Concept of Insuranc

7/29/2019 Concept of Insuranc

1/62

PROJECT REPORT

ON

A COMPARITIVE ANALYSIS OF LIFE INSURANCE CORPORATION AND PRIVATE

INSURANCE COMPANIES

PROJECT GUIDE SUBMITTED BY

Mrs.ALKA MITTAL MADHURI SURANA

(Lecturer) (BBA-B&I)

DEPTT. OF BUSINESS ADMINISTRATION 0481491808

SUBMITTED TO

MAHARAJA SURAJMAL INSTITUTE

AFFLIATED TO GURU GOBIND SINGH

INDRAPRASTHA UNIVERSITY

1


2/62

CERTIFICATE

This is to certify that the project titled A COMPARITIVE ANALYSIS OF LIFE

INSURANCE CORPORATION AND PRIVATE INSURANCE COMPANIES is an original

work of the student (MADHURI SURANA ROLL NO.:0481491808) And is being submitted

in partial fulfillment for the reward of the BBA (Banking and Insurance) from Maharaja

Surajmal Institute, GGSIPU.

She was working under my supervision and successfully completed her project work.

MRS. ALKA MITTAL

(PROJECT GUIDE)

2


3/62

ACKNOWLEDGEMENT

Project work is never the work of an individual. It is more a combination of views, ideas,

suggestions, contributions and work involving many individuals. This project report forms

an integral part of our curriculum.

I would like to pay my sincere regards to Mrs.Alka Mittal (My Project Guide) whose wisdom

words and teaching had guided me during the preparation of this report. This could not

have been possible without her guidance. I express my gratitude for her continuous

support without which this project could not have reached a successful completion.

Last but not the least; I am thankful to all my friends for their continuous encouragement

and support.

MADHURI SURANA

BBA (B&I)

3


4/62

TABLE OF CONTENTS

Page no.

Chapter1. Introduction

Concept of InsuranceIndustry Overview

Research Methodology

Significance of Study

Limitations of Study

Chapter2. Company Profile

Chapter3. Analysis and Interpretation

Chapter4. Findings & Conclusions

Bibliography

4


5/62

CHAPTER-1

INTRODUCTION

Concept Of Insurance

What is Insurance?

Insurance Act,1938

Types Of Insurance

Life Insurance Or Life Assurance

Life Insurance Business

Purpose And Need Of Insurance

How Insurance Works?

Role of Insurance in Economic Development

Criticism Of Insurance Companies

Indian Insurance Industry: New Avenues for Growth 2012

Research Methodology

Significance Of The Study

Limitations Of The Study

5


6/62

INTRODUCTION

CONCEPT OF INSURANCE:

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

requires the utmost resourcefulness and foresight on the part on man. To pray always requires the

utmost resourcefulness and foresight on the part of man. To pray or to pay for protection is the

spirit of the humanity. Man has been accustomed to pray God for protection and security from

time immemorial. In modern days Insurance Companies want him to pay for protection and

security. The insurance man says "God helps those who help themselves"; probably he is correct.

Risk has become central to one's life. It is within this background life insurance policy has

been introduced by the insurance companies covering risks at various levels. Life insurance

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 livelihood for the insured or dependents. This is

to make the right to life meaningful, worth living and right to livelihood a means for sustenance.

Therefore, it goes without saying that an appropriate life insurance policy within the payingcapacity and means of the insured to pay premium is one of the social security measures

envisaged under the Indian Constitution. Hence, right to social security, protection of the family,

economic empowerment to the poor and disadvantaged are integral part of the right to life 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. A person has to earn income not only for himself but also for his

dependents, viz., wife and children. He has to provide legally for his family needs, and so he has

to keep aside something regularly for a rainy day and for his old age. This fundamental need for

security for self and dependents proved to be the mother of invention of the institution of life

insurance.

6


7/62

What is Insurance?

The business of insurance is related to the protection of the economic values of assets. Everyasset has a value. The asset would have been created through the efforts of the owner. The asset is

valuable to the owner, because he expects to get some benefit from it. The benefit may be an

income or some thing else. It is a benefit because it meets some of his needs.

Every asset is expected to last for a certain period of time during which it will perform. After that,

the benefit may not be available. The owner is aware of this and he can so manage his affairs that

by the end of that period or life-time, a substitute is made available. Thus, he makes sure that the

value or income is not lost. However, the asset may get lost earlier. An accident or some other

unfortunate event may destroy it or make it non-functional. In that case, the owner and those

deriving benefits from there would be deprived of the benefit and the planned substitute would

not have been ready. There is an adverse or unpleasant situation. Insurance is a mechanism that

helps to reduce the effect of such adverse situations.

Insurance, in law and economics, is a form of risk management primarily used to hedge against

the risk of a contingent loss. Insurance is de fined as the equitable transfer of the risk of a

potential loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the

company that sells the insurance. Insurance rate is a factor used to determine the amount, called

the premium, to be charged for a certain amount of insurance coverage. Risk management, the

practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

7


8/62

INSURANCE ACT, 1938:

The Insurance Act, 1938, was the first comprehensive legislation governing not only life but also

non- life branches of insurance to provide strict state control over insurance business. In sub-sections to dealt with provident companies, mutual offices and co-operative societies as well.

The salient features of the Act were as follows:

(A)Constitution of a Department of Insurance under a superintendent vested with wide

powers of supervision and control over all kinds of insurance companies.

(B) Regulation for the compulsory registration of insurance companies and for filing of

returns of investment and financial conditions.

(C) Provisions for deposit, to prevent insurers of inadequate financial resources of

speculative concerns for commencing business.

(D) Provisions that 55% of the net life fund of an Indian or non- Indian insurer should

invested in Indian Government and approved securities with at least 25% in Indian

Government Rupee securities. All other companies, i.e., foreign companies must invest

100% of their Indian liabilities in Indian Government and approved securities, with at least

33.3% Indian Government securities.

(E) Prohibition of rebating, restriction of commission, licensing of agents etc. Maximum

rates of commission were fixed at 40% of the first premiums and 5% of the renewal

premium in respect of life assurance business. The agent must be licensed, to improve the

status of the profession.

(F) Periodical valuation of Indian Insurance business of foreign companies and the

business of Indian companies.

(G) Provision for policy holders' directors, making it possible for the re preventatives of

policyholders to be on the Board of directors.

(H) Standardization of policy conditions required all companies to file standard forms and

tables of premium approved by an Actuary. Under this requirement, the initial deposit for

life insurance business was raised from Rs. 25000 in Government securities to Rs. 50000

8


9/62

in cash approved securities, which was subsequently to be raised by installments to Rs. 2

lakh within a specified time limit.

Types of Insurance:

Any risk that can be quantified probably has a type of insurance to protect it. Among the

different types of insurance are:

Automobile insurance, also known as auto insurance, car insurance and in the

UK as motor insurance, is probably the most common form of insurance and may cover

both legal liability claims against the driver and loss of or damage to the vehicle itself.

Over most of the United States purchasing an auto insurance policy is required to legally

operate a motor vehicle on public roads. Recommendations for which policy limits

should be used are specified in a number of books. In some jurisdictions, bodily injury

compensation for automobile accident victims has been changed to No Fault systems,

which reduce or eliminate the ability to sue for compensation but provide automatic

eligibility for benefits.

Casualty insurance insures against accidents, not necessarily tied to any specific

property.

Credit insurancepays some or all of a loan back when certain things happen to the

borrower such as unemployment, disability, or death.

Financial loss insuranceprotects individuals and companies against various

financial risks. For example, a business might purchase cover to protect it from loss of

sales if a fire in a factory prevented it from carrying out its business for a time. Insurance

might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds

and surety bonds are included in this category.

9


10/62

Health insurance covers medical bills incurred because of sickness or accidents.

Liability insurance covers legal claims against the insured. For example, a

homeowner's insurance policy provides the insured with protection in the event of a claim

brought by someone who slips and falls on the property, and brings a lawsuit for her

injuries. Similarly, a doctor may purchase liability insurance to cover any legal claims

against him if his negligence (carelessness) in treating a patient caused the patient injury

and/or monetary harm. The protection offered by a liability insurance policy is two-fold:

a legal defense in the event of a lawsuit commenced against the policyholder, plus

indemnification (payment on behalf of the insured) with respect to a settlement or court

verdict.

Life insuranceprovides a cash benefit to a decedent's family or other designated

beneficiary, and may specifically provide for burial and other final expenses.

Annuitiesprovide a stream of payments and are generally classified as insurance

because they are issued by insurance companies and regulated as insurance. Annuities

and pensions that pay a benefit for life are sometimes regarded as insurance against the

possibility that a retiree will outlive his or her financial resources. In that sense, they are

the complement of life insurance.

Total permanent disability insuranceprovides benefits when a person is

permanently disabled and can no longer work in their profession, often taken as an

adjunct to life insurance.

Locked Funds Insurance is a little known hybrid insurance policy jointly issued by

governments and banks. It is used to protect public funds from tamper by unauthorized

parties. In special cases, a government may authorize its use in protecting semi-private

funds which are liable to tamper. Terms of this type of insurance are usually very strict.

As such it is only used in extreme cases where maximum security of funds is required.

10


11/62

Marine Insurance covers the loss or damage of goods at sea. Marine insurance

typically compensates the owner of merchandise for losses sustained from fire,

shipwreck, etc., but excludes losses that can be recovered from the carrier.

Nuclear incident insurance - damages resulting from an incident involving

radioactive materials is generally arranged at the national level. (For the United States,

see Price-Anderson Nuclear Industries Indemnity Act.)

Political risk insurance can be taken out by businesses with operations in

countries in which there is a risk that revolution or other political conditions will result in

a loss.

Professional Indemnity Insurance is normally a mandatory requirement for

professional practitioners such as Architects, Lawyers, Doctors and Accountants to

provide insurance cover against potential negligence claims. Non licensed professionals

may also purchase malpractice insurance; it is commonly called Errors and Omissions

Insurance and covers a service provider for claims made against them that arise out of the

performance of specified professional services. For instance, a web site designer can

obtain E&O insurance to cover them for certain claims made by third parties that arise

out of negligent performance of web site development services.

Property insuranceprovides protection against risks to property, such as fire,

theft or weather damage. This includes specialized forms of insurance such as fire

insurance, flood insurance, earthquake insurance, home insurance, inland marine

insurance or boiler insurance.

Terrorism insurance

Title insuranceprovides a guarantee that title to real property is vested in the

purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued

in conjunction with a search of the public records done at the time of real estate

transactions.

11


12/62

Travel insurance is an insurance cover taken by those who travel abroad, which

covers certain losses such as medical expenses, lost of personal belongings, travel delay,

personal liabilities, etc.

Workers' compensation insurance replaces all or part of a worker's wages

lost and accompanying medical expense incurred due to a job-related injury.

A single policy may cover risks in one or more of the above categories. For example, car

insurance would typically cover both property risk (covering the risk of theft or damage to the

car) and liability risk (covering legal claims from say, causing an accident). A homeowner's

insurance policy in the US typically includes property insurance covering damage to the home

and the owner's belongings, liability insurance covering certain legal claims against the owner,

and even a small amount of health insurance for medical expenses of guests who are injured on

the owner's property.

Potential sources of risk that may give rise to claims are known as "perils". Examples of perils

might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy

will set out in details which perils are covered by the policy and which are not.

LIFE INSURANCE or LIFE ASSURANCE:

12


13/62

Human life is subject to risks of death and disability due to natural and accidental causes. When

human life is lost or a person is disabled permanently or temporarily, there is a loss of income to

the household. The family is put to hardship. Sometimes, survival itself is at stake for the

dependants. Risks are unpredictable. Death/disability may occur when one least expects it. An

individual can protect himself or herself against such contingencies through life insurance.

Life insurance orlife assurance is a contract between the policy owner and the insurer, where

the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or

individuals'death or other event, such as terminal illness or critical illness. In return, the policy

owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums

It can also be a form of savings in the long run if you purchase a plan, which offers the option of

contributing regularly. Additionally, a little known function of life insurance is that it can be tied

in with a person's pension plan. A person can make contributions to a pension that is funded by a

life insurance company. These are considered private pension arrangements

There are a number of life insurance products which offer protection and also coupled with

savings.

A term insurance product provides a fixed amount of money on death during the period of

contract.

A whole life insurance product provides a fixed amount of money on death.

An Endowment Assurance product provided a fixed amount of money either on death during

the period of contract or at the expiry of contract if life assured is alive.

A money back assurance product provides not only fixed amounts which are payable on

specified dates during the period of contract, but also the full amount of money assured on death

during the period of contract.

13
http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Death


14/62

An annuity product provides a series of monthly payments on stipulated dates provided that the

life assured is alive on the stipulated dates.

A linked product provides not only a fixed amount of money on death but also sums of money

which are linked with the underlying value of assets on the desired dates.

Thus life insurance policies offer protection and security to families and provide happiness to

society.

LIFE INSURANCE BUSINESS:

The growth of Life Insurance in concrete terms could be said to being during the first two decades

of twentieth century when most of the major companies were founded. They grew in terms of rise

in the number of companies, in terms of number of policies and sum assured as well as total life

fund. Indian Insurance Year Book, published for the first time in 1914, gives the 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 the next 25 years their number

rose to 176. The total progress on all the primary heads, viz. life fund (Rs. 50.50 crore), premium

income (Rs. 10.50 crore) and new business (Rs. 43.30 crore) indicate that Indian Insurance

Business had been ma king a definite headway during this years. 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 insurance

companies 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 and insurancebusiness in India. Feeling concerned about it, the All India Life Assurance Offices' Association

urged upon the Government in 1932 to undertake the insurance legislation to:

(a) Compulsorily register all Life Insurance companies.

(b) Secure a deposit of Rs.2 lakh from all Life Insurance companies.

14


15/62

(c) Compel foreign companies doing business in India to keep sufficient funds in India securities

to meet their liabilities under all policies issued in India.

Important milestones in the life insurance business in India:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started

functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its

business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life

insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect

statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of

protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central

government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a

capital contribution of Rs.5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton

Insurance Company Ltd., the first general insurance company established in the year 1850 in

Calcutta by the British.

Purpose and Need of Insurance:

15


16/62

Assets are insured, because they are likely to be destroyed through accidental occurrences. Such

possible occurrences are called perils. Fire, floods, breakdowns, lightening, earthquakes, etc, are

perils. If such perils can cause damage to the asset, we say that the asset is exposed to that risk.

Perils are the events. Risks are the consequential losses or damages. The risk to a owner of a

building, because of the peril of an earthquake, may be a few lakhs or a few crores of rupees,

depending on the cost of the building and the contents in it.

The risk only means that there is a possibility of loss or damage. The damage may or may not

happen. Insurance is done against the contingency that it may happen. There has to be an

uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is no

uncertainty about the occurrence of an event, it cannot be insured against. In the case of human

being, death is certain, but the time of death is uncertain. In the case of person who is terminally

ill, the time of death is not uncertain, though not exactly known. He cannot be insured.

Insured does not protect the asset. It does not prevent its loss due to peril. The peril cannot be

avoided through insurance. The peril can sometimes be avoided through better safety and damage

control management. Insurance only tries to reduce the impact of the risk on the owner of the

asset and those who depend on that asset. It only compensates the losses and that too, not fully.

Only economic consequences can be insured. If the loss is not financial, insurance may not be

possible. Examples of non-economic losses are love and affection of parents, leadership of

managers, sentimental attachments to family heirlooms, innovative and creative abilities, etc.

How Insurance Works?

16


17/62

The mechanism of insurance is very simple. People who are exposed to the same risks come

together and agree that, if any one of them suffers a loss, the others will share the loss and make

good to the person who lost. All people who send goods by ship are exposed to the same risks,

which are related to water damage, ship sinking, piracy, etc. Those owning factories 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 be identified 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 the same time) is divided

into bearable small losses by all. In other words, the risk is spread among the community and the

likely big impact on one is reduced to smaller manageable impacts on all.

If a Jumbo Jet with more than 350 passengers crashes, the loss would run into several crores of

rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jets will crash

at same time. If 100 airline companies flying Jumbo Jets, come together into an insurance pool,

whenever one of the Jumbo Jets in the pool crashes, the loss to be borne by each 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 fair arrangement.

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 the burden. The second is that the

perils should occur in an accidental manner. Nobody should be in a position to make the risk

happen. In other words, none in the group should set fire to his assets 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. The occurrence 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 ma y be proportional to the risk that each person is exposed to. This

would be indicative of the benefit he would receive if the peril befell him. The share could becollected from the members after the loss has occurred or the likely shares ma y be collected in

advance, at the time of admission to the group. Insurance companies collect in advance and create

a fund from which the losses are paid. The collection to be made from each person in advance is

determined on assumptions. While it may not be possible to tell beforehand, which person will

suffer, it ma y be possible to tell, on the basis of past experiences, how many persons, on an

17


18/62

average, ma y suffer losses. The following two examples explain the above concept of insurance:

EXAMPLE-1

In a village, thereare 400 houses, each valued at Rs. 20000. Each year, on the average, 4 houses

get burnt, resulting into a total loss of Rs. 80000. If all the 400 owners come together and

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 spread over 400

house-owners of the village.

EXAMPLE-2

There are 1000 persons who are all aged 50 and are healthy. It is expected that of these, 10

persons may die during the year. If the economic value of the loss suffered by the family of each

dying person is taken to b e 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 pa r Rs. 20000 to the family of each of the ten persons who die. Thus, the risks in the

case of 10 persons are shared by 1000 persons.

Role of Insurance in Economic Development:

For economic development, investments are necessary. Investments are made out of savings. A

18


19/62

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 into

investments for economic growth. As on 31.3.2002, the total investments of the LIC exceeded Rs.

245000 crores, of which more than Rs. 130000 crores were directly in Government (both State

and Centre) related securities, more than Rs. 12000 crores in the State Electricity Boards, nearly

Rs. 20000 crores in housing loans and Rs. 4000 crores in water supply and sewerage systems.

Other investments included road transport, setting up industrial estates and directly financing

industry. Investments in the corporate sector (shares, debentures and term loans) exceeded

Rs.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 in trust for the

benefit of the policyholders. The management of life insurance companies is required to keep this

aspect in mind and make all its decisions in ways that benefit the community. This applies also to

its investments. That is why successful insurance companies would not be found investing in

speculative ventures. Their investments, as in the case of the LIC, benefit the society at large.

Apart from investments, business and trade benefit through insurance. Without insurance, trade

and commerce will find it difficult to face the impact to major perils like fire, earthquake, floods,

etc. Financiers, like banks, collapse if the factory, financed by it, is reduces to ashes by terrible

fire. Insurers cover also the loss to financiers, if their debtors default.

Criticism of Insurance Companies:

Some people believe that modern insurance companies are money-making businesses which have

little interest in insurance. They argue that the purpose of insurance is to spread risk so the

19


20/62

reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to

flooding, or young drivers) runs counter to the principle of insurance.

Other criticisms include:

A) Insurance policies contain too many exclusion clauses. For example, some house insurance

policies do not cover damage to garden walls.

B) Most insurance companies now use call centre and staff attempt to answer questions by

reading from a script. It is difficult to speak to anybody with expert knowledge.

Indian Insurance Industry: New Avenues for Growth 2012:

With an annual growth rate of 15-20% and the largest number of life insurance policies in force,

the potential of the Indian insurance industry is huge. Total value of the Indian insurance market

(2004-05) is estimated at Rs. 450 billion (US$10 billion). According to government sources, the

insurance and banking services contribution to the country's gross domestic product (GDP) is 7%

out of which the gross premium collection forms a significant part. The funds available with the

state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP.

Till date, only 20% of the total insurable population of India is covered under various lifeinsurance schemes, the penetration rates of health and other non-life insurances in India is also

well below the international level. These facts indicate the of immense growth potential of the

insurance sector.

The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took

place with the ending of government monopoly and the passage of the Insurance Regulatory and

Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing

foreign players to enter the market with some limits on direct foreign ownership.

Though, the existing rule says that a foreign partner can hold 26% equity in an insurance

company, a proposal to increase this limit to 49% is pending with the government. Since opening

up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the

20


21/62

Indian market and 21 private companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled fledgling private

insurance companies to sign up Indian customers faster than anyone expected. Indians, who had

always seen life insurance as a tax saving device, are now suddenly turning to the private sector

and snapping up the new innovative products on offer.

The life insurance industry in India grew by an impressive 36%, with premium income from new

business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from

private insurers. This report, Indian Insurance Industry: New Avenues for Growth 2012, finds

that the market share of the state behemoth, LIC, has clocked 21.87% growth in business at

Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to

arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion in

2004-05 from Rs. 24.29 billion in 2003-04.

Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared

to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers

increased their market share from about 13% to about 22% in a year's time. The figures for the

first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers.

The share of LIC for this period has further come down to 75 percent, while the private players

have grabbed over 24 percent.

There are presently 12 general insurance companies with four public sector companies and eight

private insurers. According to estimates, private insurance companies collectively have a 10%

share of the non-life insurance market.

Though the focus of this market research report is on the potential growth on the IndianInsurance Sector, it also talks about the market size, market segmentation, and key developments

in the market after 1999.

21


22/62

RESEARCH METHODOLOGY

RESEARCH OBJECTIVES:

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 each category size.

(Growth, productivity and efficiency.)

3. To compare grievance management of LIC and private insurance companies.

RESEARCH DESIGN:

(A) Type of research design : Analytical Research

(B) Data collection : Secondary Sources

(C) Statistical tools : Bar Graphs

RESEARCH PROCESS:

In this research, my research objective was to compare the performance of LIC and Private

insurance companies. For this purpose I decided the four broad categories under which I have

compared the LIC and Private insurance companies. These are:

1. Size

2. Growth3. Productivity

4. Grievance Handling

Under these Broad Categories I have analyzed 13 factors which are:

22


23/62

1. Size

Total Premium

Total Income

Size of Balance Sheet

Total number of Policies

Total number of Branches

2. Growth

Growth in Premium

Growth in Income

Growth in number of Policies

Growth in Market share

3. Productivity

Business per Branch

Income per Branch

New Premium per Branch

4. Grievance Handling

I have used the Secondary data of last five financial years. I have collected data from the various

balance sheets of LIC and other private insurance companies and web sites. I tried to find out

most of the information required to compare the LIC and private insurance companies.

In 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 Points have

been multiplied with the weightage of that factor. And then after the analysis of each factor a

consolidated point tab le has been prepared to know that which sector is performing better thanother.

The Weightage for different categories are:

FACTORS WEIGHTAGE

23


24/62

SIZE 25%

A. Total Premium 5%

B. Total Income 5%

C. Balance Sheet Size 5%

D. Total No. of Policies 5%

E. Total No. of Branches 5%

GROWTH 40%

A. First Premium 10%

B. Growth in Income 10%

C. Increase in No. of Policies 10%

D. Growth in Market Share 10%

PRODUCTIVITY 15%

A. Business per Branch 5%

B. Income Per Branch 5%C. First Premium per Branch 5%

GRIEVANCE HANDLING 20%

SIGNIFICANCE OF THE STUDY:

The Detailed Study has been done with the purpose of finding out the relative share of LIC

and Private Insurance in India. It is useful for the people associated with the Insurance

Industry and the research associates related to the Insurance Sector in India. This study will

acquaint them with the data of all the banks complied at one place along with the findings,

conclusion and recommendations.

LIMITATIONS:

24


25/62

1. Could reach to a limited number of documents of different insurance companies inregard

to the management and other policies and resultant figures so as to identify the exact cause of

their lag in performance.

2. Due to the limited time could not study all the insurance companies original

documents individually.

3. Non-Proficiency in technical aspects of insurance companies might have hindered the

best analysis of the findings.

CHAPTER-2

PROFILE OF THE COMPANY

LIC:Life Insurance Corporation

Private Life Insurance Companies

Market Share

25


26/62

LIC: LIFE INSURANCE CORPORATION

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 thecurrency 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

26


27/62

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, 100 divisional offices, 7

zonal offices and the corporate office. LICs Wide Area Network covers 100 divisional 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 Centers 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.

PRIVATE LIFE INSURANCE COMPANIES

27


28/62

Kotak Mahindra Old Mutual Life Insurance Ltdis a joint venture between

Kotak Mahindra Bank Ltd., its affiliates and Old Mutual plc. A company that combines its

international strengths and local advantages to offer its customers a wide range of innovative lifeinsurance products, helping them in taking important financial decisions at every stage in life and

stay financially independent. The company is one of the fastest growing insurance companies in

India and has shown remarkable growth since its inception in 2001. Kotak Life Insurance

employs around 5,565 people in its various businesses and has 197 branches across 141 cities.

ICICI Prudential Life Insurance Company is a joint venture between ICICI

Bank - one of India's foremost financial services companies-and Prudential plc - a leading

international financial services group headquartered in the United Kingdom. Total capital

infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc

holding 26%.

It began our operations in December 2000 after receiving approval from Insurance Regulatory

Development Authority (IRDA). Today, our nation-wide team comprises of 2074 branches

(inclusive of 1,116 micro-offices), over 225,000 advisors; and 7 banc assurance partners.

Established in 2000,Birla Sun Life Insurance Company Limited (BSLI) is a

joint venture between the Aditya Birla Group, a well known and trusted name globally amongst

Indian conglomerates and Sun Life Financial Inc, leading international financial services

organization from Canada. The local knowledge of the Aditya Birla Group combined with the

domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers

future.

With an experience of over 9 years, BSLI has contributed significantly to the growth and

development of the life insurance industry in India and currently ranks amongst the top 5 private

life insurance companies in the country.

28


29/62

Max New York Life Insurance Company Ltd. is a joint venture between Max

India Limited, one of India's leading multi-business corporations and New York Life

International, the international arm of New York Life, a Fortune 100 company. The company has

positioned itself on the quality platform. In line with its vision to be the most admired life

insurance company in India, it has developed a strong corporate governance model based on

the core values of excellence, honesty, knowledge, caring, integrity and teamwork.

Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its

values of financial responsibility, Max New York Life has adopted prudent financial practices to

ensure safety of policyholder's funds. The Company's paid up capital as on 30th April, 2009 is

Rs 1782 crore.

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest

Insurance Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in

the world, managing assets worth over a Trillion (Over INR. 55, 00,000 Crores). Allianz SE has

over 115 years of financial experience and is present in over 70 countries around the world.

At Bajaj Allianz Life Insurance, customer delight is our guiding principle. Our business

philosophy is to ensure excellent insurance and investment solutions by offering customised

products, supported by the best technology.

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a jointventure company, formed by the Tata Group and American International Group, Inc. (AIG). Tata

AIG Life combines the Tata Groups pre-eminent leadership position in India and AIGs global

presence as one of the worlds leading international insurance and financial services

organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG holding

the balance 26 per cent. Tata AIG Life provides insurance solutions to individuals and

29


30/62

corporates. Tata AIG Life Insurance Company was licensed to operate in India on February 12,

2001 and started operations on April 1, 2001

HDFC Standard Life Insurance Company Limited Is one of India's leading

private insurance companies, which offers a range of individual and group insurance solutions. It

is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited),

India's leading housing finance institution and a Group Company of the Standard Life Plc, UK.

As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006,

Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others.

MetLife India Insurance Company Limited (MetLife) is an affiliate of

MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings,

Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private

investors. MetLife is one of the fastest growing life insurance companies in the country. It serves

its customers by offering a range of innovative products to individuals and group customers at

more than 600 locations through its bank partners and company-owned offices. MetLife has

more than 50,000 Financial Advisors, who help customers achieve peace of mind across the

length and breadth of the country.

Established in India in September 2001, ING Vysya Life Insurance Company

Limitedis a joint venture between Vysya Bank, which is one of the largest private sector

banks in India, and ING Insurance Co., which is the world's second largest life insurance

company. This private life insurance company has around 140 branches all over India, with head

office in Bangalore. ING Vysya Life Insurance Co. has around 3000 employees with over 21,000

sales insurance agents and brokers. ING Vysya Life presently has around 4.5 lakh customers,

and is making a total income of Rs. 400 crore.

Reliance Life Insurance Company Limitedis a part of Reliance Capital Ltd., a

part of Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India's leading

private sector financial services companies, which ranks among the top 3 private sector financial

services and banking companies. Reliance Life Insurance is not only one of India's fastest

30


31/62

growing life insurance companies, but also counts among the top 4 private sector insurers. In just

2 years, the Company has crossed the mark of 1.7 Million policies.

SBI Life Insurance offers a slew of products designed for various segments of society.

These include money back products, pension products, protection cum savings products, and unit

linked products. All these products cater to various requirements of its end users.

Bharti AXA Life Insurance Co. Ltd. is a joint venture between Bharti - one of

Indias leading business groups with interests in telecom, agri business and retail, and AXA -

global leader in financial protection and wealth management. Bharti has recently entered into the

retail business under a company called Bharti Retail Pvt. Ltd. AXA's operations are diverse

geographically, with major operations in Western Europe, North America and the Asia/Pacific

area. It also has operations in Australia, New Zealand, Hong Kong, Singapore, Indonesia,

Philippines, Thailand, China, India and Malaysia.

IDBI Fortis Life Insurance Co. Ltdis a joint venture of IDBI Bank, Federal Bank

(India) and Fortis Insurance International. The Certificate of Registration has been issued by the

Insurance regulator IRDA to this Insurance Company on 19th December 2007. According to the

agreement, IDBI will have a 48-per cent stake in the venture, while Fortis and Federal Bank

would have 26-per cent stake each. While IDBI and Federal Bank are major Indian banks, Fortis

has the expertise of bancasurance across global markets. It is one of the best names in the

insurance business in Europe and has successful joint ventures in various Asian countries. IDBI

Fortis Life Insurance has become 18th life insurer in India.

AEGON Religare Ltdis a joint venture of AEGON, Religare and Bennett, Coleman &

Company. AEGON in one of the world's leading life insurance and pension groups. Religare is a

prominent player in the field of integrated financial services in India. On the other hand, Bennett-

Coleman & Company is Indias largest media house. The insurance company began its operation

in July 2008. Within a short span of time, it has spread across India, by opening over 30 branches

in the country.

31


32/62

Future Generali India Life Insurance Co. Ltd. is one of the rapidly growing

Insurance companies in India. The Company is a joint venture between the India-based Future

Group and the Italy-based Generali Group. Future Generali group is present in both the Life and

Non-Life businesses in India as Future Generali India Life Insurance Co. Ltd. and Future

Generali India Insurance Co. Ltd.

MARKET SHARE OF LIFE INSURANCE COMPANIES:

MARKET SHARE (%)

LIFE INSURERS

1. LIC 76.07

2. ICICI Prudential 6.91

3. Bajaj Allianz 4.75

4. HDFC Standard 2.98

5. Birla Sun life 1.72

6. Tata AIG 1.66

7. SBI Life 1.46

8. Max New York 1.28

9. Aviva 1.08

10. Kotak Mahindra Old Mutual 0.71

11. ING Vysya 0.54

12. AMP Sanmar 0.46

13. Met Life 0.37

32


33/62

14. Sahara Life 0.03

Private total 23.93

Public total 76.07

Grand total 100.00

In the above table shows, the private players in the life insurance business have increased their

market share to 23.93 per cent. Among them ICICI prudential is ranked first in capturing the

market followed by Bajaj Allianz and HDFC Standard. Moreover, private insurers have planned

to increase their market share in the next five years. The public insurers have to enrich its

approach to withhold its share.

CHAPTER-3

ANALYSIS AND INTERPRETATION

33


34/62

63533

3120

751

27

7727

90792

15083

127822

28253

149789

51561

0

20000

40000

60000

80000

100000

120000

140000

160000

PREMIUM

AMOUNT

(In crores)

1 2 3 4 5

YEARS

TOTAL PREMIUM

LIC Private Insurers

ANALYSIS AND INTERPRETATION

1. SIZE:

(A) TOTAL PREMIUM:

(Rs.In crores)

34

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 63533 75127 90792 127822 149789

Private

Insurers3120 7727 15083 28253 51561

TOTAL 66653 82854 105875 156075 201350


35/62

Average premium of LIC is much more than that of all insurance companies altogether. LIC is

average premium of the last five years is nearly five times the average premium of the all other

private insurance companies.

It can be said that up to that time their were less number of private players in the field of

insurance but then also undoubtedly LIC is the king.

(B) TOTAL INCOME:

(Rs.In crores)

35

Premium

(in crores)

Ra

nk

P

oints

Points after

multiplying by

weightage (7.5%)

LIC 101412.20 1 1 7.5Private

Insurers21148.80 2 0.5 3.75


36/62

93089

4323

112393

9049

132147

18863

174425

24242

206363

52648

0

50000

100000

150000

200000

250000

INCOME

(In crores)

1 2 3 4 5

YEARS

TOTAL INCOME


All over income of LIC is much more than of private players. It is due to the fact that LIC being a

government agency is being trusted by lot of companies and has large number of shares in big

36

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 93089 112393 132147 174425 206363

Private

Insurers4323 9049 18863 24242 52648

TOTAL 97412 121442 151010 198667 259011

Average

Income

(in crores)

Rank Points Points after

multiplying by

weightage

(7.5%)

LIC 143683.40 1 1 7.5

Private

Insurers21825.00 2 0.5 3.75


37/62

346022

6585

416910

13653

531390

28910

625956

53048

776904

100774

0

100000

200000

300000

400000

500000

600000700000

800000

SIZE

(In crores)

1 2 3 4 5

YEARS

SIZE OF BALANCE SHEET


corporate.

(C) SIZE OF BALANCE SHEET:

(Rs.In crores)

37

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 346022 416910 531390 625956 776904

Private

Insurers

6585 13653 28910 53048 100774

TOTAL 352607 430563 560300 679004 877678


38/62

Total average size of balance sheet of LIC in the last five years is certainly higher than that ofprivate insurance companies. There is a huge gap in this value. It is obvious that LIC has bigger

balance sheet as being working in the insurance field for quite large time. As compared to average

balance sheet size

of 40,594 crores of private insurance companies, LIC s average balance sheet size goes to much

high as that of 5,39,436.4 crores.

(D) TOTAL NUMBER OF POLICIES:

38

Average

Balance Sheet

Size

(in crores)

Rank PointsPoints after

multiplying by

weightage (7.5%)

LIC 539436.40 1 1 7.5

Private

Insurers40954.00 2 0.5 3.75

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 26968069 23978123 31590515 38229292 37612599Private

Insurers1658847 2233075 3871410 7922294 13261558

TOTAL 28626916 26211198 35462117 46151586 50874157


39/62

26968069

1658847

23978123

2233075

31590515

3871410

38229292

7922294

37612599

13261558

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

NUMBER

1 2 3 4 5

YEARS

NUMBER OF POLICIES ISSUES

LIC

Private Insurers

LIC is an undoubted leader in the field of average number of policies per year in the last five

years. It is seen that private insurance companies are gaining momentum and are trying to defeat

LIC in case of new insurances. Main reason behind LIC having such a large number of policies

is the trust of a common man. LIC being a government agency has got a faith of Indian mass.

People are not yet prepared to give their savings in the hands of private players.

39

Average

Number Of

Policies

Rank Points

Points after

multiplying by

weightage (7.5%)

LIC 31675670 1 1 7.5

Private

Insurers5789437 2 0.5 3.75


40/62

2196

416

2197

804

2220

1645 2

301

3072

2522

6391

0

1000

2000

3000

4000

5000

6000

7000

NUMBER

1 2 3 4 5

YEARS

NUMBER OF BRANCHES


(E) NUMBER OF BRANCHES:

40

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 2196 2197 2220 2301 2522

Private

Insurers416 804 1645 3072 6391

TOTAL 2612 3001 3865 5373 8913


41/62

2. GROWTH:

(A) FIRST PREMIUM:(Rs.In crores)

41

Average

Number Of

Branches


multiplying by

weightage (7.5%)

LIC 14.84 1 1 7.5

Private

Insurers

1436.29 2 0.5 3.75

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 17347 20653 28515 55934 59996

Private

Insurers2440 5564 10270 19425 33715

TOTAL 19787 26217 38785 75359 93711


42/62

17347

2440

20653

5564

28515

10270

55934

19425

59996

33

715

0

10000

20000

30000

40000

50000

60000

PREMIUM

ANOUNT

(In crores)

1 2 3 4 5

YEARS

FIRST PREMIUM


42

Growth in

First

Premium

(In %)

Growth in

First Premium

(In absolute

terms)

(in crores)


multiplying

by weightage

(10%)

LIC 245.85 426492 0.5 5

Private

Insurers

1281.76 31275 1 1 10


43/62

Though LIC has attained more growth in absolute terms i.e. Rs.42649 crores but private players

being so less in number five years back has achieved a dream come true growth of 1281.76 %

which is certainly a matter of pride for them.

(B) GROWTH IN INCOME: (Rs.In crores)

% GROWTH IN INCOME:

43

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 12101 19303 19754 42277 31988

Private

Insurers

2692 4725 9814 5379 28406

TOTAL 14793 24028 29568 47656 60394


44/62

44

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 14.9 20.7 17.5 32 18.3

Private

Insurers

165 109.3 108.4 28.5 117

TOTAL 17.8 24.6 24.3 31.5 30.3

14.

9

165

20.

7

109

.3

17.

5

108.

4

32

28.

5

18.

3

117

0

20

40

60

80

100

120

140

160

180

%

1 2 3 4 5

YEARS

% GROWTH IN INCOME



45/62

Here LIC has neither attained more growth in absolute terms i.e. Rs.19887 crores as compared to

25714 crores of private players nor has got more growth in terms of percentage. This shows that

private players are doing great job in enhancing their business.

(C) INCREASE IN NUMBER OF POLICIES:

45

Growth in

Income

(In %)

Growth in

Income

(In absolute

terms)

(in crores)


multiplying by

weightage

(10%)

LIC 164.34 19887 2 0.5 5

Private

Insurers

955.20 25714 1 1 10

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 1475992 -2989946 7632584 6638585 -616693

Private

Insurers

804696 574228 1638335 4050884 5339264

TOTAL 2280688 -2415718 9270919 10689469 4722571


46/62

14.

9

94.2

1

-11.

09

34.

62

31.

75

73.

37

21.

01

104

.64

-1.

6

67.

4

-20

0

20

40

60

80

100

120

%

1 2 3 4 5

YEARS

% GROWTH IN NO.OF POLICIES


46

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 5.79 -11.09 31.75 21.01 -1.6

Private

Insurers

94.21 34.62 73.37 104.64 67.4

TOTAL 8.6 -8.4 35.3 30.1 10.2


47/62


48/62

28.

93

7.

5

34.

2

9.

61

40

.9

9.

17

55.

55

9.

2

59.

2

8.

07

0

10

20

30

40

50

60

BUSINESS

(In crores)

1 2 3 4 5

YEARS

BUSINESS PER BRANCH

LIC is still the market leader in insurance industry with 73.9 % share. But we cannot forget that in

last five years market share of LIC has decreased. It was 87.7 % in year 2003-04 which came

down to 73.9 % in 2007-08.

3. PRODUCTIVITY:

(A) BUSINESS PER BRANCH:

(Rs.In crores)

48

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 28.93 34.20 40.9 55.55 59.20

Private

Insurers7.5 9.61 9.17 9.2 8.07


49/62

Average business per branch of LIC is much higher than that of whole private insurance

companies.

(B) INCOME PER BRANCH:

(Rs.In crores)

49

Average Business

Per Branch

(In crores)

Rank Points

Points after

multiplying by

weightage (5%)

LIC 43.756 1 1 5

Private

Insurers8.71 2 0.5 2.5


50/62

42.

39

10.

41

51.1

6

11.

25

59.

52

11.

47

75.

8

7.

89

81.

8

8.

23

0

10

20

30

40

50

6070

80

90

INCOME (In

crores)

1 2 3 4 5

YEARS

INCOME PER BRANCH


50

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 42.39 51.16 59.52 75.80 81.80

Private

Insurers10.41 11.25 11.47 7.89 8.23


51/62

7.

9

5.

86

9.

4

6.

92

12.

84

6.

24

24.

3

6.

32

23.

78

5.

28

0

5

10

15

20

25

PREMIUM

(In crores)

1 2 3 4 5

YEARS

NEW PREMIUM PER BRANCH


Average income per branch of LIC is much more than that of private insurance companies. Its

almost six times the total value of all the private companies.

(C) NEW PREMIUM PER BRANCH:(Rs.In crores)

51

Average Income

Per Branch

(In crores)

Rank Points

Points after

multiplying by

weightage (5%)

LIC 62.134 1 1 5

Private

Insurers9.864 2 0.5 2.5

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 7.90 9.40 12.84 24.30 23.78

Private

Insurers5.86 6.92 6.24 6.32 5.28


52/62

This value tells us about increase in the business of an insurance company in a period. Here we

see that LIC is ahead of private insurance companies in case of increasing their business.

4. GRIEVANCE HANDLING:

(A) TOTAL NUMBER OF GRIEVANCES:

52

Average

Income Per

Branch

(In crores)

Rank Points

Points after

multiplying by

weightage (5%)

LIC 15.644 1 1 5

Private

Insurers6.124 2 0.5 2.5


53/62

474

45

704

195

8

51

540

354

507

651

1406

0

200

400

600

800

1000

1200

1400

1600

NUMBER

(In crores)

1 2 3 4 5

YEARS

TOTAL NO.OF GRIEVANCES


(B) NUMBER OF GRIEVANCES RESOLVED:

53

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 474 704 851 354 651

Private

Insurers45 195 540 507 1406


54/62

39

26

123

83

215

216

313

450

80

1103

0

200

400

600

800

1000

1200

NUMBER

RESOLVED

(In crores)

1 2 3 4 5

YEARS

TOTAL NO.OF GRIEVANCES RESOLVED


(C) % OF GRIEVANCES RESOLVED:

54

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)

LIC 39 123 215 313 80

Private

Insurers26 83 216 450 1103


55/62

8.

2

57.

7

17.

5

42.

6

25.

3

40

88.

4

88.

7

12.

2

78.

4

0

10

20

30

40

50

60

70

80

90

NUMBER

RESOLVED

(In crores)

1 2 3 4 5

YEARS

%OF GRIEVANCES RESOLVED


55

YEARS

FIRMS

03-04

(1)

04-05

(2)

05-06

(3)

06-07

(4)

07-08

(5)LIC 8.2 17.5 25.3 88.4 12.2

Private

Insurers57.7 42.6 40 88.7 78.4


56/62

Grievance Handling is one of the major issues in any organization. It plays an important role in

Insurance sector. People do attract towards companies who handles their grievances.

Here we see that private players are much ahead of LIC when the matter comes to grievance

management. In the last five years LIC has resolved only 25.37 % of cases brought in front of

them while the percentage of cases resolved in case of private players is 69.7 %.

This shows that private players are very serious about their image and are working hard to

provide the solution of the problems of the people as early as possible.

TOTAL POINTS TABLE

56

% Grievances

resolvedRank Points

Points after

multiplying by

weightage

(7.5%)

LIC 25.37 2 0.5 3.75

Private

Insurers69.70 1 1 7.5


57/62

57

FACTORS LICPRIVATE

INSURERS

SIZE

A. Total Premium 7.5 3.75

B. Total Income 7.5 3.75

C. Balance Sheet Size 7.5 3.75

D. Total No. of Policies 7.5 3.75

E. Total No. of Branches 3.75 7.5

GROWTH

A. First Premium 5 10

B. Growth in Income 5 10

C. Increase in No. of Policies 5 10

D. Growth in Market Share 10 5

PRODUCTIVITY

A. Business per Branch 5 2.5

B. Income Per Branch 5 2.5

C. First Premium per Branch 5 2.5

GRIEVANCE HANDLING 3.75 7.5

TOTAL SCORE 77.50 72.50


58/62

CHAPTER-4FINDINGS AND CONCLUSIONS

58


59/62

FINDINGS & CONCLUSIONS:

LIC is the giant of the insurance sector. The overall size of LIC is much more than that of all

private insurance companies. Private insurers are in expansion mode and are increasing their size

but are still much behind LIC. A total premium deposit in LIC is much higher than the private

insurance companies. Total premium of LIC in FY 07-08 was Rs.149789 crores which three times

more than that of private insurance companies.

Income of LIC is much greater than private insurance companies. Last year total income from

investments of LIC was Rs.48244.14 crores which was nearly equal to the total income of the all

private insurance companies. By this we can imagine how big the 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 established player in the fieldof insurance and many private companies have just started their business. Hence it is obvious that

LIC is having large number of policyholders.

Number of branches of private insurance companies is increasing as the new players are entering

in this market. Also the established players are in expansion phase and hence are expanding there

59


60/62

business. There are many private insurance companies and hence there total number of branches

has gone past LIC in the last financial year. But offices of private insurance companies are mostly

in urban areas and still it is LIC which covers most of the area.

Hence we see that LIC is leading when it comes to size. It is a giant in insurance sector

having huge network and customer base.

We see that due to excellent service quality and attractive offers private insurance companies

have started getting a number of customers. They are growing rapidly. Though LIC is also

increasing its customer base but private insurance companies are moving at a fast pace.

Though the income of private insurance companies is negligible when compared with LIC but

then also the pace with which they are increasing their income is tremendous. Private insurance

companies are expanding their business and will certainly going to give a tough competition to

LIC in the coming days.

LIC is certainly having a large customer base. Private insurance companies are not having that

much number of customer base but they are increasing it rapidly. They have registered a decent

growth of 104.64 % in number of new policies in the year 2006-07. Last year also their growth

rate was 67.4 %.

LIC, being the oldest player in the existing insurance market, has the biggest market share of

73.9 % which was 87.3% five years earlier. We see that private insurance companies are

penetrating in the customer base of LIC.

Overall we can see that private insurance companies are giving a tough competition to the

LIC and will certainly create a good business for themselves in the coming days.

There are many new entrants in this sector. There are many private insurance companies whohave reported loss in this and previous years. This is the main reason why 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 private insurance

companies in this field. They are undoubted champions in insurance when it comes to profit

60


61/62

earning.

New business is increasingly going towards private insurance companies but still the customer

base of LIC is very strong. In issuing new policies per branch also, they are ahead of private

insurance companies though not by very large margin.

Customer base of LIC is very strong and still business per branch, profit per branch or

premium per branch, they are leading much ahead of private insurance companies.

LIC ha s 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 rapid increase in customer base of private insurance

companies which ca n be very much affected by this factor.

Overall we have seen that still LIC is very famous but private insurance companies are

growing at exceptionally fast pace. Private companies show due concern in grievance

management and brings innovative schemes to attract the customers. Right now they are

giving good competition to LIC and very soon they will give very tough competition to Life

Corporation of India.

61


62/62

Concept of Insuranc

Documents

Transcript of Concept of Insuranc