4 Role of LIC in Life Insurance Industry Priti Jha, Assistant Professor, DAV Centenary College, Faridabad, Haryana Bindu Roy, Assistant Professor, DAV Centenary College, Faridabad, Haryana ABSTRACT Uncertainty is the fundamental fact of life. This uncertainty leads to fear of risk in our life. Fear of risk can be satisfied by taking all precautions to avoid risk. Inspite of all precautions, accident occurs. So, Insurance is one of the best techniques to face this uncertainty. It is important to understand that risk is the part of any person s life. So, Life Insurance is a tool which safeguards an individual s life with benefits. There are many life insurance companies in India, but LIC plays a major role in this field. So, the researchers have chosen this topic to study the growth pattern and to observe the role of LIC in Life Insurance Industry. The paper is based on secondary data which is analyzed by statistical tools like percentage & growth rate. The findings reveals that LIC should strived to increase its business by adopting new marketing strategies & by issuing more & more policies in order to retain its market share in the competitive scenario as well as it should make advertisement to promote & aware about its policies to the consumers. KEYWORDS Risk, Insurance, LIC, Growth rate INTRODUCTION Man Proposes & God Disposes This statement is self-explanatory that man has no control on its life and results of its human activities. It means that there is always uncertainty of the results of human activity. From the moment of birth, till the end of life, all material possessions are also continually exposed to uncertainty. So, we can say that- Uncertainty is the fundamental fact of life This uncertainty leads to fear of risk in our life. Fear of risk can be satisfied by taking all precautions to avoid risk. In spite of all precautions, accident occurs. So, only these precautions are not sufficient to avoid the consequences of uncertainty, but it requires more effective technique to deal with the problem of risk in our society. We can deal with the risk in various ways but insurance is one of the best techniques to deal with the risk. MEANING OF INSURANCE Insurance is a cover used or protecting oneself from the risk of a financial loss. It is important to understand that risk is a part of any person s life and that it increases as a person increases in age, responsibility and wealth. Insurance is risk coverage against financial losses and should not be taken as an investment instrument. There are mainly two parties involved in this- the insurer and the insured. The insurer is the insurance company who will provide the cover to the insured against any financial losses. The insured may be an individual person or a group of people like an employer, members of a society, etc. CLASSIFICATION OF INSURANCE 1. Life Insurance 2. Non Life Insurance- Property Insurance, Casualty Insurance, Health Insurance Life Insurance: Life Insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during: The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the corporation by the policyholder. Life Insurance is universally acknowledged to be an institution, which eliminates risk, substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilization s partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: 1. That of dying prematurely leaves a dependent family to fend for itself.
5 2. That of living till old age without visible means of support. HISTORY OF LIFE INSURANCE The story of insurance is probably as old as the story of the mankind. The same instinct that prompts modern businessman today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era-past few centuries-yet its beginnings date back almost 6000 years. Life Insurance in its modern form came to India from England in the year 1818.Oriental Life Insurance Company started by Europeans in Calcutta was the first Life Insurance Company on Indian soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance companies in the year 1870, and covered Indian lives at normal rates. Starting as Indian Enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Capital Company (1896) was also one of such companies inspired by nationalism. 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 Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindra Nath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912; India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian Companies at a disadvantage. The first two decades of the 20 th Century saw lot of growth in insurance in business. From 44 companies with total business-in-force as Rs.22.44 crores it rose to 176 companies with total business-in-force as Rs. 298 crores in 1938. During the mushrooming of insurance companies many financially unsound corner were also floated which failed miserably. The insurance Act 1938 was the first legislation governing not only life insurance but also nonlife insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the legislative assembly. However, it was much later on the 19 th of January, 1956, that life insurance in India was nationalized.about 154 Indian insurance companies, 16 non-indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation of India was created on 1September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. REVIEW OF LITERATURE In the present section an attempt has been made to examine the review of literature related to the study. Bapat, H.B., Soni, V., Joshi, R. (2014) studied the products offering of largest public sector, Life Insurance Corporation of India and the private sector giant ICICI Prudential Life Insurance Company Limited on the aspects of applicability of SERQUAL dimensions to current product offering. Kotgiri, S. (2013), has focused on working of insurance players in Indian scenario and comparison in terms of growth in insurance industry and trend of customers of investing amount in particular plans. Some important aspects like amount of investment habits change in attitude of customer s investment, importance given to the type of business organization are also analyzed. Sharma, V. & Chauhan, D.S. (2013), analyzed the performance of public and private sector life insurance companies in India. Through privatization of the insurance sector is feared to affect the prospects of the LIC, the study shows the LIC continuous to dominate the sector. Private sector insurance companies also tried to increase their market shares. Nena, S. (2013) has highlighted the growth and performance of LIC by analyzing the major source of
6 income (premium earned) of the sampled unit, as well as the significant heads of the study. The study shows consistent increase in LIC business. As private players are coming up now a day, competition is increasing and LIC has made efforts to continue its business. Shashi, P. (2013), has made an effort to know whether the implemented strategies have truly helped LIC of India in the changing trends of the society and has also suggested how these recent trends have helped LIC of India as a whole to manage the existing leading position in the Life Insurance market. Bedi, H. S. and Singh, P. (2011), revealed that there is a tremendous growth in the performance of Indian Life Insurance Industry and LIC due to the policy of LPG and due to the emergence of private sector and opening up for foreign players. There is an increasing trend toward the investment in stock- market by LIC due to the effective regulation of SEBI and increasing transparency of stockmarket. OBJECTIVES OF THE STUDY 1. To study growth pattern of LIC in Life Insurance Industry. 2. To observe the role of LIC in Indian Life Insurance Industry. 1. Selection of LIC for study: In Life Insurance industry, LIC plays a major role as one and only company in public sector. That is why; the researchers have selected LIC for analyzing its role in Life Insurance Industry. 2. Collection of data: The main sources of secondary data are published annual reports, manuals, books, journals, articles, business magazines and other research papers. 3. Period of Analysis: In order to achieve the objectives of the study, a time-series data on the relevant indicators have been collected from 2005-06 to 2012-13. 4. Analysis of data: To achieve the objectives of the study, the collected data has been analyzed in tabular form as well as by using statistical tools like percentage and growth rates. FINDINGS 1. No. of Offices of LIC: - The number of offices of LIC is increasing year by year, but when we analyze the growth rate of number of offices of LIC in total Life Insurance industry, there is always a decreasing trend due to cut throat competition with the market strategies of private sector life insurance companies. BENEFITS OF THE STUDY This study provides criteria for investment in life insurance sectors. With the help of this study a person can able to choose the sector in which he wants to insure his life and invest money. With the help of this study an industry can improve itself in life insurance i.e. growth pattern, market strategies, offices, products & policies etc. LIMITATIONS OF THE STUDY 1. The researchers could cover only the position of LIC of India in Life Insurance Industry. 2. The study does not contain the comparison of LIC of India with other insurance company. 3. The area of the study is kept limited due to the short time and financial position. 4. Since the study is based upon secondary data, hence the result will depend on these data. RESEARCH METHODOLOGY 2. Registered Insurers in India:- In 2013, there are 52 insurance companies in India; of which 24 are in the life insurance business in which one is in public sector that is LIC & remaining 23 are in private sectors. There can be seen a decreasing trend in number of registered insurers in LIC till 2010-11, but after that it is constant. To fulfill the objectives of the present study, the following research methodology has been used:-
7 5. New Policies Issued:- During 2012-13, Life Insurance issued 441.87 lakhs new policies, out of which LIC issued 367.82 lakhs policies (83.24% of total policies issued). From the table, it reveals that from 2005-06 to 2010-11; there is a decrease in growth rate in new policies issued by LIC. But increased its efficiency & become able to increase its number of new policies issued gradually. 3. Premium Under-written: - From the figure, it is understood that there was a continuous decreasing trend in growth rate of premium under-written of LIC from 2005-06 up to 2010-11.But after that the rate of premium has increased in 2011-12 & 2012-13. However the minor differences are showing in the pattern of growth rate of total premium over the previous years. 6. Investments of Life Insurers: - As on 31 st March 2013, the accumulated amount of investments held by Rs. 1744894 crore, in which the share of LIC is Rs. 1402991 crore. As from the table, it seems that from the year 2005-06 to 2011-12, there is a continuous decrease in the growth rate of investment of Life Insurances of LIC. After 2010-11, there is a fluctuating trend in the total amount of investments of LIC either in instrument -wise or fund-wise. 4. Market Share: - On the basis of total premium income, the market share of LIC decreased marginally from 85.75% in 2005-06 to 69.78% in 2011. But after that its growth in market share is increasing in the year 2011-12 & 2012-13. SUGGESTIONS As per the findings of the present paper, there are some suggestions which should be followed by LIC to retain its reliable position with private sector life insurance companies in the life insurance industry:-
8 1. LIC should strive to increase its business by issuing more & more policies in order to retain its market share in the competitive scenario. 2. LIC should adopt new marketing strategies as well as make advertisement to promote & aware about its policies to the consumers. 3. LIC should concentrate on agents training to make them updated as per market requirements & professionalism to tackle the queries of customers & doubts raised in their mind by other Life Insurance competitors of the market. 4. LIC should also open more number of offices & authorized collection centers to make its objectives achieved in true way to spread the life insurance business in every corner of the country & to reach among the customers. 5. As Private Insurance companies capture the market now-a-days, therefore, LIC should launch different kinds of plans with more facilities, so that it can increase its income amount, especially premium amount. 6. Secured investments should be made continuously by LIC of India. REFERENCES [1] Agnihotri, Prachi. Altius Shodh Journal of Mgt. & Commerce, Vol. 1, Issue 2, ISSN-2348-8891 [2] Bapat, Dr. Harish B., Soni, Dr. Vishal, Joshi, Dr. Ritu (2014) IOSR- Journal of Business and Management, Vol. 16, Issue 4, Ver. III, e-issn- 2278-487 X, p-issn -2319-7668 [3] Bedi, Harpreet Singh., Singh, Dr. Preeti (Nov., 2011) ZENITH-International Journal of Multidisciplinary Research, Vol. 1, Issue 7, ISSN- 22315780 [4] Black, K., Skipper, H.D. (1987), Life Insurance, Prentice-Hall, Inc. [5] Chowhan, Dr. Sudhinder Singh, Sharma, Vikas (2013), Indian Journal of Applied Research, Vol. 3, Issue 1, ISSN-2249-555x [6] Gulati, N.C. Jain, C.M. (2011) VSRD-IJBMR, Vol. 1, Issue 8 [7] Kotgiri, Mrs. Sushma K. (Mar., 2013) IJRMBSS, Vol. 1, Issue 1, ISSN -2319-6998 [8] Husain, Shahid (2006) Growth of LIC of India during Post Privatization Period [9] Mathew M.J., Insurance Theory & Practice, RBSA Publisher, SMS Highway, Jaipur (India), First Edition 1998 [10] Nena, Dr. Sonal (2013), International Journal of Advance Research in computer science and mgt. studies, Vol. 1, Issue 7, ISSN-2321-7782 [11] Shahi, Ms. Prarthana (2013), International Journal of Application or Innovation in Engineering& Mgt., Vol. 2, Issue 10, ISSN-2319-4847 [12] P. K. Gupta, Insurance & Risk Management [13] www.indiainsuranceresearch.com [14] www.irda.com [15] www.licindia.com