a comparative analysis of life insurance

8/7/2019 A COMPARATIVE ANALYSIS OF LIFE INSURANCE

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Table of Contents

Introduction

Concept of Insurance

Global Insurance Industry

Performance of Indian Industry

Insurance sector reforms in India

Research Methodology

Research Objectives

Research Design

Research Process Limitations of the Study

Significance of the study

Analysis and Interpretation

Findings & Conclusions

References


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INTRODUCTION

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.

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

Methodology

a. Type of research design: Analytical Research

b. Data collection: Secondary Sources

c. Statistical Tools: Ratio Analysis Bar Graph

LIMITATIONS:

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

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

lag in performance.

2. D u e 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.

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.


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REVIEW OF LITERATURE

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 of man. To pray or to pay for

protection is the spirit of the humanity. Man has been used 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. Too many people in this country are not in employment and work for too

many no longer guarantees income security. Several millions are part-time self employed and

low-earning workers living under pitiable circumstances where there is no security cover against

risk. Further the inherent changing employment risks the prospect of continual change in the

work place with its attendant threats of unemployment and low pay especially after the adoption

of New Economic Policy and the imminent life cycle risks - a new source of insecurity which

includes the changing demands of family life, separation, divorce and elderly dependents are

distressing the society. 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. It is a measure of social security to livelihood living and right to livelihood a means for

sustenance. Therefore it goes without saying that an appropriate life insurance policy within the

paying capacity and means of the insured to pay premium is one of the social security measures

envisaged under the Indian Constitution. Man finds his security in income 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.

What is Insurance

The business of insurance is related to the protection of the economic values of assets. Every

asset 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


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income or something else. It is a benefit because it meets some of his needs. In the case of a

factory or a cow the product generated by is sold and income generated. In the case of a motor

car it provides comfort and convenience in transportation. There is no direct income. 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. There is a life-time for a machine in a factory or a cow or a motor car.

None of them will last forever. 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. 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 defined 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. Insurancerate 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.

Origin of InsurancePRACTICE OF INSURANCE IN INDIA: 1818-1956

It is claimed that insurance was practiced in India even in Vedic times in one form or the other.

The Sanskrit term "Yogakshema" in the Rigveda meant some kind of insurance which was

practiced by the Aryans in India nearly 3000 years ago. During the Mughal period insurance

took firm roots. There are even references to the cover against war risks. Losses due to the

passage of royal troops through farms were compensated by the State as a gesture of goodwill.

The year 1818 is an epoch -making year in the history of our country. The first Life Insurance

Company on India soil appears to have been started in this year. A group of Europeans

pioneered the establishment of the Oriental Life Insurance Society to afford relief to the

distressed relatives of European. The venture was not quite successful but the company was

reformed in 1829.The renewed Company also got into trouble in 1833 when Agency House of

Calcutta partners of the same fell. Prince Dwarkanath Tagore was the only solvent partner & the

sole responsibility for carrying on the institution developed on him. Meanwhile early in

Janury1834 the Government made up its mind to establish a Public Insurance Company & a

Committee was set up for this purpose .A number of foreign Insurance Companies then


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operating in the country viewed this move with alarm. They set up Committees of their own

enquire into their individual affairs. Dwarkanath Tagore too had a Committee appointed to look

into the affairs of the Oriental. As a result another company was born out of the previous one in

the name of "New Oriental Company" In the reorganization of the "Oriental" in the year 1834

two other gentlemen were associated. One was Ramtanu Lahiri and the other Rustamjee

Cowasjee. The latter was another prominent figure of the business world. Rustamjee entered

insurance business in 1828 he was already known to the community and the Government as a

wealthy Parsi merchant. Rustamjee's connection with insurance also started with "Laudable

Societies" but he was later on associated with Companies like "Sun Life Office (1834) New

Oriental (1835)Universal Life (1835) New Laudable (1840) and Indian Laudable (1841) . He

was also on the Committee of the Union Insurance Company which was formed by a group of

five persons. This Company was issuing policies covering river-risks only. He was intimatelyconnected with the Committee of Insurance Offices in Calcutta. Rustamjee Cowasjee &

Dwarkanath Tagore was probably the first Indians to join in partnership business with the

Europeans & in the field of insurance they were pioneers on this side of the country. The

contribution of Raja Ram Mohan Roy one of the greatest social reformers of India to the

development of life insurance is very great. He was deeply concerned about the sad plight of

desperate widows and helpless orphans.

THE BIRTH OF INDIAN INSURERS

With the advent of the 20th century the glorious renaissance of swadeshi days dawned. At the

same time well- to do Indians realized the potentiality of Indian Insurance business. The

Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in

Madras National Indian and National Insurance 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 in

Calcutta. The Indian Mercantile (1907) was started in Bombay General Assurance (1908) atAjmer and the Swadeshi Life (Later Bombay Life) in Bombay in 1908. The end of the First

World War (1914-18) witnessed an influx of insurance companies in India. Famous Indian

business houses started new insurance companies. Industrial and Prudential Bombay Western

India Satara, were floated before the war but by 1919 companies like Jupiter General New India

Vulcan Insurance Company etc. came into being. Pandit K.Santhanam with blessing of Lala


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Lajpat Rai and Pandit Motilal Nehru started Laxmi Insurance Co. Similarly Andhra Insurance

was started in Masulipatnam, with the initiative of stalwarts like Dr. Pattabhi Sitaramaiah. From

political platforms also national leaders supported this cause. It is duty to every Indian to support

only Indian Insurance. The keynote of our Swaraj is in placing all our insurance with our Indian

companies" said Mahatma Gandhi in his message. "I hope Indians will realize the importance of

patriotism only through Indian insurance institution" stated Pandit Jawaharlal Nehru. Thus the

cause of Indian insurance became a national issue. The pursuit to boost Indian insurance

represented a crusade to extricate the Indian economy from foreign domination.

PROGRESS IN 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 making a definite headway during this year. 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 insurance business 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.

(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.

INSURANCE ACT, 1938


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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 companys mutual offices and co-operative societies as

well.

The silent 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 invest inIndian 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 policyholders' directors making it possible for the representatives 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 in cash

approved securities which was subsequently to be raised by installments to Rs. 2 lakh within a

specified time limit.

NationalizationTHE LIFE INSURANCE CORPORATION OF INDIA: 1956


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This was the first step taken towards the nationalization of life insurance business in India. On

20th January, 1956 all life insurance companies were taken over by 43 nominated custodians.

The custodians were experienced senior executives of private insurance companies reporting

directly to the Finance Ministry. From the word go the complex task of running the industry on a

permanent basis and continuing the services to policy holders without interruption were their

major concerns. The actual work of integration had to await legislation. The custodians managed

the insurance companies till 1-09-1956 when Life Insurance Corporation was established under

the general direction and control of the Ministry of Finance. The Ordinance provided for the

transfer of the control of 154 Indian insurers 16 non Indian insurers and 75 provident societies.

These arrangements were designed to ensure that no inconvenience whatsoever was caused to

the policy holders. With the Government take over the management aimed towards the evolution

of a common uniform premium rate policy conditions and service and working procedures andabove all to help promote team spirit. The corporation a body corporate shall consist of not more

than 15 members appointed by the Central Government one of them being appointed by the

government as chairman. The capital of the corporation was at Rs 5 crore provided by the

central government.

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N.

Malhotra was formed to evaluate the Indian Insurance industry and recommended its future

direction. The Malhotra committee was set up with the objective of complementing the reforms

initiated in the financial sector. The reforms were aimed at "creating a more efficient and

competitive financial system suitable for the requirements of the economy keeping in mind the

structural changes currently underway and recognizing that insurance is an important part of the

overall financial system where it was necessary to address the need for similar reforms. In 1994

the committee submitted the report and some of the key recommendations included

(1) STRUCTURE

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


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Government should take over the holdings of GIC and its subsidiaries so that these

subsidiaries can act as independent corporations.

All the insurance companies should be given greater freedom to operate

(2) COMPETETION

Private Companies with minimum paid up capital of Rs.1 bn should be allowed to enter

the industry.

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

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

domestic companies.

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

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

state.(3) REGULATORY BODY

The Insurance Act should be changed

An Insurance Regulatory Body should be set up.

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

independent

(4) INVESMENTS

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

75% to 50%.

GIC and its subsidiaries are not to hold more than 5% in any company.

(5) CUSTOMER SERVICE

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

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

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

insurance industry.

The committee emphasized that in order to improve the customer service and increase the

coverage of insurance industry should opened up to competition. But at the same time the

committee felt the need to exercise caution as any failure on the part of new players could spoil

the public confidence in the industry. Hence it was decided to allow competition in a limited

way by stipulating the minimum capital requirement of Rs. 100 crores. The committee felt the


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need to provide greater autonomy to insurance companies in order to improve their performance

and enable them to act as independent companies with economic motives. For this purpose it

had proposed setting up an independent regulatory body.

Liberalization

OPENING UP OF INSURANCE SECTOR 1999 THE INSURANCEREGULATORY AND DEVELOPMENT AUTHORITY

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament

in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has

carefully stuck to its schedule of framing regulations and registering the private sector insurance

companies. The other decision taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of the IRDA'sonline service for issue and renewal of licenses to agents. The approval of institutions for

imparting training to agents has also ensured that the insurance companies would have a trained

workforce of insurance agents in place to sell their products which are expected to be introduced

by early next year. Since being set up as an independent statutory body the IRDA has put in a

framework of globally compatible regulations. In the private sector 14 life insurance companies

have been registered.

ENTRY OF PRIVATE COMPANIES

Under the IRDA Act, private companies can now operate in India's insurance industry. However

they must obtain a license from the IRDA before being permitted to write business. To have its

license application considered a domestic private company must be registered in accordance

with the Companies Act of 1956 and have approximately US$ 20 million of investment capital.

The specific licensing requirements that Private Indian Companies must fulfill are set forth in

the Registration on Indian Insurance Companies Regulations published by the IRDA 2000.

LIFTING OF BARRIERS TO FOREIGN INVESTMENT

The IRDA Act also lifts certain barriers to foreign direct investment in Indian insurance

industry. Global insurers are now permitted to set up and register a domestic company in order

to write business in India. However regulations stipulate that they have a capital base of at least

US $ 20 million and their investment in such company is capped at 26 percent. Thus to


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participate in the market they must form a joint venture with an Indian partner that is able to

invest the remaining funds. The equity investments limit is the same for global reinsures seeking

to write business in India but they are required to put up a capital of approximately US$ 45

million in order to establish a domestic company. Since the IRDA first enacted these rules 13

new life insurance companies have entered the market. On the other hand no global reinsurer has

established a domestic company. Instead most of the top international reinsurance companies

operate from their overseas offices by sharing the reinsurance risks picked up by the GIC. A

recent proposal has been put forward to increase foreign direct investment to 49 percent. In

addition global companies are pushing for the right to establish branch offices in India. These

changes are likely to substantially increase the presence of international insurers reinsurers and

brokers in India. The IRDA Insurance Brokers Act in India 2002 permitted overseas insurance

and reinsurance brokers to enter the market but with the same equity cap as that governing theoperations of foreign insurers and reinsurers. Thus foreign brokers must also form a joint

venture with an Indian partner in order to establish an Indian broking house. The 2002 IRDA

legislation established four broker categories one of which brokers must select when applying

for a license

1. Category 1A : Direct General Insurance Broker

2. Category 1B : Direct Life Insurance Broker

3. Category 2 : Reinsurance Broker

4. Category 3: Composite Broker

5. Category4: Others, for example Insurance Consultants and RiskManagement Consultants.

OVERVIEW OF THE CURRENT INSURANCE MARKET

In the years since the IRDA Act initiated market reforms the insurance sector hasexperienced

some remarkable changes.The entry of a large number of Indian and Foreign private companies

in lifeinsurance business has to lead greater choice in terms of products and services. Increased

consumer awareness of the benefits and importance of insurance andreinsurance has generated

many more buyers and new distribution channels among them brokers, bank assurance, the

Internet, and corporate agents haveprovided additional ways of getting products and services to

customers.Private insurance companies have to date written a small percentage of business in

this sector during the last three years but they have ushered in a competitive environment that

has accelerated market growth.State owned insurers still write the bulk of insurance business


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and they have the net worth required to underwrite large corporate risks without depending

almostentirely on reinsurance support. However their focus on restructuring is beginningto put

them at a disadvantage against private competitors. Over the next few years the share of the

market held by the public insurers is expected to drop substantially with private companies

assuming a growing percentage of the business written. At present there are 15 private insurers

with two standalone private players andremaining private-foreign joint venture.

How Insurance Works?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 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.

Example 1

In a village there are 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


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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 be Rs. 20000 the total loss would work out to Rs. 200000. If each

person in a group contributed Rs. 200 a year the common fund would be Rs. 200000. This

would be enough to par Rs. 20000 to the family of each of the ten persons who die. Thus the

risks in the case of 10 persons are shared by 1000 persons.

Insurance of Human Asset

A human being is an income generating asset. Ones manual labour, professional skills and

business acumen are the assets. This asset also can be lost through unexpectedly early death or

through sickness and disabilities caused by accidents. Accidents may or may not happen. Death

will happen but the timing is uncertain. If it happens around the time of ones retirement when it

could be expected that the income will normally cease the person concerned could have made

some other arrangements to meet the continuing needs. But if it happens much earlier when the

alternate arrangements are not in place there can be losses to the person and dependents.

Insurance is necessary to help those dependent on the income. A person, who may have made

arrangements for his needs after his retirement also, would need insurance. This is because the

arrangements would have been made on the basis of some expectations like likely to live for

another 15 years or that children will look after him. If any of these expectations do not become

true the original arrangement would become inadequate and there could be difficulties. Living

too long can be as much a problem as dying too young. Both are risks which need to be

safeguarded against. Insurance takes care.

Insurance of Intangibles

The concept of insurance has been extended beyond the coverage of tangible assets. Exporters

run risk of losses if the importers in the other country default in payments or in collecting the

goods. They will also suffer heavily due to sudden changes in currency exchange rates economic

policies or political disturbances in the other country. These risks are insured. Doctors run the

risk of being charged with negligence and subsequent liability for damages. The amounts in


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question can be fairly large beyond the capacity of individuals to bear. These are insured. Thus

insurance is extended to intangibles. In some countries, the voice of a singer or the legs of a

dancer may be insured.

Types of Insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give

rise to claims are known as "perils". An insurance policy will set out in detail which perils are

covered by the policy and which is not. Below is a (non-exhaustive) list of the many different

types of insurance that exist.

Automobile insurance known 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 insured's vehicle itself. Throughout most of the United States an auto insurance

policy is required to legally operate a motor vehicle on public roads. In some jurisdictions bodily

injury compensation for automobile accident victims has been changed to a no-fault system

which reduces or eliminates the ability to sue for compensation but provides automatic

eligibility for benefits.

Aviation insurance insures against hull, spares, deductible, hull war and liability risks.

Boiler insurance (also known as boiler and machinery insurance or equipment breakdown

insurance) insures against accidental physical damage to equipment or machinery.

Builder's risk insurance insures against the risk of physical loss or damage to property during

construction. Builder's risk insurance is typically written on an "all risk" basis covering damage

due to any cause not otherwise expressly excluded.

Business insurance can be any kind of insurance that protects businesses against risks. Some

principal subtypes of business insurance are (a) the various kinds of professional liability

insurance also called professional indemnity insurance which are discussed below under that

name and (b) the business owners policy (BOP) which bundles into one policy many of thekinds of coverage that a business owner needs in a way analogous to how homeowners

insurance bundles the coverage that a homeowner needs.

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

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

borrower such as unemployment, disability, or death. Mortgage insurance is a form of credit


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insurance although the name credit insurance more often is used to refer to policies that cover

other kinds of debt.

Crime insurance insures the policyholder against losses arising from the criminal acts of third

parties. For example a company can obtain crime insurance to cover losses arising from theft or

embezzlement.

Crop insurance "Farmers use crop insurance to reduce or manage various risks associated

with growing crops. Such risks include crop loss or damage caused by weather, hail, drought,

frost damage, insects, or disease, for instance."

Defense Base Act Workers' compensation or DBA Insurance provides coverage for civilian

workers hired by the government to perform contracts outside the US and Canada. DBA is

required for all US citizens, US residents, US Green Card holders, and all employees or

subcontractors hired on overseas government contracts. Depending on the country, ForeignNationals must also be covered under DBA. This coverage typically includes expenses related to

medical treatment and loss of wages, as well as disability and death benefits.

Directors and officers liability insurance protects an organization (usually a corporation)

from costs associated with litigation resulting from mistakes incurred by directors and officers

for which they are liable. In the industry it is usually called "D&O" for short.

Disability insurance policies provide financial support in the event the policyholder is unable

to work because of disabling illness or injury. It provides monthly support to help pay such

obligations as mortgages and credit cards. Total permanent disability insurance provides benefits

when a person is permanently disabled and can no longer work in their profession, often taken as

an adjunct to life insurance.

Errors and omissions insurance See "Professional liability insurance" under "Liability

insurance".

Expatriate insurance provides individuals and organizations operating outside of their home

country with protection for automobiles, property, health, liability and business pursuits.

Financial loss insurance protects 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 the failure of a

creditor to pay money it owes to the insured. This type of insurance is frequently referred to as

"business interruption insurance." Fidelity bonds and surety bonds are included in this category

although these products provide a benefit to a third party (the "obligee") in the event the insured


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party (usually referred to as the "obligor") fails to perform its obligations under a contract with

the oblige.

Health insurance policies will often cover the cost of private medical treatments if the

National Health Service in the UK (NHS) or other publicly-funded health programs does not pay

for them. It will often result in quicker health care where better facilities are available.

Home insurance or homeowners insurance See "Property insurance".

Life insurance provides a monetary benefit to a decedent's family or other designated

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

insurance policies often allow the option of having the proceeds paid to the beneficiary either in

a lump sum cash payment or an annuity. Annuities provide a stream of payments and are

generally classified as insurance because they are issued by insurance companies and regulated

as insurance and require the same kinds of actuarial and investment management expertise thatlife insurance requires. 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 and from an underwriting perspective is the

mirror image of life insurance.

Marine insurance and marine cargo insurance cover the loss or damage of ships at sea or on

inland waterways and of the cargo that may be on them. When the owner of the cargo and the

carrier are separate corporations, marine cargo insurance typically compensates the owner of

cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered

from the carrier or the carrier's insurance. Many marine insurance underwriters will include

"time element" coverage in such policies, which extends the indemnity to cover loss of profit

and other business expenses attributable to the delay caused by a covered loss.

Mortgage insurance insures the lender against default by the borrower.

No-fault insurance is a type of insurance policy (typically automobile insurance) where

insurers are indemnified by their own insurer regardless of fault in the incident.

Nuclear incident insurance covers damages resulting from an incident involving radioactive

materials and is generally arranged at the national level.

Pet insurance insures pets against accidents and illnesses some companies cover

routine/wellness care and burial as well.

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.


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Pollution Insurance A first-party coverage for contamination of insured property either by

external or on-site sources. Coverage for liability to third parties arising from contamination of

air, water or land due to the sudden and accidental release of hazardous materials from the

insured site. The policy usually covers the costs of cleanup and may include coverage for

releases from underground storage tanks. Intentional acts are specifically excluded

Property insurance provides 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.

Purchase insurance is aimed at providing protection on the products people purchase.

Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans

and even mobile phone insurance. Such insurance is normally very limited in the scope of

problems that are covered by the policy. Retrospectively Rated Insurance is a method of establishing a premium on large commercial

accounts. The final premium is based on the insured's actual loss experience during the policy

term sometimes subject to a minimum and maximum premium with the final premium

determined by a formula. Under this plan, the current year's premium is based partially (or

wholly) on the current year's losses although the premium adjustments may take months or years

beyond the current year's expiration date. The rating formula is guaranteed in the insurance

contract. Formula: retrospective premium = converted loss + basic premium tax multiplier.

Numerous variations of this formula have been developed and are in use.

Terrorism insurance provides protection against any loss or damage caused by terrorist

activities.

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 because of a job-related injury.

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

reluctance of insurance companies to take on high-risk cases runs counter to the principle of

insurance. Other criticisms include:


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

policies do not cover damage to garden walls.

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.

Role of Insurance in Economic Development

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

life insurance company is a major instrument for the mobilization of savings of people

particularly from the middle and lower income groups. These savings are channeled 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 related

securities more than Rs. 12000 crores in the State Electricity Boards nearly Rs. 20000 crores inhousing 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 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 these aspects 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.

GLOBAL INSURANCE INDUSTRY

The global insurance industry is one of the largest sectors of finance. It ranges from consumer to

corporate and industrial insurance and even reinsurance or insurance of insurance. The major


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insurance markets of the world are obviously the US, Europe, Japan, and South Korea.

Emerging markets are found throughout Asia specifically in India and China and are also in

Latin America. With the internet and other forms of high-speed communication companies and

individuals are now able to purchase insurance and related financial products from almost

anywhere in the world. Increasing affluence especially in developing countries and a rising

understanding of the need to protect wealth and human capital has led to significant growth in

the insurance industry. Given the evolving and growing socio-economic conditions worldwide

insurance companies are increasingly reaching out across borders and are offering more

competitive and customized products than ever before. Over the past ten years global insurance

premiums have raised by more than 50% with annual growth rates ranging between 2 and

10%.In 2004 global insurance premiums amounted to $3.3 trillion. The majority of insurance

comes from developed nations such as most of Europe, the US, and Japan. In 2004 premiums inNorth American amounted to $1,217 billion, while the European Union generated $1,198

billion, and Japan produced $492 billion. The UK amounted to $295 billion. The four biggest

generators of insurance premiums comprised almost two-thirds of premiums for 2004, the US

and Japan amount to half, while they only make up 7% of the worlds population. In contrast the

emerging markets that make up 85% of the worlds population produced only 10% of the

premiums.

The leading global insurance companies are:

Zurich Financial Services,

AXA

Berkshire Hathaway/ Berkshire Hathaway Re

Allianz

Aviva

ING Group

Munich RE Group

American International Group (AIG)

Nippon Life Insurance

Assicurazioni Generali

PERFORMANCE OF INDIAN INSURANCE INDUSTRY

Performance up to October 2006


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The performance growth rate that was 22.8 percent as at September 2006 has moved up to 23.3

percent at the end of October 2006 an improvement of significance. The total premium at the

end of October is Rs.14,628 crore as against Rs.11,855 crore. The established players have

added Rs.807 crore at a growth rate of 8.3 percent with the new players adding Rs.1966 crore at

a growth rate of 62 percent. Here again ICICI Lombard has achieved an accretion of Rs.887

crore whereas the total accretion of all the established players is Rs 807 crores a truly impressive

record. New India with Rs.286 crore closely followed by Oriental with Rs.277 crore are the

major contributors for the established players. Reliance a late starter in the race for premium

acquisition has recorded an accretion of Rs.357 crore as against a meager last year renewal of

Rs.89 crore. The growth path is now led by several players: with eight out of the twelve players

having achieved accretions in excess of Rs.100 crore and more at the end of October 2006. With

the imminent detariffing around the corner in January 2007, the next two months should witnesseven more fierce battles for supremacy of the market turf. A few of the new players are inching

towards breaking into the big league premium players of yesteryears and this may happen

sooner than one thought. Interesting and challenging times are certainly ahead for all the players.

Premiums Rise 163.68% over October, 2006

Individual premium:

The life insurance industry underwrote Individual Single Premium of Rs.1336610.10 lakh for

the period ended October, 2006 of which the private insurers garnered Rs.118242.78 lakh and

LIC garnered Rs.1218367.32 lakh. The corresponding numbers for the previous year were

Rs.443296.40 lakh for the industry, with private insurers underwriting Rs.64530.68 lakh and

LIC Rs.378765.72 lakh. The Individual Non-Single Premium underwritten during April-

October, 2006 was Rs.1771903.71 lakh of which the private insurers underwrote Rs.536863.16

lakh and LIC Rs.1235040.55 lakh. The corresponding numbers for the previous year were

Rs.743586.24 lakh, Rs.260432.63 lakh and Rs.483153.61 lakh respectively.

Private sector life insurance business jumps 90%

In a tough battle to expand market shares the private sector life insurance industry consisting 14

life insurance companies at 26% have lost 3% of market share to the state owned Life Insurance

Corporation (LIC) in the domestic life insurance industry in 2006- 07. According to the figures

released by Insurance Regulatory & Development Authority the total premium these 14

companies have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore. LIC


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with a total premium mobilization of Rs 55,934 crore has been able retain a market share of

74.26 % during the reporting period. In total the life insurance industry in first year premium has

grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 performance has thrown a few

surprises in the ranking among the private sector life insurance companies. New entrants like

Reliance Life and SBI Life had shown a huge growth of over 381% and 210% respectively

during the year. Reliance Life which has become one of the top five companies ended the year

with a premium of Rs 930 crore during the year. Though ICICI Prudential Life Insurance

remained as the No 1 private sector life insurance Company during the year Bajaj Allianz

overtook ICICI Prudential in terms of monthly market share in March for the first time ever.

Bajaj's market share among private players in non-single premium for March stood at 29.1% vs.

ICICI Prudential's 23.8%. Bajaj gained 4.6 percentage point market share among private sector

players for FY07. Among other private players SBI Life and Reliance Life continued to do welleach gaining 4% market share in FY07. SBI Life's growth was driven by increasing contribution

from ULIP premiums. Another notable development of the 2006-07 performance has been the

expansion of retail markets by the life insurance companies. Bajaj Allianz Life insurance has

added 20 lakh policies while ICICI Prudential has expanded over 19 lakh policies during the

year.

Insurance Sector Reforms in India: Challenges and OpportunitiesInsurance in India started without any regulations in the nineteenth century. It was a typical

story of a colonial era: a few British insurance companies dominating the market serving mostly

large urban centers. After the independence, the Life Insurance Company was nationalized in

1956 and then the general insurance business was nationalized in 1972. Only in 1999 private

insurance companies were allowed back into the business of insurance with a maximum of 26

per cent of foreign holding. The entry of the State Bank of India with its proposal of bank

assurance brings a new dynamics in the game. On July 14, 2000 Insurance Regulatory and

Development Authority bill was passed to protect the interest of the policyholders from private

and foreign players. The following companies are entitled to do insurance business in India. The

private insurance joint ventures have collected the premium of Rs.1019.09 crore with the

investment of just Rs.3,000 crore in three years of liberalization. The private insurance players

have significantly improving their market share when compared to 50 years Old Corporation

(i.e. LIC). As per the figures compiled by IRDA, the Life Insurance Industry recorded a total


22/41

premium underwritten of Rs. 10,707.96 crore for the period under review. Of this, private

players contributed to Rs.1, 019.09 crore, accounting for 10 percent. Life Insurance Corporation

of India (LIC), the public sector giant, continued to lead with a premium collection of

Rs.9,688.87 crore, translating into a market share of 90 per cent. In terms of number of policies

and schemes sold private sector accounted for only 3.77per cent as compared to 96.23 per cent

share of LIC (The Economic Times 21March04). He ICICI Prudential topped among the private

players in terms of premium collection. It recorded a premium of Rs. 364.9 crore and a market

share of 25 per cent, followed by Birla Sun Life with a premium underwritten Rs.170 crore and

a market share of 15 percent, HDFC Standard with 132.7 crore and Max New York Life with

Rs.76.8 crore with a market share of approximately 15 per cent each. Unlike their counterpart in

the life insurance business private non-life insurance companies have not yet started addressing

the retail market. All is set to change in the coming years. Like in the banking sector nonlifeinsurance companies will soon have no choice but to focus on individual buyers. The latest

series of bomb attacks, attack on parliament, attack on Ayodhya, attacks of the Maoists, nature

calamities like tsunami, floods and drought, ragging are prevailed in the country and need not to

say about the farmer who has been insecure about rains, seeds, crops and suitable price for his

crop. In developed countries the owners have insured even pet dogs. Whereas in India about 80

percent of human beings and major natural resources have not been insured in globalization era.

It is therefore an urgent need to explore the challenges and opportunities faced by the insurance

sector in India.

PROCESSOF THE STUDY

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. Growth

3. Productivity

4. Grievance Handling

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


23/41

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 sheet of LIC and other private insurance companies, 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 table has been prepared to know that which sector is performing better than

other.The Weightage for different categories are:

Factors Weig

htage


24/41

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


25/41

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

2

0%

ANALYSIS AND INTERPRETATION


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1. SIZE

(A) TOTAL PREMIUM (Rs. In crores)FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 63533 75127 90792 127822 149789

Private

Insurers

3120 7727 15083 28253 51561

TOTAL 66653 82854 105875 156075 201350

Avg.

Premium

( In Crores)

Rank points points after

multiplyingby

weightage

(5%)

LIC 101412.2

0

1 1 5

Private

Insurance

Co.

21148.80 2 0.5 2.5


27/41

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

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 there 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)FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 93089 112393 132147 174425 206363

Private

Insurers

4323 9049 18863 24242 52648

TOTAL 97412 121442 151010 198667 259011

Avg. Income

( In Crores)


multiplying

by

weightage

(5%)


28/41

LIC 143683.40 1 1 5

Private

InsuranceCo.

21825.00 2 0.5 2.5

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

corporate.

(C) SIZE OF BALANCE SHEET(Rs. In


LIC 346022 416910 531390 625956 776904

Private

Insurers

6585 13653 28910 53048 100774

TOTAL 352607 430563 560300 679004 877678

Avg. Balance

Sheet

Size

( In Crores)


multiplying by

weightage


29/41

(5%)

LIC 539436.40 1 1 5

Private

Insurance co.

40594.00 2 0.5 2.75

Total average size of balance sheet of LIC in the last five years is certainly higher than that of

private 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, LICs average

balance sheet size goes to much high as that of 5,39,436.4 crores.

(D) TOTAL NUMBER OF POLICIES

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 26968069 23978123 31590515 38229292 37612599

Private

Insurers

1658847 2233075 3871410 7922294 13261558

TOTAL 28626916 26211198 35462117 46151586 50874157


30/41

Avg. number

of

policies

Rank Points points after

multiplying

by

weightage

(5%)

LIC 31675670 1 1 5

Private

InsuranceCo.

5789437 2 0.5 2.5

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.

(E) NUMBER OF BRANCHES

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 2196 2197 2220 2301 2522

Private

Insurers

416 804 1645 3072 6391

TOTAL 2612 3001 3865 5373 8913


31/41

%growth in

number of

branches


multiplying

by

weightage

(5%)

LIC 14.8 2 0.5 2.5

PrivateInsurance

Co.

14361 1 5

When the matter of total number of branches comes its very much obvious that LIC, being the

oldest existing insurance company in India, has the large number of offices in the country by any

single insurance company. Since the number of private insurance companies is increasing, with

continuous expansion in their business, now the number of branches of all private players has

crossed the number of branches of LIC.

2. GROWTH(A) FIRST PREMIUM

(Rs. In crores)FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 17347 20653 28515 55934 59996


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Private

Insurers

2440 5564 10270 19425 33715

TOTAL 19787 26217 38785 75359 93711

Growth in

First

Premium

(in

Percentage

Terms)

Growth in

First

Premium

(in Absoute

Terms) (in

crores)

Rank points points

after

multiplying

by

weightage

(10%)

LIC 245.85 42649 2 0.5 5

Private

Insuranc

e Co.

1281.76 31275 1 1 10

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



33/41

LIC 12101 19303 19754 42277 31988

Private

Insurers

2692 4725 9814 5379 28406

TOTAL 14793 24028 29568 47656 60394

% GROWTH IN INCOME :FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

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

Growth in

Income

(in

Percentage

Terms)

Growth in

Income

(in Absoute

Terms) (in

crores)

Rank points points

after

multiplying

by

weightage

(10%)


34/41

LIC 164.34 19887 2 0.5 5

Private

Insuranc

e Co.

955.20 25714 1 1 10

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.

3. PRODUCTIVITY

(A) BUSINESS PER BRANCH

(Rs. Incrores)

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 28.93 34.20 40.9 55.55 59.20

Private

Insurers

7.5 9.61 9.17 9.2 8.07

Avg.

Business


multiplying


35/41

Per Branch

(In

crores)

by

weightage

(5%)

LIC 43.756 1 1 5

Private

Insurance

Co.

8.71 2 0.5 2.5

Avg business per branch of LIC is much higher than that of whole private insurance companies.

(B) INCOME PER BRANCH(Rs. In


LIC 42.39 51.16 59.52 75.80 81.80

Private

Insurers

10.41 11.25 11.47 7.89 8.23


36/41

Avg. Income

Per

Branch (In

crores)


multiplyingby

weightage

(5%)

LIC 62.134 1 1 5

Private

InsuranceCo.

9.864 2 0.5 2.5

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.

4. GRIEVANCE HANDLINGTOTAL NUMBER OF GRIEVANCES

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 474 704 851 354 651

Private 45 195 540 507 1406


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Insurers

NUMBER OF GRIEVANCES RESOLVED

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 39 123 215 313 80

Private

Insurers

26 83 216 450 1103

% OF GRIEVANCES RESOLVED

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

LIC 8.2 17.5 25.3 88.4 12.2

Private

Insurers

57.7 42.6 40.0 88.7 78.4


38/41

%

Grievances

resolved


multiplying

by

weightage

(5%)

LIC 25.37 2 0.5 2.5

Private

InsuranceCo.

69.70 1 1 5

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.


39/41

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. Total premium deposits in LIC are much higher than the

private insurance companies. Total premium of LIC in FY 07-08 was 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 48244.14 crores which wasnearly 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 field

of insurance and many private companies have just started their business. Hence it is obviousthat 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 their business. There are many private insurance companies and hence there total


40/41

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 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 thatmuch 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 who

have 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

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.


41/41

LIC has not shown their good concern when the matter of grievance handling comes. Private

insurance companies are far ahead in this matter. LIC has just resolved 25% cases in the last five

years while private insurance companies have resolved nearly 70% cases. This is a matter from

where customer shift starts. We have seen the rapid increase in customer base of private

insurance companies which can 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.

REFRENCES Data on Indian Insurance from http://www.irdaindia.org

Different statistics from http://www.rbi.org.in

Journals published by Insurance Regulatory & Development Authority.

Management of financial institutions by R.M. Srivastava

http://www.businesstoday.com

http://www.businessworld.com

http://www.economictimes.com

Profile of Indian Insurance Companies by IRDA.

www.licindia.co.in

www.sbilife.co.in/

www.tata-aig-life.com

www.bharti-axalife.com/

www.hdfcinsurance.com/

www.reliancelife.co.in/

www.bajajallianz.com/

www.metlife.co.in/ www.birlasunlife.com/

http://www.finance.indiamart.com

a comparative analysis of life insurance

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