International Journal of Management and Social Sciences Research (IJMSSR)
Volume 4, No. 2, February 2015
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
persons life. So, Life Insurance is a tool which safeguards
an individuals 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.
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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 persons 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 civilizations 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.
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 4, No. 2, February 2015
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 20th 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
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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 non-
life 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 19th 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 customers 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
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 4, No. 2, February 2015
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 stock-
market.
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.
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
To fulfill the objectives of the present study, the following
research methodology has been used:-
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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.
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.
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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 7
Volume 4, No. 2, February 2015

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 31st 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:-

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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 4, No. 2, February 2015
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.
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