CTENTSAcknowledgementIntroductionConcept of InsuranceGlobal Insurance Industry

Research MethodologyResearch ObjectivesResearch DesignResearch ProcessLimitations of the StudySignificance of the studyAnalysis and InterpretationFindings & ConclusionsReferences

CHAPTER 1

INTRODUCTION

1. CONCEPT OF INSURANCELife 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 prayor to pay for protection is the spirit of the humanity. Man has been accustomed topray God for protection and security from time immemorial. In modern daysInsurance Companies want him to pay for protection and security. The insurance mansays "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 nolonger guarantees income security. Several millions are part-time, self employed andlow-earning workers living under pitiable circumstances where there is no securitycover against risk. Further the inherent changing employment risks, the prospect ofcontinual change in the work place with its attendant threats of unemployment andlow pay especially after the adoption of New Economic Policy and the imminent lifecycle risks - a new source of insecurity which includes the changing demands offamily life, separation, divorce and elderly dependents are tormenting the society.Risk has become central to one's life. It is within this background life insurance policyhas been introduced by the insurance companies covering risks at various levels. Lifeinsurance 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 livelihoodfor the insured or dependents. This is to make the right to life meaningful, worthliving and right to livelihood a means for sustenance. Therefore, it goes withoutsaying that an appropriate life insurance policy within the paying capacity and meansof the insured to pay premium is one of the social security measures envisaged underthe Indian Constitution. Hence, right to social security, protection of the family,economic empowerment to the poor and disadvantaged are integral part of the right tolife 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 himselfbut also for his dependents, viz., wife and children. He has to provide legally for hisfamily needs, and so he has to keep aside something regularly for a rainy day and forhis old age. This fundamental need for security for self and dependents proved to bethe 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. Everyasset has a value. The asset would have been created through the efforts of the owner. Theasset is valuable to the owner, because he expects to get some benefit from it. The benefitmay be an income or some thing else. It is a benefit because it meets some of his needs. In thecase of a factory or a cow, the product generated by is sold and income generated. In the caseof a motor car, it provides comfort and convenience in transportation. There is no directincome.Every asset is expected to last for a certain period of time during which it will perform. Afterthat, the benefit may not be available. There is a life-time for a machine in a factory or a cowor a motor car. None of them will last for ever. The owner is aware of this and he can somanage 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 lostearlier. 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 thebenefit and the planned substitute would not have been ready. There is an adverse orunpleasant situation. Insurance is a mechanism that helps to reduce the effect of such adversesituations.Insurance, in law and economics, is a form of risk management primarily used to hedgeagainst the risk of a contingent loss. Insurance is defined as the equitable transfer of the riskof a potential loss, from one entity to another, in exchange for a premium. Insurer, ineconomics, is the company that sells the insurance. Insurance rate is a factor used todetermine the amount, called the premium, to be charged for a certain amount of insurancecoverage. Risk management, the practice of appraising and controlling risk, has evolved as adiscrete field of study and practice.

PROGRESS IN INSURANCE BUSINESS

The growth of Life Insurance in concrete terms could be said to being during the first twodecades of twentieth century when most of the major companies were founded. They grew interms of rise in the number of companies, in terms of number of policies and sum assured aswell as total life fund. Indian Insurance Year Book, published for the first time in 1914, givesthe 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 thenext 25 years their number rose to 176. The total progress on all the primary heads, viz. lifefund (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 thisyears. 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 insurancecompanies mushroomed. In this period, 176 insurance companies were formed and many ofthem failed. Thus unhealthy growth was harmful to the interest of the policy holders andinsurance 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 inIndia securities to meet their liabilities under all policies issued in India

GROWTH OF LIFE BUSINESS IN INDIA: 1914-1948

Sr19141930194019451948

no

1No of insurers4468195215209

(a)Indian4468179200189

(91.79)(93.02)(90.43)

(b)Non-Indian--161520

2Total No. of-748997162838127140003016000

policies In force

(a)Indian-513925137196323760002791000

(68.61)(84.25)(87.55)(90.15)

(b) Non-Indian-220703181247261000234000

(c)Indian outside-143697517177000202000

India

3Total business in22.44258.42304.03573.07712.76

force

(a)Indian (Rs. Crore)22.4484.89225.51459.43566.38

(32.85)(74.17)(80.17)(79.46)

(b)Non-Indian-69.7660.1291.85101.08

(c)Indian outside-3.7718.421.7945.3

India

4Total life funds6.3620.5362.41107.4150.39

(Rs. Crore)

Note: Figures in brackets show percentage of the total.

ENTRY OF PRIVATE COMPANIESUnder the IRDA Act, private companies can now operate in India's insuranceindustry. However, they must obtain a license from the IRDA before beingpermitted to write business.To have its license application considered, a domestic private company must beregistered in accordance with the Companies Act of 1956 and have approximatelyUS$ 20 million of investment capital. The specific licensing requirements thatPrivate Indian Companies must fulfill are set forth in the Registration on IndianInsurance Companies Regulations, published by the IRDA 2000.

OVERVIEW OF THE CURRENT INSURANCE MARKETIn 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 inthis sector during the last three years, but they have ushered in a competitiveenvironment that has accelerated market growth.State owned insurers still write the bulk of insurance business, and they have thenet 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 isexpected to drop substantially, with private companies assuming a growingpercentage of the business written.At present there are 15 private insurers with two standalone private players andremaining private-foreign joint venture.

Purpose and Need of Insurance :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 assetis 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 lakhsor 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 nothappen. Insurance is done against the contingency that it may happen. There has to be anuncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is nouncertainty about the occurrence of an event, it cannot be insured against. In the case ofhuman being, death is certain, but the time of death is uncertain. In the case of person who isterminally ill, the time of death is not uncertain, though not exactly known. He cannot beinsured.Insured does not protect the asset. It does not prevent its loss due to peril. The peril cannot beavoided through insurance. The peril can sometimes be avoided through better safety anddamage control management. Insurance only tries to reduce the impact of the risk on theowner of the asset and those who depend on that asset. It only compensates the losses andthat too, not fully.Only economic consequences can be insured. If the loss is not financial, insurance may not bepossible. Example of non-economic losses are love and affection of parents, leadership ofmanagers, sentimental attachments to family heirlooms, innovative and creative abilities, etc.

How Insurance Works?The mechanism of insurance is very simple. People who are exposed to the same risks cometogether and agree that, if any one of them suffers a loss, the others will share the loss andmake good to the person who lost. All people who send goods by ship are exposed to thesame risks, which are related to water damage, ship sinking, piracy, etc. Those owningfactories 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 beidentified 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 thesame time) is divided into bearable small losses by all. In other words, the risk is spreadamong the community and the likely big impact on one is reduced to smaller manageableimpacts on all.If a Jumbo Jet with more than 350 passengers crashes, the loss would run into several croresof rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jetswill crash at same time. If 100 airline companies flying Jumbo Jets, come together into aninsurance pool, whenever one of the Jumbo Jets in the pool crashes, the loss to be borne byeach airline would come down to a few lakhs of rupees. Thus, insurance is a business ofsharing.There are certain principles, which make it possible for insurance to remain a fairarrangement. The first is that it is difficult for any one individual to bear the consequences ofthe risks that he is exposed to. It will become bearable when the community shares theburden. The second is that the perils should occur in an accidental manner. Nobody should bein a position to make the risk happen. In other words, none in the group should set fire to hisassets and ask others to share the costs of damage. This would be taking unfair advantage ofan arrangement put into place to protect people from risks they are exposed to. Theoccurrence 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 may beproportional to the risk that each person is exposed to. This would be indicative of the benefithe would receive if the peril befell him. The share could be collected from the members afterthe loss has occurred or the likely shares may be collected in advance, at the time ofadmission to the group. Insurance companies collect in advance and create a fund from whichthe losses are paid.The collection to be made from each person in advance is determined on assumptions. Whileit may not be possible to tell beforehand, which person will suffer, it may be possible to tell,on the basis of past experiences, how many persons, on an average, may suffer losses. Thefollowing two examples explain the above concept of insurance:

Insurance of Human AssetA human being is an income generating asset. Ones manual labour, professional skills andbusiness acumen are the assets. This asset also can be lost through unexpectedly early deathor 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 onesretirement, when it could be expected that the income will normally cease, the personconcerned could have made some other arrangements to meet the continuing needs. But if ithappens much earlier when the alternate arrangements are not in place, there can be losses tothe 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 wouldneed insurance. This is because the arrangements would have been made on the basis of someexpectations like, likely to live for another 15 years, or that children will look after him. Ifany of these expectations do not become true, the original arrangement would becomeinadequate and there could be difficulties. Living too long can be as much a problem as dyingtoo 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 incollecting the goods. They will also suffer heavily due to sudden changes in currencyexchange rates, economic policies or political disturbances in the other country. These risksare insured. Doctors run the risk of being charged with negligence and subsequent liabilityfor damages. The amounts in question can be fairly large, beyond the capacity of individualsto bear. These are insured. Thus, insurance is extended to intangibles. In some countries, thevoice of a singer or the legs of a dancer may be insured.

Advantages of Life Insurance :Life insurance has no competition from any other business. Many people think that lifeinsurance is an investment or a means of saving. This is not a correct view. When a personsaves, the amount of funds available at any time is equal to the amount of money set aside inthe past, plus interest. This is so in a fixed deposit in the bank, in national savings certificates,in mutual funds and all other savings instruments. If the money is invested in buying sharesand stocks, there is the risk of the money being lost in the fluctuations of the stock market.Even if there is no loss, the available money at any time is the amount invested plusappreciation. In life insurance, however, the fund available is not the total of the savingsalready made (premiums paid), but the amount one wished to have at the end of the savingsperiod (which is the next 20 or 30 years). The final fund is secured from the very beginning.One is paying for it later, out of the savings. One has to pay for it only as long as one lives orfor a lesser period if so chosen. There is no other scheme which provides this kind of benefit.Therefore life insurance has no substitute.

The Business of Insurance :

Insurance companies are called insurers. The business of insurance is to (a) bring togetherpersons with common insurance interests (sharing the same risks), (b) collect the share orcontribution (called premium) from all of them, and (c) pay out compensation (called claims)to those who suffer. The premium is determined on the same lines as indicated in theexamples above, but with some further refinements.In India, insurance business is classified primarily as life and non-life or general. Lifeinsurance includes all risks related to the lives of human beings and General insurance coversthe rest. General insurance has three classifications viz., Fire (dealing with all fire relatedrisks), Marine (dealing with all transport related risks and ships) and Miscellaneous (dealingwith all others like liability, fidelity, motor crop, personal accident, etc.). Personal accidentand sickness insurance, which are related to human beings, is classified as non-life in India, but is classified as life, in many other countries.

Criticism of Insurance Companies :Some people believe that modern insurance companies are money-making businesses whichhave little interest in insurance. They argue that the purpose of insurance is to spread risk sothe reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subjectto flooding, or young drivers) runs counter to the principle of insurance.Other criticisms include: Insurance policies contain too many exclusion clauses. For example, some house insurancepolicies do not cover damage to garden walls. Most insurance companies now use call centre and staff attempt to answer questions byreading from a script. It is difficult to speak to anybody with expert knowledge.

2. GLOBAL INSURANCE INDUSTRY :The global insurance industry is one of the largest sectors of finance. It ranges fromconsumer to corporate and industrial insurance, and even reinsurance, or insurance ofinsurance.The major insurance markets of the world are obviously the US, Europe, Japan, and SouthKorea. Emerging markets are found throughout Asia, specifically in India and China, and arealso in Latin America.With the internet and other forms of high-speed communication, companies and individualsare now able to purchase insurance and related financial products from almost anywhere inthe world. Increasing affluence, especially in developing countries, and a risingunderstanding of the need to protect wealth and human capital has led to significant growth inthe insurance industry.Given the evolving and growing socio-economic conditions worldwide, insurance companiesare increasingly reaching out across borders and are offering more competitive andcustomized products than ever before.Over the past ten years, global insurance premiums have risen by more than 50%, withannual growth rates ranging between 2 and 10%.In 2004, global insurance premiumsamounted to $3.3 trillion.The majority of insurance comes from developed nations such as most of Europe, the US,and Japan. In 2004, premiums in North American amounted to $1,217 billion, while theEuropean Union generated $1,198 billion, and Japan produced $492 billion. The UKamounted to $295 billion.The four biggest generators of insurance premiums comprised almost two-thirds of premiumsfor 2004, the US and Japan amount to half, while they only make up 7% of the worldspopulation.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

GLOBAL LIFE INSURANCE DENSITY :Continent/Country2001**2002**2003**2004**2005**2006**

North America1508.61563.81565.71617.21686.31731.8

United States16021662.61657.51692.51753.21789.5

Canada675.9657.3722.9926.11071.91204.1

Latin America26.329.13037.242.051.3

Brazil10.827.235.845.956.872.5

Mexico53.259.241.350.249.962.9

Uruguay21.517.815.4N/A15.516.6

Argentina68.819.724.234.535.443.8

Panama39.344.642.450.647.251.2

Chile122.1103.5138.3164.5174.9176

Colombia11.512.512.414.316.820.5

Europe573.2620.4726.9848.1911.81119.6

United kingdom2567.92679.42617.13190.43287.15139.6

Switzerland2715.73099.73431.83275.13078.13111.8

Netherlands13451296.11561.71936.51954.22071.6

France1268.21349.51767.92150.22474.62922.5

Belgium11551323.62004.82291.22988.72427.7

Sweden13561232.21602.31764.32105.22214.6

Denmark1364.41574.92037.52310.52489.92840.8

Germany674.3736.7930.41021.31042.11136.1

Italy720.8904.91238.31417.21449.81492.8

Austria632648.7811955.31095.11104.6

Portugal302.9418.6611.4768.11113.71131.5

Spain491588488.6571.9615.8651.0

Poland48.750.759.973.3101.9150.5

Russia33.223.133.924.86.34.0

Croatia25.333.246.358.770.981.8

Hungary59.376.799.1117.3148.2192.3

Greece108.9116152.1177.9213.1256.7

Bulgaria59.95.58.211.113.2

Ukraine0.10.10.30.61.31.9

Turkey5.56.58.41212.713.1

Asia125128.1140.1147.2149.6154.6

South Korea763.4821.9873.61006.81210.61480.0

Japan2806.42783.93002.930442956.32829.3

Tiwan760.9925.11050.11494.61699.11800.0

Hongkong1249.71237.91483.91884.32213.22456

Israel525.2459.3460.8467.4510.2532.6

Malaysia129.5118.7139.8167.3188189.2

Singapore713.2730.11300.21483.91591.41616.5

Thailand34.142.15250.854.660

India9.111.712.915.718.333.2

China12.219.525.127.330.534.1

Phillipines6.68.78.69.410.613.1

UAE56.37472.559.774.789.8

Srilanka4.34.55.36.26.98.5

Indonesia3.65.26.47.510.512.5

Oman13.614.813.814.217.314.3

Vietnam2.13.84.17.36.16.1

Iran1.11.51.72.32.22.6

Kuwait30.336.836.939.135.740.9

Pakistan1.211.11.51.92.3

Saudia Arabia0.61.71.72.10.70.8

Africa22.421.526.130.330.738.3

South Africa377.2360.5476.5545.5558.3695.6

Mauritius95.3103.7119.1133.1136.1N/A

Zimbabwe12.47.821.4N/AN/AN/A

Morocco9.412.21210.611.714.7

Kenya2.933.43.74.55.3

Nigeria0.50.50.60.70.50.8

Egypt2.72.42.73.144.7

Algeria0.40.50.50.80.91.2

Oceania697.5668.7750.7851885896.3

Australia1040.31010.41129.31285.11366.71389

New Zealand198.4211.1272318219.7215

World235247.3267.1291.5299.5330.6

Source: Swiss Re, Sigma volumes

Insurance density is measured as ratio of premium to total population

Data relates to calender

years Figure in US$

www.indiainsuranceresearc

CHAPTER 2

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 eachcategory (size. growth, productivity and efficiency)3. To compare grievance management of LIC and private insurance companies.

RESEARCH DESIGN :a. Type of research design : Analytical Researchb. Data collection : Secondary Sourcesc. Statistical Tools : Ratio Analysis

RESEARCH PROCESSIn this research my research objective was to compare the performance of LIC and Privateinsurance companies. For this purpose I decided the four broad categories under which I havecompared the LIC and Private insurance companies. These are:1. Size2. Growth3. Productivity4. Grievance HandlingUnder these Broad Categories I have analyzed 13 factors which are:1. Size Total Premium Total Income Size of Balance Sheet Total number of Policies Total number of Branches2. Growth Growth in Premium Growth in Income Growth in number of Policies Growth in Market share3. Productivity Business per Branch Income per Branch New Premium per Branch4. Grievance HandlingI have used the Secondary data of last five financial years. I have collected data from thevarious balance sheet of LIC and other private insurance companies, web sites and in somecases I personally met some employees of some insurance companies. I tried to find out mostof 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 rankto LIC and Private Insurance Companies on each factor and then points. Now these Pointshave been multiplied with the weightage of that factor. And then after the analysis of eachfactor a consolidated point table has been prepared to know that which sector is performingbetter than other. The Weightage for different categories are:

FactorsWeightage

Size25%

A. Total Premium5%

B. Total Income5%

C. Balance Sheet Size5%

D. Total No. of Policies5%

E. Total No. of Branches5%

Growth40%

A. First Premium10%

B. Growth in Income10%

C. Increase in No. of Policies10%

D. Growth in Market Share10%

Productivity15%

A. Business per Branch5%

B. Income Per Branch5%

C. First Premium per Branch5%

Grievance Handling20%

LIMITATIONS: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 identifythe exact cause of their lag in performance.2 . Due to the limited time could not study all the insurance companies originaldocuments individually.3. Non-Proficiency in technical aspects of insurance companies might have hindered thebest 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.

CHAPTER 3

ANALYSIS AND INTERPRETATION

1. SIZE :

(A) TOTAL PREMIUM :

(Rs. In crores)

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

LIC635337512790792127822149789

Private31207727150832825351561

Insurers

TOTAL6665382854105875156075201350

160000PREMIUM OF LIC149789

140000127822

120000

10000090792

75127

80000

63533

60000

40000

20000

0

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

PREMIUM OF PVT INSURERS

6000051561

50000

40000

3000028253

2000015083

1000031207727

0

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

points after

Avg. Premiummultiplying by

weightage

( In Crores)Rankpoints(7.5%)

LIC101412.20117.5

Private Insurance Co.21148.80

20.53.75

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

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

LIC93089112393132147174425206363

Private43239049188632424252648

Insurers

TOTAL97412121442151010198667259011

250000INCOME OF LIC

206363

200000174425

150000132147

93089112393

100000

50000

0

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

INCOME OF PVT INSURERS

6000051561

50000

40000

3000024242

1886320000

9049100004323

0

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

points after

Avg. Incomemultiplying by

weightage

( In Crores)Rankpoints(7.5%)

LIC143683.40117.5

Private Insurance Co.21825.00

20.53.75

All over income of LIC is much more than 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 corporates.

(C) SIZE OF BALANCE SHEET :

(Rs. In crores)

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

LIC346022416910531390625956776904

Private6585136532891053048100774

Insurers

TOTAL352607430563560300679004877678

BALANCE SHEET SIZE OF LIC1000000

776904800000625956600000531390

416910400000346022

200000

0

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

BALANCE SHEET SIZE OF PVT

INSURERS

120000100774

100000

80000

6000053048

4000028910

20000658513653

0

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

Avg. Balance Sheetpoints after

Sizemultiplying by

( In Crores)Rankpointsweightage (7.5%)

117.5

LIC539436.40

Private Insurance co.40594.00

20.53.75

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

(D) TOTAL NUMBER OF POLICIES :

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

LIC2696806923978123315905153822929237612599

Private165884722330753871410792229413261558

Insurers

TOTAL2862691626211198354621174615158650874157

TOTAL NUMBER OF POLICIES

60000000

50874157

5000000046151586

4000000035462117

300000002862691626211198LIC

PVT.INSURERS

20000000INDUSTRY

10000000

0

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

points after

Avg. number ofmultiplying by

weightage

policiesRankpoints(7.5%)

LIC31675670117.5

Private Insurance Co.578943720.53.75

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

LIC21962197222023012522

Private416804164530726391

Insurers

TOTAL26123001386553738913

100008913

9000

8000

70006391

60005373LIC

5000

PVT INSURERS

400038653072

3001INDUSTRY

300026122522

219722202301

2196

20001645

1000416804

0

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

%growth inpoints after

multiplying by

number ofweightage

branchesRankpoints(7.5%)

LIC14.820.53.75

Private Insurance Co.1436117.5

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

LIC1734720653285155593459996

Private24405564102701942533715

Insurers

TOTAL1978726217387857535993711

FIRST PREMIUM OF LIC

7000059996

6000055934

50000

40000

3000028515

2000017347

10000

0

20653

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

FIRST PREMIUM OF PVT

INSURERS

4000033715

35000

30000

2500019425

20000

1500010270

10000

24405564

5000

0

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

Growth inGrowth in Firstpoints after

Premiummultiplying

First Premium(in Absouteby

(in PercentageTerms) (inweightage

Terms)crores)Rankpoints(10%)

LIC245.854264920.55

Private Insurance Co.1281.7631275

1110

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)

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

LIC1210119303197544227731988

Private269247259814537928406

Insurers

TOTAL1479324028295684765660394

% GROWTH IN INCOME :

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

LIC14.920.717.53218.3

Private165109.3108.428.5117

Insurers

TOTAL17.824.624.331.530.3

180165

160

140117

120109.3108.4

100LIC

80PVT INSURERS

603231.530.3INDUSTRY

40

17.820.724.617.524.328.518.3

2014.9

0

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

Growth inGrowth inpoints after

Incomemultiplying

Income(in Absouteby

(in PercentageTerms) (inweightage

Terms)crores)Rankpoints(10%)

LIC164.341988720.55

Private Insurance Co.955.2025714

1110

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 :

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

LIC1475992-298994676325846638585-616693

Private804696574228163833540508845339264

Insurers

TOTAL2280688-9270919106894694722571

2415718

% INCREASE IN NUMBER OF POLICIES :

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

LIC5.79-11.0931.7521.01-1.6

Private94.2134.6273.37104.6467.4

Insurers

TOTAL8.6-8.435.330.110.2

% GROWTH IN NO. OF POLICIES

120104.64

10094.21

8073.3767.4

60LIC

4034.6231.75 35.3PVT INSURERS

30.1INDUSTRY

21.01

208.610.2

5.79

0

FY 03-04 FY 04-05FY 05-06-1.6

FY 06-07 FY 07-08

-20-11.09 -8.4

Growth inGrowth inpoints after

number ofnumber ofmultiplying

policiespoliciesby

(in Percentage(in Absouteweightage

Terms)Terms)Rankpoints(10%)

LIC39.471064453020.55

Private Insurance Co.699.4411602711

1110

Private players are doing extremely well as they are increasing their customer base rapidly.

(D) MARKET SHARE :

26.1FY 07-0873.9

FY 06-0725.8

74.2

FY 05-0626.5PVT. INSURERS

73.5

LIC

FY 04-0521.2

78.8

FY 03-0412.387.7

020406080100

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.

(A) BUSINESS PER BRANCH :

(Rs. In crores)

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

LIC28.9334.2040.955.5559.20

Private7.59.619.179.28.07

Insurers

BUSINESS PER BRANCH

7059.2

6055.55

50

40.9

4034.2

LIC

3028.93

PVT INSURERS

20

107.59.619.179.28.07

0

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

Avg. Businesspoints after

multiplying by

Per Branch (Inweightage

crores)Rankpoints(5%)

LIC43.756115

Private Insurance

Co.8.7120.52.5

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

(B) INCOME PER BRANCH :

(Rs. In crores)

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

LIC42.3951.1659.5275.8081.80

Private10.4111.2511.477.898.23

Insurers

INCOME PER BRANCH

9081.8

8075.8

70

6059.52

51.16

5042.39

40LIC

PVT INSURERS

30

2010.4111.2511.47

8.23

107.89

0

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

Avg. Income Perpoints after

Branch (Inmultiplying by

crores)Rankpointsweightage (5%)

LIC62.134115

Private Insurance Co.9.864

20.52.5

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.

(C) NEW PREMIUM PER BRANCH :

(Rs.in crores)

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

LIC7.909.4012.8424.3023.78

Private5.866.926.246.325.28

Insurers

NEW PREMIUM PER BRANCH

3024.323.78

25

20

1512.84LIC

109.4PVT INSURERS

7.9

6.926.246.32

5.865.28

5

0

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

Avg. New

Premium Perpoints after

Branch (Inmultiplying by

crores)Rankpointsweightage (5%)

LIC15.644115

Private Insurance Co.6.124

20.52.5

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 :

TOTAL NUMBER OF GRIEVANCES :

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

LIC474704851354651

Private451955405071406

Insurers

NUMBER OF GRIEVANCES RESOLVED :

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

LIC3912321531380

Private26832164501103

Insurers

% OF GRIEVANCES RESOLVED :

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

LIC8.217.525.388.412.2

Private57.742.640.088.778.4

Insurers

GRIEVANCES IN LIC

800704651

700

540

600507

500474450

400TOTAL

300216RESOLVED

20012380

10039

0

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

GRIEVANCES IN PVT. COMPANIES

16001406

1400

12001103

1000

800540507TOTAL

600

450RESOLVED

400195216

20045 2683

0

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

% OF GRIEVANCES RESOLVED

10088.884.7

90

78.4

80

70

6057.7

5042.640LIC

40

25.3PVT INSURERS

30

2017.512.2

8.2

10

0

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

points after

% Grievancesmultiplying by

weightage

resolvedRankpoints(7.5%)

LIC25.3720.53.75

Private Insurance Co.69.70

117.5

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.

TOTAL POINTS TABLE:

Private

Insurance

FactorsLICCompanies

Size

A. Total Premium7.53.75

7.53.75

B. Total Income

7.53.75

C. Balance Sheet Size

7.53.75

D. Total No. of Policies

3.757.5

E. Total No. of Branches

Growth

A. First Premium510

510

B. Growth in Income

510

C. Increase in No. of Policies

105

D. Market Share

Productivity

A. Business per Branch52.5

52.5

B. Income Per Branch

52.5

C. First Premium per Branch

Grievance Handling3.757.5

Total Score77.7572.75

CHAPTER 4

FINDINGS & CONCLUSIONS

LIC is the giant of the insurance sector. The overall size of LIC is much more thanthat of all private insurance companies. Private insurers are in expansion mode andare increasing their size but are still much behind LIC. Total premium deposits inLIC is much higher than the private insurance companies. Total premium of LIC inFY 07-08 was 149789 crores which three times more than that of private insurancecompanies. Income of LIC is much greater than private insurance companies. Last year totalincome from investments of LIC was 48244.14 crores which was nearly equal to thetotal income of the all private insurance companies. By this we can imagine how bigthe LIC is. Size of balance sheet of private insurance companies are lagging much behind LIC.Balance sheet of LIC is seven times bigger than that of private insurance companies.If we see the total number of policies issued by LIC and private insurance companies,we find that there is a huge gap between them. No doubt that LIC is a well establishedplayer in the field of insurance and many private companies have just started theirbusiness. Hence it is obvious that LIC is having large number of policyholders. Number of branches of private insurance companies is increasing as the new playersare entering in this market. Also the established players are in expansion phase andhence are expanding there business. There are many private insurance companies andhence there total number of branches has gone past LIC in the last financial year. Butoffices of private insurance companies are mostly in urban areas and still it is LICwhich covers most of the area.

Hence we see that LIC is leading when it comes to size. It is giant in insurancesector having huge network and customer base.

We see that due to excellent service quality and attractive offers private insurancecompanies have started getting a number of customers. They are growing rapidly.Though LIC is also increasing its customer base but private insurance companies aremoving at a fast pace. Though the income of private insurance companies is negligible when compared withLIC but then also the pace with which they are increasing their income is tremendous.Private insurance companies are expanding their business and will certainly going togive a tough competition to LIC in the coming days. LIC is certainly having a large customer base. Private insurance companies are nothaving that much number of customer base but they are increasing it rapidly. Theyhave registered a decent growth of 104.64 % in number of new policies in the year2006-07. Last year also their growth rate was 67.4 %.64 LIC, being the oldest player in the existing insurance market, has the biggest marketshare of 73.9 % which was 87.3% five years earlier. We see that private insurancecompanies are penetrating in the customer base of LIC.Overall we can see that private insurance companies are giving a toughcompetition to the LIC and will certainly create a good business for themselvesin the coming days. There are many new entrants in this sector. There are many private insurancecompanies who have reported loss in this and previous years. This is the main reasonwhy 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 privateinsurance companies in this field. They are undoubted champions in insurance when itcomes to profit earning. New business is increasingly going towards private insurance companies but still thecustomer base of LIC is very strong. In issuing new policies per branch also, they areahead of private insurance companies though not by very large margin.

Customer base of LIC is very strong and still business per branch, profit perbranch or premium per branch, they are leading much ahead of privateinsurance companies.

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 nearly70% cases. This is a matter from where customer shift starts. We have seen the rapidincrease in customer base of private insurance companies which can be very muchaffected by this factor.Overall we have seen that still LIC is very famous but private insurance companies aregrowing at exceptionally fast pace. Private companies show due concern in grievancemanagement and brings innovative schemes to attract the customers. Right now theyare giving good competition to LIC and very soon they will give very tough competitionto Life Corporation of India.