CHAPTER 5 FINANCIAL REPORTING PRACTICES OF LIFE INSURANCE COMPANIES

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1 CHAPTER 5 FINANCIAL REPORTING PRACTICES OF LIFE INSURANCE COMPANIES

2 CHAPTER 5 FINANCIAL REPORTING PRACTICES OF LIFE INSURANCE COMPANIES Life Insurance Corporation of India (LIC) was a sole player in the life insurance industry prior to liberalization of insurance sector in India. Liberalization and opening up of this sector to private players resulted in competitive pressure in the insurance industry. In an environment of market volatility and competition, companies must ensure transparency in their financial statements to win public trust (Rao, 2004). The present chapter discusses the disclosure results of life insurance companies including one public sector company (LIC) and 16 private sector companies operating in India. To analyze the financial reporting practices 103 items are selected from the annual reports of companies for 8 years i.e to These items are classified into mandatory disclosure items (45 items) and voluntary disclosure items (58 items). Extent of disclosure has been explained as item-wise, company-wise and area wise. For comparing the disclosure practices of public and private sector life insurance companies following two null hypotheses have been formulated. These hypotheses have been tested with the help of t-test and F-test. Ho 1 - There is no significant difference in the mean disclosure score of an item for public and private sector life insurance companies. Ho 2 - There is no significant difference in the variation of items of disclosure for public and private sector life insurance companies. 5.1 Item-Wise Mandatory Disclosure Various regulatory bodies have issued different regulations to improve the disclosure practices of insurance companies from time to time. Main statutes governing disclosure practices of insurance companies are Companies Act 1956, Insurance Act 1938, Insurance Regulatory Development Authority (IRDA) Act 1999 and various regulations issued by IRDA. After consulting the provisions issued by these laws and by scanning the annual reports of the selected insurance companies an index of 45 items is prepared. Further these 45 items are divided into 4 sub-heads i.e. statutory disclosure as per IRDA, director s report, balance sheet abstract and disclosure as per accounting standards issued by ICAI (Institute of Chartered Accountants of India). Disclosure results of private life insurance companies have been analyzed for all these 45 items.

3 But for Life Insurance Corporation of India (LIC) only statutory disclosure as per IRDA is considered mandatory as LIC is a statutory corporation and incorporated under a special Act of Parliament i.e. Life Insurance Corporation Act 1956.A statutory corporation is not subject to the accounting, reporting and audit regulations applicable to other government companies Statutory Disclosure as per IRDA Every insurance company prepares the financial statements and makes disclosures from 30 th March 2002 onwards in accordance with the guidelines of Insurance Regulatory and Development Authority titled, The Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002 (Anonymous, 2002). According to these regulations every insurance company has to include in their annual reports some specific information which forms the contents of this head. There are 24 items under this head. There is 100 percent disclosure for 20 items in Life Insurance Corporation (Table 5.1). These 20 items are balance sheet, revenue account, profit and loss account, schedules forming part of financial statements, significant accounting policies, notes to accounts, receipts and payments account, auditors report, contingent liabilities, claim settlement and age wise analysis, summary of financial statements of last five years, sector wise details of policies issued, employee benefit plans, allocation of income and expenditure, managerial remuneration, accounting and performance ratios, basis of allocation of investment, commitment in respect of loans and investments, encumbrances on assets, shareholders and policyholders fund. Two items i.e. certificate as per schedule C and premium deficiency is not disclosed for any of the years by LIC. Results of private life insurance companies reveal that only four items (balance sheet, revenue account, profit and loss account, schedules forming part of financial statement) are having 100 percent disclosure (Table 5.2). Eight items are disclosed by more than 80 percent companies in their annual reports. These items are receipts and payment account (89.51), auditor s report (87.45), management report (86.22), sector wise details of policies issued (81.87), commitment in respect of loans and investments (83.82), accounting and performance ratios (93.08), encumbrances on assets (87.00) and shareholders and policyholder s funds (93.25). Only 3.12 percent companies are showing information relating to premium deficiency in their annual reports. Other items are having moderate disclosure scores. 75

4 Standard deviation results (Table 5.2) show that more variation is found in the disclosure scores of summary of financial statements of last five years (18.98), certificate as per schedule C (16.78), sector-wise details of policies issued (16.13), claim settlement and age wise analysis (14.49), employee benefit plans (14.27), significant accounting policies (14.03), notes to accounts (14.03) and encumbrances on assets (13.68). There is complete consistency for items i.e. balance sheet, revenue account, profit and loss account and schedules forming part of financial statements as there is 100 percent disclosure score for these items for all the years of study. Results of percentage change in the year over depicts that the highest percentage change is for item, summary of financial statements of last five years (337.67). Minimum change is 9.38 percent for two items i.e. auditors report and shareholders and policy holders fund Director s Report Director s report is an index to financial reporting (Ubha and Kaur, 2005). There are total ten items under this head. Results of private sector life insurance companies show that percent companies are including information on particulars of employees under section 217(2A) of the companies Act 1956 in their annual reports (Table 5.2). Director s responsibility statement is disclosed by percent companies and percent companies are giving corporate governance report in their annual reports. Three items i.e. addendum to directors report, adoption of accounts by shareholders and subsidiary companies are not shown by any of the private life insurance companies in their annual reports. Standard deviation results of private life insurance companies show that there is highest variation for item additional information disclosure (18.90) followed by directors responsibility statement (17.28), Right to Information Act 2005 (15.63), corporate governance report (13.83). 76

5 S. No. Table 5.1 Mandatory Disclosures (%) of Public Sector Life Insurance Company (LIC) Description of Item Mean SD % change Statutory Disclosure as per IRDA 1 Balance sheet NA NA 2 Revenue account NA NA 3 Profit and loss account NA NA 4 Schedules forming part of financial NA NA statements 5 Significant accounting policies * NA 6 Notes to accounts * NA 7 Receipts and payments account * NA 8 Auditors report * NA 9 Management report * 7.04** 10 Contingent Liabilities * NA 11 Claim Settlement and Age wise Analysis * NA 12 Summary of Financial Statements of last * NA five years 13 Sector wise Details of Policies Issued * NA 14 Employee Benefit Plans * NA 15 Allocation of Income and Expenditure * NA 16 Managerial Remuneration * NA 17 Accounting and performance Ratios NA 18 Basis of allocation of investment * NA 19 Certificate as per schedule C * NA 20 Premium Deficiency NA 21 Performance of Social Sector Schemes for ** Last Five years 22 Commitment in Respect of Loans and * NA Investments 23 Encumbrances on Assets * NA 24 Shareholders and Policyholders funds * NA * indicates that these values are significant at 5% level of significance and 14 degrees of freedom having table value of t =2.15 ** indicates that these values are significant at 5% level of significance and 7,7 degree of freedom having tabulated value of F=3.79 t-value F-value 77

6 Table 5.2 Mandatory Disclosure (%) of Private Life Insurance Companies S.No. Description of Item Statutory Disclosure As Per IRDA Mean SD % change 1 Balance sheet Revenue account Profit and loss account Schedules forming part of financial statements 5 Significant accounting policies Notes to accounts Receipts and payments account Auditors report Management report Contingent Liabilities Claim Settlement and Age wise Analysis Summary of Financial Statements of last five years 13 Sector wise Details of Policies Issued Employee Benefit Plans Allocation of Income and Expenditure Managerial Remuneration Accounting and performance Ratios Basis of allocation of investment Certificate as per schedule C Premium Deficiency Performance of Social Sector Schemes for Last Five years 22 Commitment in Respect of Loans and Investments 23 Encumbrances on Assets Shareholders and Policyholders funds Contd.. 78

7 Table 5.2 contd.. S.No. Description of Item Mean SD % change Director s Report 25 Particulars of employees(sec 217(2A)) Addendum to Directors Report Directors responsibility statement Compliance with section 40C Additional Information Disclosure(Disclosure Rules 1988) 30 Adoption of Accounts by Shareholders Submission of Accounts before Parliament(Sec. 619 A) 32 Subsidiary companies Corporate governance report Right To Information Act Balance Sheet Abstract 35 Registration Details Capital Raised During The Year Position of Mobilization and Deployment of Funds 38 Performance of the company Services of the company Disclosure As Per Accounting Standards 40 Employee Benefits as per (AS-15) Segment Reporting as per ( AS-17) Related Party Disclosure as per (AS-!8) Leases as per AS EPS as per (AS-20) Deferred Tax Liability as per (AS-22)

8 As far as percentage change in disclosure score over the year is concerned, there is the highest change in the disclosure score of additional information disclosure as per rules 1988 (293.91) followed by corporate governance report (250.14). As the item, particulars of employees is already having good disclosure through out the period of study, percent change in disclosure is minimum (13.75) Balance Sheet Abstract This head consists of 5 items. Every company registered under the companies act 1956, is required to prepare a balance sheet abstract as per the requirements of Part IV schedule VI of the companies Act Due to the different nature of transactions in the insurance industry, the accounts of insurance companies are difficult to prepare according to the Schedule VI, so there is very less disclosure for items covered under this head. Table 5.2 depicts that only percent private sector life insurance companies are disclosing registration details in their annual reports. Position of mobilization and deployment of funds has been shown by percent companies. For all the five items disclosure score is less than 50 percent, indicating there is very less disclosure by private life insurance companies regarding these items The highest variation is for item performance of the company (19.57) and minimum variation is for item, capital raised during the year (7.79) in case of private sector companies (Table 5.2). There is more than 100 percent change in disclosure score of registration details (250.14) and position of mobilization and deployment of funds (206.37) Disclosure as per Accounting Standards Institute of Chartered Accountants of India (ICAI) have issued various accounting standards from time to time to improve the disclosure practices and the companies have to comply with these accounting standards as per Section 211 (3C) of the Companies Act To check the compliance of insurance companies regarding these accounting standards, 6 items are selected from annual reports. Results of private life insurance companies shown in table 5.2 highlights that the highest mean disclosure score is percent each for 2 items, segment reporting as per AS-17 and related party disclosure as per AS-18.Other 4 items are disclosed by less than 50 percent private life insurance companies in their annual reports (Table 5.2). 80

9 Standard deviation is the highest (32.62) for item EPS as per AS-20 (Table 5.2) indicating greater variation in the disclosure values and it is the lowest (5.05) each for segment reporting as per AS-17 and related party disclosure as per AS-18, reflecting that disclosure values for these items are comparatively consistent. There is a very high degree of change over the years in the disclosure scores of EPS as per AS-20(512.74) and deferred tax liability as per AS-22 (425.21) followed by leases as per AS- 19 (250.14).There is percent change in the disclosure scores for both the items i.e. segment reporting as per AS-17 and related party disclosure as per AS-18. Overall item-wise mandatory results of life insurance companies show that comparatively there is better disclosure for items concerned with statutory disclosure as per IRDA for LIC than private sector life insurance companies. As compared to items included under other heads, there is better disclosure for items concerned with statutory disclosure as per IRDA in private sector life insurance companies. 5.2 Item-Wise Voluntary Disclosure For the analysis of voluntary disclosure practices in life insurance companies an index of 58 items is prepared. This index is further classified into four sub-heads i.e. information on accounting and finance, information on human resource and marketing, business specific information and general information. Disclosure score is calculated in percentage by dividing the actual score of an item by its total scores. To interpret the data, mean disclosure score, standard deviation and percent change in disclosure score over the year are calculated separately for both public and private sector companies Information on Accounting and Finance Information on accounting and finance is the most important part of an annual report. It provides the operational results of an enterprise expressed in financial terms (Singh, 2009). Majority of the users are interested in this part of information as it helps in various financial decisions. This head consists of twelve items. There is 100 percent disclosure for 6 items in case of Life Insurance Corporation (Table 5.3). These items are financial highlights, underwriting results, net incurred claims, class-wise performance, foreign currency transactions and taxation provision. Data further highlights that there is zero disclosure score for 5 items (gross domestic premium, 81

10 solvency margins, and certain expenses of management, employee stock option scheme and financial consultants) means LIC is not disclosing these items in their annual report for all the years of study. There is percent disclosure for one item provision for claims incurred but not reported. In private life insurance companies not even a single item under this is having 100 percent disclosure (Table 5.4). The highest disclosure score of is for item net incurred claims. There are other 3 items having more than 70 percent disclosure score i.e. gross domestic premium (81.26), class wise performance (81.26) and solvency margins (76.80). Remaining items are having moderate disclosure. Standard deviation is used to study the variation in the items disclosed by companies in various years. In private sector life insurance companies this is the highest for item solvency margins (19.81) and taxation provision (19.80) followed by financial highlights (18.91), provision for claims incurred but not reported (12.98) and class wise performance (11.88) To study the improvement in disclosure practices, percent change in disclosure score in the year over the year has been calculated (Table 5.4). There is more improvement in the disclosure of private sector companies. Provision for claims incurred but not reported (293.31) have got the highest percent growth in disclosure score over the period of study. There is more than 100 percent change in disclosure score for two other items namely financial highlights (206.26) and taxation provision (184.39). Minimum percentage change (20.32) is found in disclosure score of foreign currency transactions as this item is also having good disclosure for the initial year of study Information on Human Resource and Marketing Human resources are the most significant resources of an organization. All the users expect from companies to disclose maximum information regarding these resources in their annual reports, as it gives an insight to the interested parties regarding measures taken by the organization to develop these human resources. Information on marketing is also an important part of annual reports of any company as various users want to judge the customer services, distribution channels, grievance redresseal machinery, publicity activities and other related activities of the company. There are 14 items included under this head. Results given in Table 5.3 depicts that LIC is disclosing information related to nine items i.e. training of employees, 82

11 Table 5.3 Voluntary Disclosure (%) of Public Sector Life Insurance Company (LIC) S No Description of Item Mean SD % change Information on Accounting and Finance 1 Financial Highlights Gross Domestic Premium Solvency Margins Certain Expenses of Management Employee Stock Option Scheme Financial Consultants Underwriting results Net Incurred Claims Class wise performance Foreign Currency transactions Taxation Provision Provision for Claims incurred But Not Reported Information on Human Resource and Marketing Staff Welfare Schemes Training of Employees Gender Issues and Empowerment Sports Activities SCs, STs, OBCs, and Ex-Servicemen Customer Service Distribution Offices Corporate Agents Contd 83

12 Table 5.3 contd S No Description of Item Mean SD % change 21 Riders Grievance Redressal Techno-Marketing Publicity Activities Voluntary Retirement Schemes Retirement Benefits of Employees Business Specific Information 27 Business Overview Product Portfolio Branch Network Industrial Relations Rural Insurance, Special sector insurance and Special Schemes 32 Vigilance Activities Organization Structure Market Scenario in the Industry Market Share Micro and Small Scale Business Entities Industry Premium Growth Contribution to Retail Business Reinsurance Foreign operations Internal Audit Name of Statutory Auditors of the company General/Other Information 43 Company s Vision/Mission Chairman Report Names of board of Directors Contd. 84

13 Table 5.3 contd S No Description of Item Mean SD % change 46 Message from the CEO Awards and Recognition Notice of AGM Bi-Lingual Presentation Glossary Disclosure through Charts, Graphs and Diagrams 52 Acknowledgements Citizens Charter Plans for Future Associate companies Information Technology Office language implementation Corporate Communication

14 gender issues and empowerment, SC S, ST S, OBC S and Ex-servicemen, customer service, distribution offices, corporate agents, grievance redressal, publicity activities and retirement benefits of employees for all the years of study. These items are having 100 percent disclosure. Further data reveals that LIC is not disclosing information related to items; riders, technomarketing and voluntary retirement schemes. For theses three items average disclosure score is zero. Data also reveals that there is percent disclosure each for staff welfare schemes and sports activities in their annual reports. On the other hand in case of private sector companies none of the item is having 100 percent disclosure score. Table 5.4 shows that the highest disclosure score is for item grievance redressal (69.94). Information relating to distribution offices is given by percent companies in their annual reports. It is clear from the data given in table 5.4 that there is no disclosure for four items (sports activities, gender issues and empowerment, SC S, ST S and Ex-servicemen, and voluntary retirement schemes) in case of private sector companies. Remaining eight items are having less than 50 percent disclosure scores, indicating that only some companies are disclosing voluntary information in their annual reports. Results of mean disclosure values show that there is better disclosure in case of public sector company as compared to private sector companies. Standard deviation results show that greater variation is found for item distribution offices (16.56) in case of private sector life insurance companies (Table 5.4). Other items having larger standard deviation values in case of private sector companies are retirement benefits of employees (15.91), grievance redressal (12.86) and training of employees (12.59). The highest percentage change of in the disclosure score in over the year is for item, staff welfare schemes of private sector companies. There is more than 100 percent change in disclosure over the period of study for other three items i.e. retirement benefits of employees (140.64), distribution offices (104.15) and grievance redressal (104.15). But one item corporate agents is showing negative growth (-12.46) in disclosure score in case of private sector life insurance companies Business Specific Information Various users are interested in business related information which includes business overview, product portfolio, branch network, market share, foreign operations, internal audit and 86

15 S. No Table 5.4 Voluntary Disclosure (%) of Private Sector Life Insurance Companies Description of Item Information on Accounting and Finance Mean SD % change 1 Financial Highlights * NA 2 Gross Domestic Premium * NA 3 Solvency Margins * NA 4 Certain Expenses of * NA Management 5 Employee Stock Option Scheme * NA 6 Financial Consultants * NA 7 Underwriting results * NA 8 Net Incurred Claims * NA 9 Class wise performance * NA 10 Foreign Currency transactions * NA 11 Taxation Provision * NA 12 Provision for Claims incurred But Not Reported Information on Human Resource and Marketing t-value Contd.. F-value * 7.42** 13 Staff Welfare Schemes * 13.49** 14 Training of Employees * NA 15 Gender Issues and NA NA Empowerment 16 Sports Activities * NA 17 SCs, STs, OBCs, and Ex NA NA Servicemen 18 Customer Service * NA 19 Distribution Offices * NA 20 Corporate Agents * NA 87

16 Table 5.4 contd S.No Description of Item Mean SD % change t-value F-value 21 Riders * NA 22 Grievance Redressal * NA 23 Techno-Marketing NA 24 Publicity Activities * NA 25 Voluntary Retirement Schemes NA NA 26 Retirement Benefits of Employees * NA Business Specific Information 27 Business Overview * NA 28 Product Portfolio * NA 29 Branch Network * NA 30 Industrial Relations ** 31 Rural Insurance, Special sector * NA insurance and Special Schemes 32 Vigilance Activities * NA 33 Organization Structure NA 34 Market Scenario in the Industry * NA 35 Market Share * NA 36 Micro and Small Scale Business ** Entities 37 Industry Premium Growth * NA 38 Contribution to Retail Business * ** 39 Reinsurance * NA 40 Foreign operations * NA 41 Internal Audit * NA 42 Name of Statutory Auditors of the company ** Contd.. 88

17 Table 5.4 contd S. No Description of Item General/Other Information Mean SD % change 43 Company s Vision/Mission ** 44 Chairman Report * NA 45 Names of board of Directors * NA 46 Message from the CEO * NA 47 Awards and Recognition * 31.91** 48 Notice of AGM NA NA 49 Bi-Lingual Presentation NA NA 50 Glossary NA 51 Disclosure through Charts, Graphs and * NA Diagrams 52 Acknowledgements * NA 53 Citizens Charter NA NA 54 Plans for Future * NA 55 Associate companies * NA 56 Information Technology * NA 57 Office language implementation NA NA 58 Corporate Communication * NA * indicates that these values are significant at 5% level of significance and 14 degrees of freedom having table value of t =2.15 **indicates that these values are significant at 5% level of significance and 7,7 degree of freedom having tabulated value of F=3.79 t-value F-value 89

18 others. Sixteen items are included under this head. Table 5.3 highlights that there is 100 percent disclosure for ten items viz. business overview, product portfolio, branch network, rural insurance, special sector insurance and special schemes, vigilance activities, market scenario in the industry, market share, industry premium growth, foreign operations and internal audit in LIC. There is no disclosure for item reinsurance by LIC. Three items i.e. industrial relations, micro and small scale business entities, and name of statutory auditors of the company are disclosed by LIC only in the last year of study. One item, organization structure is having only 25 percent disclosure score as this item is disclosed only for last two years of the study. Data relating to private life insurance companies given in table 5.4 reveals that the highest mean disclosure is only percent for item business overview in case of private life insurance companies. There is no disclosure for item organization structure and majority of the remaining items are having even less than 30 percent disclosure. Results of mean disclosure values shows that public sector company is disclosing more information regarding business specific information in their annual reports, whereas there is very less disclosure in case of private sector companies. Standard deviation results show that there is greater variability in the disclosure score for private sector companies. The highest standard deviation is found for item business overview (21.45) followed by micro and small scale business entities (15.93), branch network (14.53), market share (14.46) industry premium growth (13.75), rural insurance and special insurance schemes (12.49), and product portfolio (12.39). The highest percent change in disclosure score for item branch network (293.91) is in case of private sector companies. Two items rural insurance, special sector insurance and special schemes and industry premium growth are showing percent change in disclosure score over the period of study. Other items having higher percentage change in disclosure scores are market share (206.37), business overview (162.51) and market scenario in the industry (162.60) General/ Other Information There are sixteen items included under the head general information. It is clear from table 5.3 that LIC, the sole operator in the public life insurance sector is including names of board of directors, bi-lingual presentation, disclosure through charts, graphs and diagrams, 90

19 acknowledgements, plans for future, information technology, official language implementation and corporate communication in their annual reports for all the years of study. On the other hand there is no disclosure at all for five items i.e. chairman report, message from the CEO, notice of AGM, glossary and citizen charter. There is percent disclosure score for item awards and recognition in public sector company. Company s vision/mission is having only 50 percent disclosure in the annual report of LIC. In case of private life insurance companies, the highest mean disclosure is percent for item names of board of directors (Table 5.4). Five items i.e. notice of AGM, bi-lingual presentation, citizen charter, associate companies and office language implementation are not disclosed in the annual reports of private life insurance companies for any of the years. Remaining items are having very less disclosure. Standard deviation results show that there is greater variation in the disclosure values of five items called plans for future(18.74), information technology (17.80), corporate communication (13.53), names of board of directors (13.25) and acknowledgements (11.82) in case of private sector companies. There is consistency in disclosure for remaining items. The highest percentage change is for item; plans for future (293.91) followed by corporate communication (250.14) in private sector companies. There is negative change of in the disclosure score of one item i.e. chairman report indicating that in recent years some companies are not disclosing this item in their annual reports. 5.3 Company-Wise Disclosure To analyze the disclosure practices of life insurance companies on an individual basis, company-wise disclosure scores are calculated. Company wise mandatory and voluntary disclosure score has been calculated by dividing the actual score of an individual company for a particular year by the total disclosure score of that year. There are 17 companies in life insurance sector, out of which only one company is in public sector and 16 companies are private sector companies (Annexure 1) Mandatory Disclosure The mandatory disclosure results of life insurance companies operating in the public and private sector (Table 5.5 and figure 5.1) show that there is the highest mean disclosure (84.37) in case of public sector company i.e. LIC. Among private sector companies the highest disclosure is 91

20 found (79.26) in case of Future Generali India Life Insurance Co. Ltd, which is a new entrant in the private life sector. Max New York Life Insurance Co. Ltd, which has got the lowest disclosure score, is disclosing only 24 percent items relating to mandatory disclosure in their annual reports. Other companies having higher disclosure scores are Reliance Life Insurance Co. Ltd (74.22), Shriram Life Insurance Co. Ltd (70.67), Sahara India Insurance Co. Ltd (70.37), Bajaj Allianz Life Insurance Co. Ltd (65.34), ICICI Prudential life insurance co. Ltd (65.00), Bharti AXA Life Insurance Co. Ltd (64.44) and HDFC Standard Life Insurance Co. Ltd (63.61).Two companies which were originally private limited companies but changed their status to public limited companies in recent years are having very good disclosure scores i.e. ING Vysaya Life Insurance Co. Ltd(63.89) and Aviva Life Insurance Co. India Ltd(71.55). Results of standard deviation show that maximum variation is found in the disclosure values of Kotak Mahindra Old Mutual Life Insurance Co. Ltd. (21.92) and the minimum variation is found in Birla Sun Life Insurance Co Ltd (2.06). Other companies having larger standard deviation values are Bajaj Allianz Life Insurance Co. Ltd. (21.64) and Shriram Life Insurance Co. Ltd. (15.43).Disclosure values of life insurance company in the public sector is comparatively consistent as the value of standard deviation is only 2.95 in case of Life insurance Corporation of India. Data given in Table 5.5 further highlights that there is a good improvement in the disclosure scores of Kotak Mahindra Old Mutual Life Insurance Co. Ltd (244.45) followed by Bajaj Allianz life Insurance Co. Ltd (183.31) and SBI Life Insurance Co. Ltd. (111.1) Voluntary Disclosure Company wise voluntary disclosure of life insurance companies (public and private) is given in table 5.6.and figure 5.1. LIC has the highest mean disclosure (67.45) in all the public and private sector insurance companies. All the private sector life insurance companies have less than 50 percent disclosure with Sahara India Insurance Co Ltd. having the highest disclosure of percent items. Future Generali India Life Insurance Co. Ltd. which started its operations in the year , is disclosing percent items in their annual reports and is on the second rank. SBI Life Insurance Co. Ltd. has the least disclosure (11.88). Company wise standard deviation results show that there is greater variation (18.80) in the disclosure values of Shriram Life Insurance Co. Ltd. Other companies having larger standard 92

21 deviation values are Sahara India Insurance Co. Ltd. (13.46), HDFC Standard Life Insurance Co. Ltd. (13.25), and Bajaj Allianz Life Insurance Co. ltd. (11.66). The lowest variation is found in the disclosure values of Birla Sun Life Insurance Co. Ltd. (1.28) To know the improvement in disclosure of different companies, the percent change in disclosure score in the year over the entry year of the company is calculated (Table 5.5). This shows that maximum change in the disclosure score is in Shriram Life Insurance Co. Ltd. ( ).Other companies having more than 100 percent change in disclosure score are, HDFC Standard Life Insurance Co. (250.18), Max New York Life Insurance Co. Ltd. (116.60), Kotak Mahindra Old Mutual Life Insurance Co. Ltd. (216.70),ING Vysaya Life Insurance Co. Ltd.(166.70), Bharti AXA Life Insurance Co. Ltd.(200.12) and SBI Life Insurance Co. Ltd.(398.82). The lowest change in disclosure score is found in case of Birla Sun Life Insurance Co. Ltd. (8.71). Overall company wise voluntary disclosure results depict that LIC is having better disclosure score, but there is greater improvement in the disclosure scores of private sector companies. Company wise results of life insurance sector show that in case of both mandatory and voluntary disclosure, there is better disclosure in LIC as compared to private sector companies. Greater variation is found in the disclosure scores of private sector companies. There is more improvement in the disclosure practices of private sector companies than LIC. 5.4 Area Wise Disclosure To facilitate the better interpretation of data, area wise disclosure has been calculated. Total items have been divided into 8 important areas including statutory disclosure as per IRDA, directors report, balance sheet abstract, disclosure as per accounting standards, accounting and finance, human resource and marketing, business specific information and general information. First 4 areas are related to mandatory disclosure and other 4 areas to voluntary disclosure items Public Life Insurance Company There is only one company, LIC in the public sector. Table 5.7 and figure 5.2 reflects that the area statutory disclosure as per IRDA which includes mandatory items have got the highest mean disclosure (84.4). Two areas which include voluntary items i.e. human resource and 93

22 marketing (76.8) and business specific information (70.3) have got more than 70 percent mean disclosure. Standard deviation results shows that there is greater variation in the disclosure scores of business specific information as the highest standard deviation (10.4) whereas minimum variation is there in the disclosure values of accounting and finance (2.4). Disclosure scores of other areas are comparatively consistent. The highest percentage change in disclosure score is for area business specific information (50.00).Whereas the lowest percent change is observed in statutory disclosure as per IRDA (10.00) as there is good disclosure for this area in the initial year Private Life Insurance Companies A glance at the Table 5.8 and Figure 5.2 reflects that the highest mean disclosure score (73.14) is for area statutory disclosure as per IRDA, witnessing that it is mandatory in nature and majority of the companies are disclosing information required under this area. Least mean disclosure (12.26) is found in case of general/other information, due to voluntary nature of items included under this head. Disclosure as per accounting standards is disclosed by percent companies in their annual reports. There is less than 25 percent mean disclosure in case of five areas i.e. human resource and marketing(19.09), business specific information (18.46), directors report (21.77), general information (12.26) and balance sheet abstract (23.27). One area accounting and finance is disclosed by percent companies in their annual reports. 94

23 Table 5.5 Company-Wise Mandatory Disclosure (%) of Life Insurance Companies S No. Name of Company Public Sector Met Life India Insurance Co. Pvt. Ltd Reliance Life Insurance Co. Ltd **Aviva Life Insurance Co. India Ltd Sahara India Insurance Co. Ltd Shriram Life Insurance Co. Ltd Bharti AXA Life Insurance Co. Ltd Future Generali India Life Insurance Co. Ltd *Originally a Pvt Ltd.Co became a Public Ltd. Co. in 2005) **(changed its incorporation status in Nov.2007) Annual Reports of Bajaj Allianz life insurance co. ltd., Max New York Life Insurance Co. Ltd., Met Life India Insurance Co. Pvt. Ltd., Reliance Life Insurance Co. Ltd. and Aviva Life Insurance Co. India Ltd. for the year were not made available Mean SD % change 1 Life Insurance Corporation of India Private Sector 2 HDFC Standard Life Insurance Co. Ltd Max New York Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd Kotak Mahindra Old Mutual Life Insurance Co. Ltd Birla Sun Life Insurance Co. Ltd Tata AIG Life Insurance Co. Ltd SBI Life Insurance Co. Ltd *ING Vysaya Life Insurance Co. Ltd Bajaj Allianz Life Insurance Co. Ltd

24 Table 5.6 Company-Wise Voluntary Disclosure (%) of Life Insurance Companies S No. Name of Company Mean SD % change Public Sector 1 Life Insurance Corporation of India Private Sector 2 HDFC Standard Life Insurance Co. Ltd Max New York Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd Kotak Mahindra Old Mutual Life Insurance Co. Ltd Birla Sun Life Insurance Co. Ltd Tata AIG Life Insurance Co. Ltd SBI Life Insurance Co. Ltd *ING Vysaya Life Insurance Co. Ltd Bajaj Allianz Life Insurance Co. Ltd Met Life India Insurance Co. Pvt. Ltd Reliance Life Insurance Co. Ltd **Aviva Life Insurance Co. India Ltd Sahara India Insurance Co. Ltd Shriram Life Insurance Co. Ltd Bharti AXA Life Insurance Co. Ltd Future Generali India Life Insurance Co. Ltd *Originally a Pvt Ltd.Co became a Public Ltd. Co. in 2005) **(changed its incorporation status in Nov.2007) Annual Reports of Bajaj Allianz life insurance co. ltd., Max New York Life Insurance Co. Ltd., Met Life India Insurance Co. Pvt. Ltd., Reliance Life Insurance Co. Ltd. and Aviva Life Insurance Co. India Ltd. for the year were not made available 96

25 97

26 Table 5.7 Area-Wise Disclosure (%) of Public Sector Life Insurance Company (LIC) S. No. Area Mean SD % change t- value F-value 1 Statutory disclosure as per IRDA * 8.92** 2 Accounting and finance ** 3 Human resource and marketing * Business specific information * General/other information * 2.05 * indicates that these values are significant at 5% level of significance and 14 degrees of freedom having table value of t =2.15 ** indicates that these values are significant at 5% level of significance and 7,7 degree of freedom having tabulated value of F=

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