv
ed from the Rig Veda. The term suggests that a form of 'community insurance' was
prevalent around 1000 BC and practised by the Aryans.
Bombay Mutual Assurance Society, the first Indian life assurance society, was fo
rmed in 1870. Other companies like Oriental, Bharat and Empire of India were als
o set up in the 1870
90s.
The Insurance Act was passed in 1912, followed by a detailed and amended Insuran
ce 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 fun
d societies in the country's life insurance scene. However, in the absence of re
gulatory systems, scams and irregularities were almost a way of life at most of
these companies' funds.
As a result, the government decided to nationalise the life assurance business i
n India. The Life Insurance Corporation of India was set up in 1956 to take over
around 250 life assurance companies. After the RN Malhotra Committee report of
1994 became the first serious document calling for the re-opening up of the insu
rance sector to private players
that the sector was finally opened up to private
players in 2001.
WHAT IS LIFE INSURANCE
Life Insurance is a contract for payment of a sum of money to the person assured
on the happening of the event insured against. Usually the contract provides fo
r the payment of an amount on the date of maturity or at specified dates at peri
odic intervals or at unfortunate death, if it occurs earlier. It is concerned wi
th two hazards that stand across the life- path of every person that of dying pr
ematurely leaving a dependent family to fend itself and that of living to old ag
e without visible means of support.
GROWTH OF NEW BUSINESS
During the 1997-98 LIC sum assured through policies 63927.83 Crore Rs. In 1998-9
9 LIC sum assured 75606.26 Crore Rs. In 1999-00 LIC sum assured 91490.94 Crore R
s. In 2000-01 LIC sum assured 124950.63 Crore Rs. In 2001-02 LIC sum assured 192
784.96 Crore Rs. We can see that LIC gets success in new business.
NUMBER OF POLICIES
In 1997-98 LIC's number of polices are 850.03 in lakh. In 1998-99 LIC'S number o
f polices are 917.26 in lakh. In 1999-00 LIC's number of polices are 1013.89 in
lakh. In 2000-01 LIC's numbers of policies are 1131.11 in lakh. In 2001-02 LIC's
number of policies 1258.76 in lakh. We can see that LIC's position is very goo
d. Numbers of policies are increased.
ANALYSIS OF INCOME
This chart shows various income of LIC. LIC gets 14.11 % income through first ye
ar premium. LIC gets 40.74 % income from Renewal Premium. LIC gets 12.43 % incom
e from Single Premium. LIC gets 31.19 % income from investments. LIC gets income
1.53 % from Miscellaneous.
CONCLUTION
LIC gets achievement in various fields. We can see that LIC gets success in new
business. Numbers of policies are increased. We can see LIC's income from vario
us fields. Overall LIC has doing profitable business. But it is only LIC's own b
usiness. But it is not compared with other's insurance institute. So it is not c
ompleted.
******************************
56 years of Nation building
LIC the pride of India
On 1st September 2012, LIC completes 56 years of its glorious and purpose
ful existence. It was on this day in the year 1956, that LIC of India came into
being with the government of India nationalizing the life insurance business thr
ough an ordinance on 19th January 1956. Ever since 1956, LIC has progressed fro
m strength to strength. In the process, it has fulfilled its objectives and has
been immensely contributing to the nation building activities. Today, LIC is an
Institution of national importance and operates at a very large scale and effici
ency. It has created a significant value for its customers and dominates the lif
e insurance industry in our country. LIC has institutionalized a culture of Trus
t within its organization which is the basis for its extraordinary success. LIC
has grown today to be the premiere public sector financial institution and the p
ride of India.
LIC has invested Rs. 8,19,835 crores as on 31.3.2012 in central/state government
securities, power generation, road transport, water supply, housing and other s
ocial activities. LIC has played a very important role in nation building. LIC s c
ontribution to the Five Year Plans has been commendable. It contributed Rs. 184
crore to the second Five Year Plan (1956-61), Rs. 3, 94,779 to tenth Five Year
Plan (2002-2007) and Rs.7,04,151 Crores to the eleventh Five Year Plan (2007-2
012. The most amazing aspect is that around 25% of internal borrowings of the ce
ntral government are met by LIC every year. On an initial investment of Rs.5 cr
ores in the year 1956 by the Union Government, it s share of the valuation surplu
s of 5% for the year 2011-12 worked out to be Rs. 1281.23 Crore. With an investm
ent of just Rs.5 crore, till this fiscal year end, the government received a cum
ulative dividend of Rs. 11,376.10 Crore which is unimaginable in any other insti
tution. The Government of India has entrusted several social security schemes to
LIC. Over 1.63 crore landless households under Aam Aadmi Bima Yojana till date
are covered by LIC. Taking up the cause of financial inclusion, over 57.76 lac p
eople have been insured under LIC s Micro insurance schemes. As a part of Corporat
e Social Responsibility, the Golden Jubilee Foundation has been dedicated to the c
ause of promoting education, health and to provide relief to the people who are
poor. So far LIC has sanctioned more than 140 projects worth Rs.18.06 crores, ac
ross the country. LIC Golden Jubilee Scholarship Scheme provides scholarship to
economically weaker sections of the society to pursue higher education. Every ye
ar 1000 deserving students are given scholarship under this scheme dedicated tow
ards nation building; LIC is one of the strongest pillars of India s social and ec
onomic structure.
Ever since the opening up of the insurance sector in the year 2000, LIC is perfo
rming marvelously dominating the insurance market. The public sector LIC has sur
prised the critics with a very strong performance.
The Compounded Annual Growth Rate (CAGR) of LIC during the last ten years has ju
mped to 30.24% from 15.23% since inception. LIC s total policies have risen from 1
0.12 Croresin to 34 Crores in conventional business along with 10.45 crores of
customer base in group business. LIC s Life fund has grown from 1.54 lakh crore to
12.83 lakh crore. LIC s asset base has grown from 1.60 lac crore to 14.17 lakh c
rore by September 2012. The new business premium has gone up from Rs.5930 Crore
to Rs. 81515 Crore. Total Premium Income has increased from Rs.27489 Crore to 20
2802.90 Crore. Thus, through this amazing performance, LIC has retained it s domin
ation over the market. It is holding on to a market share of 81 percent in numb
er of policies and 74 percent in new business premium. The LIC has also an impr
essive share of 87.4% in the total assets under management. Insurance is a promi
se which needs to be fulfilled on the happening of an eventuality. LIC settles 9
9.86% of the claims which is a world record. The track record of the private ins
urance companies on settlement of claims is abysmally low. In spite of such a s
trong performance, it is surprising to note that the rating agencies to facilita
te the entry of foreign capital to access the domestic savings of the Indian peo
ple, are trying to arm twist by down grading the investment rating of LIC ironic
ally quoting that LIC is exposed to investments in government securities.
The performance of private insurance companies even after a decade of operation
is not encouraging. Out of the 23 private insurance companies, 16 have reported
operating losses and majority of them are yet to break even. The private insuran
ce companies sell more than 90% of their policies in ULIPs where the returns are
dependent on the vagaries of the volatile stock market. According to the govern
ment, the public sector LIC has dominated the investment in infrastructure devel
opment by accounting for more than 94% where as the private companies are unable
to invest for infrastructure development of our country.
In spite of the sterling performance by the Life Insurance Corporation of India,
the government, under pressure from the international finance capital, is makin
g attempts to weaken the public sector. The Insurance Laws (amendment) bill 2008
which seeks to increase the FDI cap in insurance from 26% to 49% is a pointer i
n this direction. More Over, the hurdles created by IRDA with regard to clearing
new plans, in recruitment of agents, suspending group superannuation scheme (P&
GS) etc are all the hindrances which LIC is able to successfully overcome till n
o
ABSTRACT
It is worth interesting to note that the origin of the concept of insurance is v
ery old and dates back almost 4500 years ago in the ancient empire of Babylonia.
This concept prevailed and developed during the medieval period in Europe. The
emphasis of insurance was on traders' merchants and seafarers in marine industri
es at that time to provide them safety in terms of money against certain unseen
risks including death. The concept of insurance has its origin in Indian scriptu
res. The Vedas give the idea of 'Yougkshema' means a promise to provide communit
y insurance to the risk bearers as back as around 1000 B.C., which was practised
by the Aryans.
In 1956 a radical step was taken by the central govt. regarding nationalization
of insurance industries which emerged as the Life Insurance of India the major o
bjective of this corporation was to give maximum benefits to maximum citizens of
India by providing them wide range of benefits against a number of risks. The d
etails of Lick's business during last 5 years are given in the paper, which are
self
explanatory.
INTRODUCTION
Almost 4500 years ago, in the ancient Land of Babylonia, traders used to bear ri
sk of the caravan trade by giving loans that had to be later repaid with interes
t when the goods arrived safely. In 2100 B.C. the code of Hammurabi granted lega
l status to the practice. That perhaps, was how insurance made its beginning.
Life insurance had its origins in ancient Rome, Where citizens formed burial clu
bs that would meet the funeral expenses of its members as well as help survivors
by making some payments.
In 1347, in Genoa, European maritime nations entered into the earliest known ins
urance and decided to accept marine insurance as a practice. Back to the 17th ce
ntury, in 1693, astronomer Edmond Halley constructed the first mortality and com
pound interest. In 1756, Joseph Dodson reworked the table, linking premium rate
to age. The 19th century saw huge developments in the field of insurance, with n
ewer products being devised to meet the growing needs of urbanization and indust
rialization.
LIFE INSURANCE IN INDIA
Insurance in India can be traced back to the Vedas. For instance, Yougkshema, th
e name of Life Insurance Corporation of India's corporate headquarters, is deriv
ed from the Rig Veda. The term suggests that a form of 'community insurance' was
prevalent around 1000 BC and practised by the Aryans.
Bombay Mutual Assurance Society, the first Indian life assurance society, was fo
rmed in 1870. Other companies like Oriental, Bharat and Empire of India were als
o set up in the 1870
90s.
The Insurance Act was passed in 1912, followed by a detailed and amended Insuran
ce 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 fun
d societies in the country's life insurance scene. However, in the absence of re
gulatory systems, scams and irregularities were almost a way of life at most of
these companies' funds.
As a result, the government decided to nationalise the life assurance business i
n India. The Life Insurance Corporation of India was set up in 1956 to take over
around 250 life assurance companies. After the RN Malhotra Committee report of
1994 became the first serious document calling for the re-opening up of the insu
rance sector to private players
that the sector was finally opened up to private
players in 2001.
WHAT IS LIFE INSURANCE
Life Insurance is a contract for payment of a sum of money to the person assured
on the happening of the event insured against. Usually the contract provides fo
r the payment of an amount on the date of maturity or at specified dates at peri
odic intervals or at unfortunate death, if it occurs earlier. It is concerned wi
th two hazards that stand across the life- path of every person that of dying pr
ematurely leaving a dependent family to fend itself and that of living to old ag
e without visible means of support.
GROWTH OF NEW BUSINESS
During the 1997-98 LIC sum assured through policies 63927.83 Crore Rs. In 1998-9
9 LIC sum assured 75606.26 Crore Rs. In 1999-00 LIC sum assured 91490.94 Crore R
s. In 2000-01 LIC sum assured 124950.63 Crore Rs. In 2001-02 LIC sum assured 192
784.96 Crore Rs. We can see that LIC gets success in new business.
NUMBER OF POLICIES
In 1997-98 LIC's number of polices are 850.03 in lakh. In 1998-99 LIC'S number o
f polices are 917.26 in lakh. In 1999-00 LIC's number of polices are 1013.89 in
lakh. In 2000-01 LIC's numbers of policies are 1131.11 in lakh. In 2001-02 LIC's
number of policies 1258.76 in lakh. We can see that LIC's position is very goo
d. Numbers of policies are increased.
ANALYSIS OF INCOME
This chart shows various income of LIC. LIC gets 14.11 % income through first ye
ar premium. LIC gets 40.74 % income from Renewal Premium. LIC gets 12.43 % incom
e from Single Premium. LIC gets 31.19 % income from investments. LIC gets income
1.53 % from Miscellaneous.
CONCLUTION
LIC gets achievement in various fields. We can see that LIC gets success in new
business. Numbers of policies are increased. We can see LIC's income from vario
us fields. Overall LIC has doing profitable business. But it is only LIC's own b
usiness. But it is not compared with other's insurance institute. So it is not c
ompleted.
******************************
56 years of Nation building
LIC the pride of India
On 1st September 2012, LIC completes 56 years of its glorious and purpose
ful existence. It was on this day in the year 1956, that LIC of India came into
being with the government of India nationalizing the life insurance business thr
ough an ordinance on 19th January 1956. Ever since 1956, LIC has progressed fro
m strength to strength. In the process, it has fulfilled its objectives and has
been immensely contributing to the nation building activities. Today, LIC is an
Institution of national importance and operates at a very large scale and effici
ency. It has created a significant value for its customers and dominates the lif
e insurance industry in our country. LIC has institutionalized a culture of Trus
t within its organization which is the basis for its extraordinary success. LIC
has grown today to be the premiere public sector financial institution and the p
ride of India.
LIC has invested Rs. 8,19,835 crores as on 31.3.2012 in central/state government
securities, power generation, road transport, water supply, housing and other s
ocial activities. LIC has played a very important role in nation building. LIC s c
ontribution to the Five Year Plans has been commendable. It contributed Rs. 184
crore to the second Five Year Plan (1956-61), Rs. 3, 94,779 to tenth Five Year
Plan (2002-2007) and Rs.7,04,151 Crores to the eleventh Five Year Plan (2007-2
012. The most amazing aspect is that around 25% of internal borrowings of the ce
ntral government are met by LIC every year. On an initial investment of Rs.5 cr
ores in the year 1956 by the Union Government, it s share of the valuation surplu
s of 5% for the year 2011-12 worked out to be Rs. 1281.23 Crore. With an investm
ent of just Rs.5 crore, till this fiscal year end, the government received a cum
ulative dividend of Rs. 11,376.10 Crore which is unimaginable in any other insti
tution. The Government of India has entrusted several social security schemes to
LIC. Over 1.63 crore landless households under Aam Aadmi Bima Yojana till date
are covered by LIC. Taking up the cause of financial inclusion, over 57.76 lac p
eople have been insured under LIC s Micro insurance schemes. As a part of Corporat
e Social Responsibility, the Golden Jubilee Foundation has been dedicated to the c
ause of promoting education, health and to provide relief to the people who are
poor. So far LIC has sanctioned more than 140 projects worth Rs.18.06 crores, ac
ross the country. LIC Golden Jubilee Scholarship Scheme provides scholarship to
economically weaker sections of the society to pursue higher education. Every ye
ar 1000 deserving students are given scholarship under this scheme dedicated tow
ards nation building; LIC is one of the strongest pillars of India s social and ec
onomic structure.
Ever since the opening up of the insurance sector in the year 2000, LIC is perfo
rming marvelously dominating the insurance market. The public sector LIC has sur
prised the critics with a very strong performance.
The Compounded Annual Growth Rate (CAGR) of LIC during the last ten years has ju
mped to 30.24% from 15.23% since inception. LIC s total policies have risen from 1
0.12 Croresin to 34 Crores in conventional business along with 10.45 crores of
customer base in group business. LIC s Life fund has grown from 1.54 lakh crore to
12.83 lakh crore. LIC s asset base has grown from 1.60 lac crore to 14.17 lakh c
rore by September 2012. The new business premium has gone up from Rs.5930 Crore
to Rs. 81515 Crore. Total Premium Income has increased from Rs.27489 Crore to 20
2802.90 Crore. Thus, through this amazing performance, LIC has retained it s domin
ation over the market. It is holding on to a market share of 81 percent in numb
er of policies and 74 percent in new business premium. The LIC has also an impr
essive share of 87.4% in the total assets under management. Insurance is a promi
se which needs to be fulfilled on the happening of an eventuality. LIC settles 9
9.86% of the claims which is a world record. The track record of the private ins
urance companies on settlement of claims is abysmally low. In spite of such a s
trong performance, it is surprising to note that the rating agencies to facilita
te the entry of foreign capital to access the domestic savings of the Indian peo
ple, are trying to arm twist by down grading the investment rating of LIC ironic
ally quoting that LIC is exposed to investments in government securities.
The performance of private insurance companies even after a decade of operation
is not encouraging. Out of the 23 private insurance companies, 16 have reported
operating losses and majority of them are yet to break even. The private insuran
ce companies sell more than 90% of their policies in ULIPs where the returns are
dependent on the vagaries of the volatile stock market. According to the govern
ment, the public sector LIC has dominated the investment in infrastructure devel
opment by accounting for more than 94% where as the private companies are unable
to invest for infrastructure development of our country.
In spite of the sterling performance by the Life Insurance Corporation of India,
the government, under pressure from the international finance capital, is makin
g attempts to weaken the public sector. The Insurance Laws (amendment) bill 2008
which seeks to increase the FDI cap in insurance from 26% to 49% is a pointer i
n this direction. More Over, the hurdles created by IRDA with regard to clearing
new plans, in recruitment of agents, suspending group superannuation scheme (P&
GS) etc are all the hindrances which LIC is able to successfully overcome till n
o
