Study of Life Insurance and Its Policy

STUDY OF LIFE INSURANCE AND ITS POLICY
Study of life insurance and its policy
UNIVERSITY OF MUMBAI
LALA LAJPATRAI COLLEGE COMMERCE AND
ECONOMICS, MAHALAXMI MUMBAI -34
PROJECT TITLEs
STUDY OF LIFE INSURANCE AND IT’S POLICES
SUBMITTED BY:
PEARL JUDE ALEXANDER
ROLL NO.1617322
T.Y.B.B.I- SEMESTER VI
PROJECT GUIDE
PROF.MS. LOVEENA ATWAL
YEAR OF SUBMISSION
2018-2019
CERTIFICATE
I, Prof Loveena Atwal, hereby certify that Ms. Pearl Jude Alexander from
TYBBI of Lala Lajpatrai College Of Commerce And Economic has successfully
completed this Research
Project on Insurance titled STUDY OF LIFE INSURANCE AND IT’S

POLICIES in Semester VI of the academic year 2018-2019
The information submitted here is true and original to best of my knowledge
_________________________ ___________________________
Signature of External Examiner Signature of Internal Examiner
__________________________ ____________________________
Signature of Project Guide Signature of Principal
Date of Submission: ____________________

DECLARTION
I, Miss Pearl Jude Alexander from TYBBI of Lala Lajpatrai College of

Commerce And Economics, hereby declare that I have completed this
Research Project on Insurance titled
STUDY OF LIFE INSURANCE AND IT’S POLICIES in Semester VI of

the academic year 2018-2019
The information provided by me is true and original to best of my knowledge

EXECUTIVE SUMMARY
Someone has greatly said that practical knowledge is far better than classroom teaching.
During this project I fully realized this and come to know about the present real
world of Insurance sector. It includes all the activities involved in providing insurance
products to the final customers.
I am pleased to know about the consumers’ wants and competitors activities in the real world
of Insurance. The subject of my study is to analyse the present insurance sector and
products offered by LIC by applying various tools like cold calling and through direct interaction
with customer’s. I have also done research on the growth of private life insurance companies.
The report contains first of all brief introduction about the company.
Then it contains the current status of private insurance companies and foreign insurance
companies in India. I also put forward recommendations of the consumers and
conclusions that will help LIC to provide consumer satisfactory services in the insurance
sector
RESEARCH OBJECTIVE
1. The report gives the brief background of the sector and proceeds to highlight the
short comings of the existing setup and players
2. The benefits of liberalized sectors are enumerated.
3. The report also tried to identify the market potential for insurance products and
strategy that can be employed to exploit the same
4. The stress is also given on knowing the awareness level of general public
RESEARCH METHDOLOGY
To conduct the market research first of all it necessary to create a research design
A research design is basically a blue print of how a research is to be conducted, it may

include;
1. Choosing the approach
2. Determining the type of data needed
3. Locating the source of data
4. Choosing a method of data

RESEARCH DESIGN:
Basically there are 3 types of approaches used during any research:
1. EXPLORATORY
2. DESCRIPTIVE
EXPERIMENTAL During this research Descriptive and Exploratory approach is taken

into consideration because of the availability of relevant information to describe the
relationships between the marketing problem and available information
TYPES OF DATA USED:
Both primary and secondary data is used in the research.
Data Collection Method:
To conduct the market research the data is collected by two sources.
PRIMARY DATA
Obtained my means of a simple sample questionnaire .
SECONDARY DATA:
Secondary data is one which already exists and is collected from the published sources.
The sources from which the secondary data was collected are:
 Newspaper and Magazines like Economic Times, Insurance Times, and

 Internet
CHAPTER 1
1.1 INTRODUCTION
“The Business of Insurance is related to the protection of the economic values of the
assets”. Every human being has the tendency to save to protect him from risks or events
of future. Insurance is one form of savings where in people try to assure themselves
against risks or uncertainties of future. It is assurance against risks or events or losses.
People can save their earnings either in the form gold, fixed assets like property or in
banking and insurances. All the savings of people of a country account for gross
domestic savings. In India, although savings rate is high but people prefer to invest
either in gold or fixed assets so that they can make money out of it. Hence insurance
sector is still untapped in India
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.
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a

contract between an insurance policy holder and an insurer or assurer, where the
insurer promises to pay a designated beneficiary a sum of money (the benefit) in
exchange for a premium, upon the death of an insured person (often the policy holder).
Depending on the contract, other events such as terminal illness or critical illness can
also trigger payment. The policy holder typically pays a premium, either regularly or as
one lump sum. Other expenses, such as funeral expenses, can also be included in the
benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of
the insured events. Specific exclusions are often written into the Contract to limit the
liability of the insurer; common examples are claims relating to suicide, fraud, war, riot,
and civil commotion. Modern life insurance bears Some similarity to the asset
management industry[1] and life insurers have Diversified their products into retirement
products such as annuities. Life-based contracts tend to fall into two major categories:
Protection policies – designed to provide a benefit, typically a lump sum payment, in the
event of a specified occurrence. A common form—more common in years past—of a
protection policy design is term insurance. Investment policies – the main objective of
these policies is to facilitate the growth of capital by regular or single premiums.
Common forms (in the U.S.) are whole life, universal life, and variable
life policies.typically pays a premium, either regularly or as one lump sum. Other
expenses, such as funeral expenses, can also be included in the benefits.Life policies are
legal contracts and the terms of the contract describe the limitations of the insured events.
Specific exclusions are often written into the contract to limit the liability of the insurer;
common examples are claims relating to suicide, fraud, war, riot, and civil
commotion.Modern life insurance bears some similarity to the asset
management industry[1] and life insurers have diversified their products into retirement
products such as annuities.[2]
Life-based contracts tend to fall into two major categories:
 Protection policies – designed to provide a benefit, typically a lump sum payment, in

the event of a specified occurrence. A common form—more common in years past—
of a protection policy design is term insurance.
 Investment policies – the main objective of these policies is to facilitate the growth of
capital by regular or single premiums. Common forms (in the U.S.) are whole
life, universal life, and variable life policies.
History
The Oriental Life Insurance Company, the first company in India offering life insurance
coverage, was established in Kolkata in 1818 by "Anita Bhavsar" and others. Its primary
target market was the Europeans based in India, and it charged Indians heftier
premiums. Surendranath Tagorehad founded Hindusthan Insurance Society, which later
became Life Insurance Corporation
Nationalisation in 1956
The Parliament of India passed the Life Insurance of India Act on 19 June 1956 creating
the Life Insurance Corporation of India, which started operating in September of that
year. It consolidated the business of 245 private life insurers and other entities offering
life insurance services; this consisted of 154 life insurance companies, 16 foreign
companies and 75 provident companies. The nationalisation of the life insurance business
in India was a result of the Industrial Policy Resolution of 1956, which had created a
policy framework for extending state control over at least 17 sectors of the economy,
including life insurance.
Liberalisation post 2000s
In August 2000, the Indian Government embarked on a program to liberalise the

insurance sector and opened it up for the private sector. LIC emerged as a beneficiary
from this process with robust performance, albeit on a base substantially higher than the
private sector.
In 2013 the first year premium compound annual growth rate (CAGR) was 24.53% while
total life premium CAGR was 19.28% matching the growth of the life insurance industry
and outperforming general economic growth.
LIC's Contribution to the five year plans over the years
Plan Year Investment
2 1956-1961 ₹184 Cr
3 1961-1966 ₹285 Cr
4 1969-1974 ₹1,530 Cr
5 1974-1979 ₹2,942 Cr
6 1980-1985 ₹7,140 Cr
7 1985-1990 ₹12,969 Cr
8 1992-1997 ₹56,097 Cr
9 1997-2002 ₹1,70,929 Cr
10 2002-2007 ₹3,94,779 Cr
11 2007-2012 ₹7,04,151 Cr
12 2012-2017 ₹14,23,055 Cr
13 2017-2022 ₹3,82,479 Cr
Operation
Today LIC functions with 2048 fully computerized branch offices, 8 zonal offices,
around 113 divisional offices, 2,048 branches and 1408 satellite offices and the Central
Office;[12] it also has 54 customer zones and 25 metro-area service hubs located in
different cities and towns of India. It also has a network of 1,537,064 individual agents,
342 Corporate Agents, 109 Referral Agents, 114 Brokers and 42 Banks for soliciting life
insurance business from the public.
Now LIC also has the 1899 branches of IDBI bank at its disposal thus it can carry out its
insurance business through these branches of the bank.
Solgan
LIC's slogan yogakshemam vahaamyaham is in Sanskrit which loosely translates into
English as "Your welfare is our responsibility". This is derived from ancient Hindu text,
the Bhagavad Gita's 9th chapter, 22nd verse The slogan can be seen in the logo, written
in Devanagari script. This line means "I carry what they lack, and I preserve what they
have" (refers to Krishna speaking to Arjuna), when taken in context of the entire verse
Awards and Recognitions.
 The Economic Times Brand Equity Survey 2012 rated LIC as the No. 6 Most Trusted
Service Brand of India.
 From the year 2006, LIC has been continuously winning the Readers' Digest Trusted
brand award.
 Voted India's Most Trusted brand in the BFSI category according to the Brand Trust
Report for 4 continuous years - 2011-2014 according to the Brand Trust Report
INTIATIVES
Golden Jubilee Foundation

LIC Golden Jubilee Foundation was established in 2006 as a charity organization. This
entity has the aim of promoting education, alleviation of poverty, and providing better
living conditions for the under privileged. Out of all the activities conducted by the
organisation, Golden Jubilee Scholarship awards is the best known. Each year, this award
is given to the meritorious students in standard XII of school education or equivalent,
who wish to continue their studies and have a parental income less
than ₹100,000 (US$1,400).
1.2 DEFINITION OF INSURANCE:

Insurance has been defined to be that in, which a sum of money as a premium is paid by
the insured in consideration of the insurer’s bearings the risk of paying a large sum upon
a given contingency. The insurance thus is a contract whereby:
a. Certain sum, termed as premium, is charged in consideration,
b. Against the said consideration, a large amount is guaranteed to be paid by the

insurer who received the premium,
c. The compensation will be made in certain definite sum, i.e., the loss or the policy
amount which ever may be
1.3 CONCEPT OF LIFE INSURANCE
Life has always been an uncertain thing. To be secure against unpleasant possibilities,
always requires the utmost resourcefulness and foresight on the part of man. To pray or
to pay for protection is the spirit of the humanity.
Man has been accustomed to pray God for protection and security from time
immemorial. In modern days Insurance Companies want him to pay for protection and
security. The insurance man says "God helps those who help themselves"; probably he is
correct. Too many people in this country are not in employment; and work for too many
no longer guarantees income security. Several millions are part-time, self employed and
low-earning workers living under pitiable circumstances where there is no security cover
against risk. Further the inherent changing employment risks, the prospect of continual
change in the work place with its attendant threats of unemployment and low pay
especially after the adoption of New Economic Policy and the imminent lifecycle risks - a
new source of insecurity which includes the changing demands of family life, separation,
divorce and elderly dependents are It is within this background life insurance policy has
been introduced by the insurance companies covering risks at various levels. Life
insurance 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 livelihood for
the insured or 3 dependents. This is to make the right to life meaningful, worth living
and right to livelihood a means for sustenance. Therefore, it goes without saying that an
appropriate life insurance policy within the paying capacity and means of the insured to
pay premium is one of the social security measures envisaged under the Indian
Constitution. Hence, right to social security, protection of the family, economic
empowerment to the poor and disadvantaged are integral part of the right to life 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 himself but also for his dependents, viz., wife
and children. He has to provide legally for his family needs, and so he has to keep aside
something regularly for a rainy day and for his old age. This fundamental need for
security for self and dependents proved to be the mother of invention of the institution
of life insurance.
1.4 OVERVIEW OF CURRENT INSURANCE INDUSTRY WHAT IS INSURANCE? Insurance is

a tool by which fatalities of a small number are compensated out of funds (premium
payment) collected from plenteous. Insurance is a safeguard against uncertain events
that may occur in the future. It is an arrangement where the losses experienced by a
few are extended over several who are exposed to similar risks. It is a protection against
financial loss arising on the happening of an unexpected event. Insurance companies
collect premium to provide security for the purpose. Loss is paid out of the premium
collected from people and the insurance companies act as trustees to the amount so
collected. These companies have proposal forms which are filled to give details of
insurance required. depending upon the answers in the proposal from insurance
companies assess the risk and decide on the premium. Insurance companies are risk
bearers. They underwrite the risk in return for an insurance premium. the function of
insurance is to provide protection, prevent losses, capital formation etc. hence 4
insurance can be defined as a tool in which a sum of money as a premium is paid by the
insured in consideration of the insurer’s bearing the risk of paying a large sum .it may
also be defined as a contract wherein one party (insurer) agrees to pay the other party
(insured) or his beneficiary, a certain sum upon a given contingency against which
insurance is required. Insurance industry commands massive funds through sales of
insurance products to large number of clients.
Insurers also create liabilities and commit themselves to compensate for losses
occurring to the policyholders on future date. It also plays an important role in process
of capital formation.
1.5 NATURE OF INSURANCE
a) Risk sharing and risk transfer: Insurance is used to share the financial losses that
might occur to an individual or is family on the happening of specified events. The loss
arising from such events are shared by all the insured in the form of premium.
b) Risk assessment in advance: Insurance companies are risk bearers. They assess the
risk before insuring to charge the amount of premium.
c) It’s not gambling or charity: The uncertainty is changed to certainty by insuring

property and life because the insurer promises to pay a definite sum at damage or
death. Insurance is antithesis of gambling
d) Huge number of insured people: It is essential to insure larger number of people or

property to make cost of insurance less consequently premium would also be less.
e) Assists in capital formation: Insurance provides capital to society. Accumulative

funds are invested in productive channels.
1.6 THE IMPORTANCE OF INSURANC E

Insurance benefits society by allowing individuals to share the risks faced by
many people. But it also serves many other important economic and societal functions.
Because insurance is available and affordable, banks can make loans with the assurance
that the loan’s collateral (property that can be taken as payment if a loan goes unpaid) is
covered against damage.
This increased availability of credit helps people buy homes and cars. Insurance also
provides the capital that communities need to quickly rebuild and recover economically
from natural disasters, such as tornadoes or hurricanes. Insurance itself has become a
significant economic force in most industrialized countries. Employers buy insurance to
cover their employees against work-related injuries and health problems. Because it
makes business operations safer, insurance encourages businesses to make economic
transactions, which benefits the economies of countries. In addition, millions of people
work for insurance companies and related businesses. In 1996 more than 2.4 million
people worked in the insurance industry in the United States and Canada. Insurance as
an investment that offers a lot more in terms of returns, risk cover & as also that
tax concessions & added bonuses Not all effects of insurance are positive ones. The
possibility of earning insurance payments motivates some people to attempt to cause
damage or losses. Without the possibility of collecting insurance benefits, for instance,
no one would think of arson, the will ful destruction of property by fire, as a potential
source of money.
1. 7 ADVANTAGES OF LIFE INSURANCE
1. In the event of death, the settlement is easy. The heirs can collect the moneys
quicker, because of the facility of nomination and assignment. The facility of nomination
is now available for some bank accounts.
2. There is a certain amount of compulsion to go though the plan of savings. In other

forms, if one changes the original plan of savings, there is no loss. In insurance, there is a
loss.
3. Certain cannot claim the life insurance moneys. They can be protected against
attachments by courts.
4. There are tax benefits, both in income tax and in capital gains.
5. Marketability and liquidity are better. A life insurance policy is property and can be
transferred or mortgaged. Loans can be raised against the policy.
6. Life insurance is not only the best possible way for family protection. There is no
other way.
7. Insurance is the only way to safeguard against the unpredictable risks of the future. It
is unavoidable.
8. The terms of life are hard. The terms of insurance are easy.
9. The value of human life is far greater than the value of property. Only insurance can
preserve it.
10. Life insurance is not surpassed by many other savings or investment instrument, in
terms of security, marketability, stability of value or liquidity.
11. Insurance, including life insurance, is essential for the conservation of many
businesses, just as it is in the preservation of homes.
1.8 SEMANTICS
1. Risk: It is defined as an uncertainty of a financial loss. It is the unintentional decline in

or disappearance of value arising from contingency.
2. Policy: It is the document which embodies the insurance contract.
3. Whole life policy: It is the policy under which the amount of policy will be paid only on
death of the insured. Premiums may be payable throughout the life or for a limited
period.
4. Endowment policy: Endowment policies entitle the insured to receive the amount of
the policy on his reaching a certain age and premiums also stops. If death occurs earlier,
amount of the policy will be paid at that time and payment of premium will also stop at
that time.
5. Claim: It is the amount which an insurer has to pay against a policy.
6. Reinsurance: It refers to placing a part of the risk by an insurer with another insurer.
The object is to reduce the possible loss to be borne by the original insurer, who pays
premiums at the ordinary rates to the reinsurer. Reinsure must pay commission to the
original insurer.
7. Premium: A periodic payment made on an insurance policy.
8. Insurance penetration: It is defined as insurance premium as a share of gross

domestic product.
9. Insurance density: Insurance density is defined as per capita expenditure on insurance

premium i.e. premium per capital.
1.9 PROGRESS IN LIFE INSURANCE COMPANY
The growth of Life Insurance in concrete terms could be said to being during the first
two decades of twentieth century when most of the major companies were founded.
They grew in terms of rise in the number of companies, in terms of number of policies
and sum assured as well as total life fund. Indian Insurance Year Book, published for the
first time in 1914, gives the figure of the total business-in -force as 22.44 crore which
grew to Rs. 298 crore in 1938.In 1914, there were only 44companies transacting
insurance business in India, and during the next 25 years their number rose to 176. The
total progress on all the primary heads, viz. life fund (Rs. 50.50 crore), premium income
(Rs. 10.50 crore) and new business (Rs. 43.30 crore) indicate that Indian Insurance
Business had been making a definite headway during this years. The inter-war - years
thus saw rapid growth life insurance in India.
The promotion of new life insurance companies continued to be almost a craze and
insurance companies mushroomed. In this period, 176 insurance companies were
formed and many of them failed. Thus unhealthy growth was harmful to the interest of
the policy holders and insurance business in India. Feeling concerned about it, the All
India Life Assurance Offices 'Association urged upon the Government in 1932 to
undertake the insurance legislation to Compulsorily register all Life Insurance
companies.
 Secure a deposit of Rs.2 lakh from all Life Insurance companies.
 Compel foreign companies doing business in India to keep sufficient funds in India
securities
 to meet their liabilities under all policies issued in India

CHAPTER 2
2.1 INTRODUCTION TO LIC.
LIC is the largest state-owned insurance group in India, and also the country's
largest investor? It is fully owned by the Government of India. It also funds close
to 24.6% of the Indian Government's expenses. It has assets estimated of 13.25
trillion (US$264.34 billion). It was founded in 1956 with the merger of 243
insurance companies and provident societies. Headquartered in Mumbai, financial
and commercial capital of India, the Life Insurance Corporation of India currently
has 8 tonal Offices and 113 divisional offices located in different parts of India,
around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25
Metro Area Service Hubs and a number of Satellite Offices located in different
cities and towns of India and has a network of 13,37,064 individual agents, 242
Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011)
for soliciting life insurance business from the public.
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
The slogan of LIC is "Yogakshemam Vahamyaham" - Your welfare is our
responsibility
2 .2 B A CK G R O UN D O F S T U D Y
“Life Insurance is a contract for payment of a sum of money to the person assured on the
happening of the event insured against”. Usually the insurance contract provides for the
Payment of an amount on the date of maturity or at specified dates at periodic intervals
or at unfortunate death if it occurs earlier. Obviously, there is a price to be paid for this
Benefit. Among other things the contracts also provides for the payment of premiums, by
the assured.
Life Insurance is universally acknowledged as a tool to eliminate risk, substitute certainty

for uncertainty and ensure timely aid for the family in the unfortunate event of the death
of the breadwinner. In other words, it is the civilized world’s partial solution to the
problems caused by death. Life insurance helps in two ways dealing with premature
death, which leaves dependent families to fend for themselves and old age without visible
means of support. The most common types of life insurance are whole life insurance and
term life insurance. Whole life insurance provides a lifetime of protection as long as you
pay the premiums to keep the policy active. They also accrue a cash value and thus offer
a savings component. Term life insurance provides protection only during the term of
the policy and the policies are usually renewable at the end of the term
2.3 OBJECTIVES OF LIC

Spread Life Insurance widely and in particular to the rural areas and to the socially and
economically backward classes
 Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to its

policyholders, whose money it holds in trust, without losing sight of the interest of
the community as a whole
 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with
courtesy.
INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee- headed by former Finance Secretary
and RBI Governor R.N. Malhotra- was formed to evaluate the Indian
insurance industry and recommend its future direction. The Malhotra
committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at creating a more
efficient and competitive financial system suitable for the requirements of the
economy keeping in mind the structural changes. currently underway and
recognizing that insurance is an important part of the overall financial system
where it was necessary to address the need for similar reforms. In 1994, the
committee submitted the report and some of the key recommendations
included:
Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations All the
insurance companies should be given greater freedom to operate.
II) COMPETITION
Private Companies with a minimum paid up capital of Rs.1bn should
be allowed to enter the sector.
No Company should deal in both Life and General Insurance through a
single entity.
7
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to

operate in each state.
III) REGULATORY BODY
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance- a part of the Finance Ministry- should be made
independent.
IV) INVESTMENTS
Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any company
(there current holdings to be brought down to this level over a period of
time).
V) CUSTOMER SERVICE
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked
pension plans.
Computerization of operations and updating of technology to be carried
out in the insurance industry.
The committee emphasized that in order to improve the customer
services and increase the coverage of insurance policies, industry should be
opened up to competition. But at the same time, the committee felt the need
8
to exercise caution as any failure on the part of new players could ruin the
public confidence in the industry. Hence, it was decided to allow competition
in a limited way by stipulating the minimum capital requirement of Rs.100

crores.
The committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance and enable them to act as
independent companies with economic motives. For this purpose, it had
proposed setting up an independent regulatory body- The Insurance Regulatory and
Development Authority. Reforms in the Insurance sector were initiated with the passage
of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a
statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations
and registering the private sector insurance companies. Since being set up as an
independent statutory body the IRDA has put in a framework of globally compatible
regulations. The approval of institutions for imparting training to agents has also ensured
that the insurance companies would have a trained workforce of insurance agents in place
to sell their
1.5 Organizational Structure of LIC

The life Insurance Corporation of India has a five tier organizational
structure as shown in following chart:
CENTRAL OFFICE (1)
↓
ZONAL OFFICES (8)
↓
DIVISIONAL OFFICES (113)
↓
BRANCH OFFICES (2048)
↓
SATTELITE OFFICES (1169)
NETWORK OF LIC
All Life Insurance Corporation branches in the country would be interconnected under
Metro Area Network (MAN) inaugurated here on Thursday.
Speaking at the function, K Vaidyalingam, LIC southern zonal manager, said about 1500
branches would be getting covered under MAN in which the premium amount of the
policy holder could be remitted in any branch. Besides, the policy holder gets his status
report, policy position, revival and quotation from the network. In every one hour the
system got upgraded, he said.
In southern region there are about 10 lakh new policy holders with a business of Rs 6500
crore. About settlement of claims, 92 per cent of policies were settled on or before
maturity, he said, adding, LIC was in a better position and 100 per cent connectivity was
taking place.
Kottayam stood third in premium collection during the period between April to August
2002, the first being Kozhikode and Thiruvananthapuram in second position in southern
region.
The premium amount collected in 2001 was Rs.74,000 crore through 2.32 crore new
policies by 8.2 lakh agents. LIC has introduced a new group insurance scheme for
Corporation Bank deposit holders.
1.7 Information Technology (IT) in LIC
LIC has been one of the pioneers in using the leverage of Information
Technology in servicing and in its business for the convenience of its
policyholders. Data pertaining to almost 10 crores policies is stored on
computer at LIC. Over the years, the LIC has gone in for relevant and
appropriate technology.
Front End Operations:

With a view to enhancing customer responsiveness and services, in July 1995, LIC
started a drive of Online Services to Policyholders and Agents through Computer. This
online service enabled policyholders to receive immediate policy status
report, prompt acceptance of their premium and get revival quotation,
21 loan quotation on demand. Incorporating change of address can be
done on line. Quicker completion of proposals and dispatch of policy
documents have become a reality. All its 2048 branches across the
country have been covered under front-end operations. Thus all its 100
divisional offices have achieved the distinction of 100% branch
computerization. New payment related modules pertaining to both
ordinary & SSS policies have been added to the Front End Package
catering to Loan, Claims and Development Officers’ Appraisal. All
these modules help to reduce time lag and ensure accuracy.
Metro Area Network:

A Metropolitan Area Network (MAN) connecting 74 branches in Mumbai was

commissioned in November, 1997 enabling policyholders in Mumbai to pay their
premium or get their Status Report, Surrender Value Quotation, Loan Quotation etc. from
any branch in the city. The system has been working successfully.
More than 10,000 transactions are carried out over this Network on
any given working day. Such Networks have been implemented in
other cities also.
Wide Area Network:

All 8 Zonal offices and all the MAN centres are connected through a Wide Area Network
(WAN). This will enable a customer to view his policy data and pay premium from any
branch of any MAN city. In November 2005, LIC had 91 centers in India with
more than 2035 branches networked under WAN.
Interactive Voice Response Systems (IVRS):

IVRS has already been made functional in 59 centers all over the country. The customer
Zones can be contacted form MTNL and BSNL phones by dialing IVRS Universal access
Number 1251 and exercising the relevant option to talk to executives (e.g. next premium
due, Status, Loan Amount, and Maturity payment due, Accumulated Bonus etc.) about
their policies his information could also be faxed on demand to the customer.
LIC on the Internet:

The LIC Internet site is an information bank. It has displayed information about LIC & its
offices. Efforts are on to 22 upgrade the website to make it dynamic and interactive. The
website contains addresses/e-mail Ids of all Zonal Offices, Zonal Training Centres,
Management Development Centres, Overseas Branches, Divisional Offices and also all
Branch Offices with a view to speed up the communication-process.
Payment of Premium and Policy Status on Internet:

LIC has given its policyholders a unique facility to pay premiums through Internet
absolutely free and also view their policy details on Internet. There are 11 service
providers with whom LIC has signed the agreement to provide this service.
Information Kiosks:
LIC has set up 150 Interactive Touch Screen based Multimedia KIOSKS in its prime
locations in metros and some major cities for dissemination of information to the general
public on its products and services. These KIOSKS are able to provide policy
details and accept premium payments.
Info Centres:
LIC has also set up 8 call centres, manned by skilled employees, to provide the
policyholders with information about its products, policy services, branch addresses and
other organizational information.
Satellite Offices:
With a vision of providing easy access to its policyholders, LIC has launched over 1000
satellite offices. These satellite offices, which are attached to the respective parent
branches, are basically an extension of the large parent branches for rendering quick
services to policy holders processing of new proposal and collection of renewal premium
are the main functions of these offices, at present.
Direct Marketing:
LIC has started a new channel “Direct Marketing” to explore the new age marketing
through digital campaigning and online marketing generating business leads. Initially
operations were started at six centers, i.e. Banglore, Delhi, Ernakulam, Hyderabad,
Kolkatta, & 23 Mumbai. This has reached to 22 units as on 31.03.2010. Now, buying
an LIC policy is just a click away for a prospective buyer. A visit to LIC’s portal &
registration of details thereon makes it possible for him to get the professional advice/
desired service within a few hours .
1.10 IMPACT OF GLOBALISATION

While nationalized insurance companies have done a commendable job in extending the
volume of the business, opening up insurance sector to private players was a necessity in
the context of globalization of financial sector. If traditional infrastructural and
semipublic goods industries such as banking, airlines, telecom, power etc., have
significant private sector presence, continuing a state of monopoly in provision of
insurance was indefensible. Its impact has to be seen in the form of creating various
opportunities and challenges.
Opportunities:
A state monopoly has little incentive to innovative or offers a wide range of products.
It can be seen by a lack of certain products from LIC's portfolio. More competition in this
business will spur firms to offer several new products and more complex and extensive
risk categorization. It would also result in better customer services and help improve the
variety and price of insurance products.
The entry of new players would speed up the spread of both life and general insurance.
Spread of insurance will be measured in terms of insurance penetration and measure of
density.
With the entry of private players, it is expected that insurance business roughly 400
billion rupees per year now, more than 20 per cent per year even leaving aside the
relatively under developed sectors.
More importantly, it will also ensure a great mobilization of funds that can
be utilized for purpose of infrastructure development that was a factor
considered for globalizations of insurance.
With allowing of holding of equity shares by foreign company either itself or through
its subsidiary company or nominee not exceeding 26% of paid up capital of Indian
partners will be operated resulting into supplementing domestic savings and increasing
economic progress of nation.
It has been estimated that insurance sector growth more than 3 times the growth of
economy in India. So business or domestic firms will attempt to invest in insurance
sector. Moreover, growth of insurance business in India is 13 times the growth insurance
in developed countries. So it isnatural, that foreign companies would be fostering a very
strong desire to invest something in Indian insurance business.
Most important not the least tremendous employment opportunities will be

created in the field of insurance which is burning problem of the present

day today issues.
Challenges before the LIC
New age companies have started their business. Some of these companies have been able
to float 3 or 4 products only and some have targeted to achieve the level of 8 or 10
products. At present, these 23 companies are not in a position to pose any challenge to
LIC, but if we see the quality and standards of the products which they issued, they can
certainly be a challenge in future because the challenge in the entire environment caused
by globalization and liberalization the industry is facing the following challenges:
The existing insurer, LIC, have created a large group of dissatisfied customers due to
the poor quality of service. Hence there will be shift of large number of customers from
LIC to the private insurers.
LIC may face problem of surrender of a large number of policies, as new insurers will
woo them by offer of innovative products at lower prices.
The corporate clients under group schemes and salary savings schemes
may shift their loyalty from LIC to the private insurers.
There is a likelihood of exit of young dynamic managers from LIC to the private
insurer, as they will get higher package of remuneration.
LIC has overstaffing and with the introduction of full computerization, a large number
of the employees will be surplus. However they cannot be retrenched. Hence the
operating costs of LIC will not be reduced. This will be a disadvantage in the competitive
market, as the new insurers will operate with lean office and high technology to reduce
the operating costs.
LIC has more than to 60 products which are outdated in the present context as they are
not suitable to the changing needs of the customers. Not only that they are not competent
enough to complete with the new products offered by foreign companies in the market.
Reaching the consumer expectations on par with foreign companies such as better
yield and much improved quality of service particularly in the area of settlement of
claims, issue of new policies, transfer of the policies and revival of policies in the
liberalized market is very difficult to LIC.
Intense competition from new insurers in winning the consumers by multidistribution

channels, which will include agents, brokers, corporate intermediaries, bank branches,
affinity groups and direct marketing through telesales and interest.
The market very soon will be flooded by a large number of products by fairly large
number of insurers operating in the Indian market. Even with limited range of products
offered by LIC the consumers are confused in the market. Their confusion will further
increase in the face for large number of products in the market. The existing level of
awareness of the consumers for insurance products is very low. It is so because only 62%
of the Indian population is literate and less than 10% educated. Even the educated
consumers are ignorant about the various products of the insurance.
The insurers will have to face an acute problem of the redressal of the consumers,
grievances for deficiency in products and services.
Increasing awareness will bring number of legal cases filled by the consumers against
insurers is likely to increase substantially in future.
Major challenges in canalizing the growth of insurance sector are product innovation,
distribution network, investment management, customer service and education.
CURRENT STATUS
Over its existence of around 50 years, Life Insurance Corporation of India, which
commanded a monopoly of soliciting and selling life insurance in India, created huge
surpluses, and contributed around 7 % of India's GDP in 2006.
The Corporation, which started its business with around 300 offices, 5.6 million policies
and a corpus of INR 459 million, has grown to 2,048 offices servicing around 180 million
policies and a corpus of over INR 3.4 trillion.
The organization now comprises 2048 branches, 100 divisional offices and 8 zonal
offices, and employs over 1 million agents. It also operates in 12 other countries,
primarily to cater to the needs of Non Resident Indians.
With the change in the India's economic philosophy from the early 1990s, and the
subsequent relaxation of state control over several sectors of the economy, the
monopolistic position of the Life Insurance Corporation of India was diluted, and it has
had to compete with a number of other corporate entities, Indian as well as transnational
Life Insurance brands.
In the financial year 2006-07 Life Insurance Corporation of India's number of policy
holders are said to have crossed a whopping 200 million (fourth in terms of population of
the countries of the world)
WHY LIC IS TRUSTED BRAND OF INDIA?
1) As a Govt of India owned Company, LIC is 51 + years old in the field of life
insurance and money management. LIC's Life Fund size as on day is more than Rs
5 Lakh Thousand Crores.
2) Any LIC policyholder or the nominee will vouch for the best claims settlement
from LIC. Perhaps, this is the only institution where you as a policyholder are
virtually chased till such time your claim cheques is handed over to you!
3) LIC has won `NDTV Profit Leadership Award 2007 under Life Insurance
Category', `Outlook Money Award 2007 as the best Life Insurer', `CNBC Awaaz
Consumer Award 2007 as the best Life Insurance Company', `Golden Peacock
Award for excellence in Corporate Governance 2007', `Web 18 Genius of the Web
Award 2007 and many more'.
4) LIC adjudged No.1 Trusted Service Brand for the 4th successive year by ET Brand
Equity Survey.
5) LIC has been adjudged Superbrand India for 2004-06 and Reader's Digest `Trusted
Brand' Asia 2007.
6) This is the only corporation that is catering to more than 190 million satisfied
policyholders in India and abroad.
7) This is one of the very few institutions that pays ex-gratia interest on pending
maturity claims!
8) More than 2050 LIC branches all over India are connected together to serve you.
You can pay your premium anywhere in the country.
9) During its long existence, LIC has kept on updating its portfolio by bringing in
new plans depending on public requirement. More than 50 of them are most
popular and can be customized to meet any of your requirements. LIC ULIPs have
become extremely popular due to the returns they offer. Money Plus- latest LIC
Unit Linked Plan is a case in point.
10) All LIC Plans come with Sovereign Guarantee i.e., Govt of India Guarantee
regarding repayment. Infact, as of now, only LIC plans enjoy this Govt Guarantee.
Beneficiary for this Sovereign Guarantee is you and you alone as the policyholder/
would-be policyholder.
11) All LIC plans are characterized by low premium, high life insurance
coverage and a vast package of benefits offered by them. Add to this package,
section 80C benefit and section 10(10D) benefit on the maturity proceeds, you will
find investment on LIC plans one of the most coveted investment options available
to you.
12) Premium paid under Key-Man Insurance plan is a recognized business
expense under section 37(I) of the Income-Tax Act. For companies making profits,
this is a very good incentive indeed.
13) Through Employer-Employee Insurance scheme, you can recognize the
worth of your most valuable employees whose absence you can ill afford to lose.
14) Entire contribution to LIC Group Gratuity Scheme is a recognized business
expense in the hands of the employer. In addition, through this scheme, the
employer can transfer his gratuity liability to the corporation and fund the same
under cash accumulation scheme. The most popular among all the companies.
15) LIC is declaring quite an impressive bonus (profits) on all its with-profits
policies every year. Extra attraction under LIC Bonus is (a) it is calculated every
year on the insured amount and not on the premium paid and (b) entire bonus
received along with insured amount either by you on maturity of your policy(ies)
or by your nominee in your absence during the currency of your policy(ies) is free
from income-tax under section 10(10D) of the Income-tax Act.
16) On most of the LIC plans, you can borrow to take care of your immediate
monetary requirements. None of the policy benefits get affected as a result of
borrowal. Infact, policy loans offer one of the most attractive investment
opportunities.
17) You can pay your premium 3 years in advance at 5% discount. Chief
attractions of this advance payment of premium are (a) there is no possibility of
your overlooking your premium payment and getting your policy(ies) lapsed
wherever you are in the world and (b) you will be earning 5% tax-free interest on
the unutilized portion of the amount left with LIC after apportioning the regular
instalment.
18) Most of the LIC plans come with Riders to take care of Total and Permanent
Disablement due to Accident and some of the most dread diseases that may result
in loss of income.
19) LIC pension plans that guarantee your life pension are extremely popular.
You can park your hard earned money safely with the corporation and enjoy
pension as long as you are alive.
Due to these reasons and lot more, LIC should be your obvious choice for all your
life insurance requirements.
Different Types of Life Insurance Policies in India

1. Term Plan – pure risk cover
2. Unit linked insurance plan (ULIP) – Insurance + Investment opportunity
3. Endowment Plan – Insurance + Savings
4. Money Back – Periodic returns with insurance cover
5. Whole Life Insurance – Life coverage to the life assured for whole life
6. Child’s Plan – For fulfilling your child’s life goals like education, marriage, etc.
7. Retirement Plan - Plan your retirement and retire gracefully.
Let’s dive deeper to know each plan in detail:
Term Life Insurance

Term insurance is the simplest form of life insurance plan. Easy to understand and
affordable to buy.
A term plan provides death risk cover for a specified period. In case the life assured
passes away during the policy period, the life insurance company pays the death benefit
to the nominee. It is a pure risk cover plan that offers high coverage at low
premiums.There’s an option to add riders to widen up the coverage.The death benefit is
payable as lump sum, monthly payouts, or a combination of both.There’s no payout if the
life assured outlives the policy term. However, these days there are companies offering
Term Plans with Return of Premiums (TROPS), where insurance companies payback all
the paid premium amount in case the life assured outlives the term period. But, such
plans are costlier than the vanilla term insurance plan.
Example:An individual non-smoker male who is looking for a term life plan of Rs.1
crore cover, will cost him approximately Rs.6, 800 to Rs.10, 500 per year.
AGE TERM SUM ASSURED ANNUAL PREMIUM RANGE
25 years 40 years Rs.1 Crore Rs.6,800 – Rs.10,500
Best known for: High sum assured (coverage) at a low premium.
Benefit of Term Plan: In case of an untimely death of the breadwinner, family is

supported with an enormous amount of money – sum assured, which helps them
to replace the loss of the income caused due to the breadwinner’s death. Moreover, the
money could be utilized to pay off loan, monthly household expenses, child’s education,
child’s marriage, etc.
2. Unit Linked Plans (ULIPs)

A unit linked plan is a comprehensive combination of insurance and investment. The
premium paid towards ULIP is partly used as a risk cover (insurance) and partly is
invested in funds. One can invest in different funds offered by the insurance company
depending on his risk appetite. The insurance company then invests the accumulated
amount in the capital market i.e. in bonds, equities, debts, market funds, or a hybrid
funds...
Example:
SUM ANNUAL
TERM FUND VALUE
ASSURED PREMIUM
Depending on the fund

20
Rs.2 lakh Rs.20,000 value at the time of
years
maturity.
Best known for: Long-term investment option with much more flexibility to invest.
Benefit of ULIP: Invest money as per your risk appetite. You have the option to invest
either in equity, debt or in hybrid funds through the life insurance company with
complete transparency.
Related Article: Term Plan Vs ULIP: What makes more sense.
3. Endowment Plans
Endowment plan is another type of life insurance plan, which is a combination of
insurance and saving. A certain amount is kept for life cover – insurance, while the rest is
invested by the life insurance company. In an endowment plan, if the life assured outlives
the policy term, the insurance company offers him the maturity benefit.
Moreover, Endowment Plans may offer bonuses periodically, which are paid either on
maturity or to the nominee under death claim. On death, the death benefit is payable to
the nominee. Endowment plans are also commonly known as traditional life insurance,
although, there is an investment component but the risk is lower than the other
investment products and so are the returns.
Example:
SUM ANNUAL PREMIUM

TERM BONUS
ASSURED RANGE
30 Depending on the Bonus at the time of

Rs.10 lakh Rs.20,000 – Rs.25,000
years maturity.
Best known for: Long-term saving option for people with much lower risk appetite for
investment.
Benefit of Endowment Plan: Long-term financial planning and an opportunity to earn

returns on maturity.
4. Money Back Life Insurance

Money back plan is a unique type of life insurance policy, wherein a percentage of the
sum assured is paid back to the insured on periodic intervals as survival benefit.
Money back plans are also eligible to receive the bonuses declared by the company from
time to time. This way, policyholder can meet short-term financial goals.
Example:
ANNUAL
SUM PERIODIC MATURITY
TERM PREMIUM
ASSURED RETURNS BENEFIT
RANGE
A percentage
Accrued
of Sum
20 Rs.20,000 – bonuses/Guaranteed
Rs.5 lakh Assured paid
years Rs.25,000 Money Back +
on regular
Coverage
intervals
Best known for: Short-term investment product to meet short-term financial goals.
Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn
returns on maturity.
5. Whole Life Insurance

A whole life insurance policy covers the life assured for whole life, or in some cases, up
to the age of 100 years. Unlike, term plans, which are for a specified term.The sum
assured or the coverage is decided at the time of policy purchase and is paid to the
nominee at the time of death claim of the life assured along with bonuses if any.
However, if the life assured outlives the age of 100 years, the insurance company pays
the matured endowment coverage to the life insured. The premiums are higher as
compared to term plans. Whole life insurance plans also offer partial withdrawals after
completion of premium payment term.
SUM ASSURED
(WITH
PREMIUM ANNUAL
GUARANTEED MATURITY
PAYING PREMIUM
MATURITY BENEFIT
TERM RANGE
SUM
ASSURED)
Guaranteed
Sum Assured +
non-guaranteed
Rs.10,000-
20 years Rs.3 lakh bonus (if any) +
Rs.15,000
non-guaranteed
terminal bonus
(if any)
Best known for: Life coverage for whole life.
Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to
leave behind a legacy for heirs.
6. Child Plan
Child plan helps to build corpus for child’s future growth. Child plans help to build funds
for child’s education and marriage. Most of the Child Plan provides annual installments
or one time payout after the age of 18 years.
In case of an unfortunate event, the insured parent passes away during the policy term -
immediate payment is payable by the insurance company. Some child plans waive off the
future premiums on death of the life insured and the policy continues till maturity.
ANNUAL
SUM PERIODIC MATURITY
TERM PREMIUM
ASSURED RETURNS BENEFIT
RANGE
Maturity
benefit +
Lump sum
guaranteed
20 payouts on
Rs.18 lakh Rs.1 lakh returns + non-
years regular
guaranteed
interval
accumulated
bonus (if any)
Best known for: Building funds for your child’s future.
Benefit of Child Plan: Helps in fulfilling your child’s dream.
7. Retirement Plan
Retirement plan helps to build corpus for your retirement. Helping you to live
independently financially and without worries. Most of the child plans provide annual
installments or one time payout after the age of 60 years.In case of an unfortunate event,
life assured passes away during the policy term - immediate payment is payable to the
nominee by the insurance company. Death benefit will be higher of coverage or fund
value or 105% of premiums paid. Vesting Benefit will be payable if the life assured
survives the maturity age. In which case, payout will be fund value which has to be
utilized for buying an annuity.
Best known for: Long-term savings and retirement planning.

Benefit of Retirement Plan: Helps in building corpus for retirement. This is just a
simplified guide to different types of life insurance policies.
CHARACTERISTICS OF INSURANCE:
 Sharing of Risks
Insurance is a co-operative device to share the burden of risk, which may fall on
happening of some unforeseen events, such as the death of head of the family, or on
happening of marine perils or loss of by fire.
 Co-operative Device
Insurance is a co-operative form of distributing a certain risk over a group of
persons who are exposed to it (Ghosh & Agarwal). A large number of persons share the
losses arising from a particular risk.
 Evaluation of Risk
For the purpose of ascertaining the insurance premium, the volume of risk is
evaluated, which forms the basis of insurance contract.
 Payment of happening of specified event

On happening of specified event, the insurance company is bound to make
payment to the insured. Happening of the specified event is certain in life insurance, but
in the case of fire, marine or accidental insurance, it is not necessary. In such cases, the
insurer is not liable for payment of indemnity.
 Amount of payment
The amount of payment in indemnity insurance depends on the nature of losses
occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed
amount is paid on the happening of some uncertain event or on the maturity of the policy.
 Large number of insured persons

The success of insurance business depends on the large number of persons
insured against similar risk. This will enable the insurer to spread the losses of risk
among large number of persons, thus keeping the premium rate at the minimum.
 Insurance is not a gambling

Insurance is not a gambling. Gambling is illegal, which gives gain to one party
& loss to the other. Insurance is a valid contract to indemnity against losses. Moreover,
insurable interest is present in insurance contracts & it has the element of investment
also.
 Insurance is not charity

Charity pays without consideration but in the case of insurance, premium is
paid by the insured to the insurer in consideration of future payment.
 Protection against risks

Insurance provides protection against risks involved in life, materials &
property. It is a device to avoid or reduce risks
Spreading of risk
Insurance is a plan, which spread the risks & losses of few people among a large
number of people. John Magee writes, ―Insurance is a plan by which large number of
people associates themselves & transfer to the shoulders of all, risks attached to
individuals.
 Transfer of risk
Insurance is a plan in which the insured transfers his risk on the insurer. This
may be the reason that Mayerson observes, that insurance is a device to transfer some
economic losses to the insurer, and otherwise such losses would have been borne by the
insured themselves.
 Ascertaining of losses
By taking a life insurance policy, one can ascertain his future losses in terms of
money. This is done by the insurer to determining the rate of premium, which is
calculated on the basis of maximum risks.
 A contract
Insurance is a legal contract between the insurer & insured under which the insurer
promises to compensate the insured financially within the scope of insurance policy, &
the insured promises to pay a fixed rate of premium to the insurer.
 Based upon certain principle

Insurance is a contract based upon certain fundamental principles of insurance,
which includes utmost good faith, insurable interest, contribution, indemnity, cause
proximal, subrogation, etc., which are the basis for successful operation of insurance
plan.
Utmost Good Faith

Insurance is a contract based on good faith between the parties. Therefore, both the
parties are bound to disclose the important facts affecting to the contract before each
other. Utmost good faith is one of the important principles of insurance. To conclude,
insurance is a device for the transfer of risks from the insured to the insurers, who
agree to it for a consideration (known as premium), & promises that the specified
extent of loss suffered by the insured shall be compensated. It is a legal contract of a
technical nature.
FUNCTION OF INSURANCE :
PRIMARY FUNCTIONS –
The primary functions of insurance include the following.
i) Provide Protection
The primary function of insurance is to provide protection against future risk,
accidents and uncertainty. Insurance cannot check the happening of the risk, but can
certainly provide for the losses of risk. Professor Hopkins observes "Insurance is a
protection against economic loss, by sharing the risk with others.”
ii) Collective bearing of risk

Insurance is a device to share the financial loss of few among many others.
Dinsdale opines, insurance is a mean by which few losses are shared among longer
people. Similarly, William Bevridge observes, "The collective bearing of risks is
insurance." All the insured contribute the premiums towards a fund and out of which the
persons exposed to a particular risk is paid.
iii) Assessment of risk

Insurance determines the probable volume of risk by evaluating various factors
that give rise to risk. Risk is the basis for determining the premium rate also.
iv) Provide certainty

Insurance is a device which helps to change from uncertainty to uncertainty. This
may the reason that John Magee writes that the function of insurance is to provide
certainty. Similarly, Riegel and-Miller observe, "Insurance is device whereby the
uncertain risks may be made more certain".
SECONDARY FUNCTIONS
i) Prevention of losses
Insurance cautions individuals and businessmen to adopt suitable device to prevent
unfortunate consequences of risk by observing safety instructions; installation of
automatic sparkler or alarm systems, etc. Prevention of losses causes lesser payment to
the assured by the insurer and this will encourage for more savings by way of premium.
Reduced rate of premiums stimulate for more business and better protection to the
insured.
ii) Small capital to cover larger risks

Dinsdale observes, insurance relieves the businessmen from security investments,
by paying small amount of premium against larger risks and uncertainty.
iii) Contributes towards the development of larger industries

Insurance provides development opportunity to those larger industries having more
risks in their setting up. Even the financial institutions may be prepared to give credit to
sick industrial units which have insured their assets including plant and machinery.
OTHER FUNCTIONS
 Means of savings and investment: insurance serves as savings and investment,

insurance is a compulsory way of savings and it restricts the unnecessary expenses
by the insured’s For the purpose of availing income-tax exemptions also, people
invest in insurance.
 Source of earning foreign exchange: Insurance is an international business. The
country can earn foreign exchange ^ by way of issue of marine insurance policies.
 Promotes exports insurance makes the foreign trade risk free with the help of
different types of policies under marine insurance cover.
CHAPTER. 4
DATA ANALYSIS AND INTERPRETATION
1. Do you have a life insurance policy?
SALES
20%
YES
NO
80%
2. If yes , which company?
CHOICES
6%
5%
11%
78%
LIC ICICI KOTAK OTHER

3. How many policies have you taken?
Sales
11%
89%
1 TO 3 3 OR MORE
4. Which is the most popular company in the insurance sector?
CHOICES
CHOICES
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
LIC KOTAK ICICI OTHERS
5. Do you think it is for the welfare of the public?
RESPONSES
0%
100%
YES NO
6. Is it customer friendly?
RESPONSES
0%
YES
NO
100%
7. Are you satisfied with the services?
RESPONSES
10%
5%
YES
NO
NOT ANSWERED
85%
CHAPTER 5
CONLUSION.
 LIC gets achievement in various fields.

 We can see that LIC gets success in new business. Numbers of policies are
increased.
 We can see LIC's income from various fields.
 Overall LIC has doing profitable business.
 But it is only LIC's own business. But it is not compared with other's insurance
institute. So it is not completed.
BIBLOGRAPHY.
www.licindia.in
www.scribd.com
www.coverfox.com
www.wikipedia.org .
REFERENCE.
8. Annual Reports of IRDA (Various Issues)
9. Annual Reports of LIC of India (Various Issues)
Annexure

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STUDY OF LIFE INSURANCE AND ITS POLICY

Study of life insurance and its policy

LALA LAJPATRAI COLLEGE COMMERCE AND

ECONOMICS, MAHALAXMI MUMBAI -34

STUDY OF LIFE INSURANCE AND IT’S POLICES

PEARL JUDE ALEXANDER

PROF.MS. LOVEENA ATWAL

Project on Insurance titled STUDY OF LIFE INSURANCE AND IT’S

The information submitted here is true and original to best of my knowledge

Signature of External Examiner Signature of Internal Examiner

Signature of Project Guide Signature of Principal

Date of Submission: ____________________

I, Miss Pearl Jude Alexander from TYBBI of Lala Lajpatrai College of

STUDY OF LIFE INSURANCE AND IT’S POLICIES in Semester VI of

The information provided by me is true and original to best of my knowledge

A research design is basically a blue print of how a research is to be conducted, it may

1. Choosing the approach

2. Determining the type of data needed

3. Locating the source of data

4. Choosing a method of data

Basically there are 3 types of approaches used during any research:

EXPERIMENTAL During this research Descriptive and Exploratory approach is taken

TYPES OF DATA USED:

Both primary and secondary data is used in the research.

Data Collection Method:

To conduct the market research the data is collected by two sources.

Obtained my means of a simple sample questionnaire .

 Newspaper and Magazines like Economic Times, Insurance Times, and

Life insurance (or life assurance, especially in the Commonwealth of Nations) is a

Life-based contracts tend to fall into two major categories:

 Protection policies – designed to provide a benefit, typically a lump sum payment, in

Liberalisation post 2000s

In August 2000, the Indian Government embarked on a program to liberalise the

LIC's Contribution to the five year plans over the years

Plan Year Investment

Awards and Recognitions.

Golden Jubilee Foundation

1.2 DEFINITION OF INSURANCE:

b. Against the said consideration, a large amount is guaranteed to be paid by the

1.3 CONCEPT OF LIFE INSURANCE

1.4 OVERVIEW OF CURRENT INSURANCE INDUSTRY WHAT IS INSURANCE? Insurance is

1.5 NATURE OF INSURANCE

c) It’s not gambling or charity: The uncertainty is changed to certainty by insuring

d) Huge number of insured people: It is essential to insure larger number of people or

e) Assists in capital formation: Insurance provides capital to society. Accumulative

1.6 THE IMPORTANCE OF INSURANC E

2. There is a certain amount of compulsion to go though the plan of savings. In other

1. Risk: It is defined as an uncertainty of a financial loss. It is the unintentional decline in

2. Policy: It is the document which embodies the insurance contract.

5. Claim: It is the amount which an insurer has to pay against a policy.

7. Premium: A periodic payment made on an insurance policy.

8. Insurance penetration: It is defined as insurance premium as a share of gross

9. Insurance density: Insurance density is defined as per capita expenditure on insurance

1.9 PROGRESS IN LIFE INSURANCE COMPANY

 Secure a deposit of Rs.2 lakh from all Life Insurance companies.

 to meet their liabilities under all policies issued in India

Life Insurance is universally acknowledged as a tool to eliminate risk, substitute certainty

2.3 OBJECTIVES OF LIC

 Maximize mobilization of people's savings by making insurance-linked savings

 Bear in mind, in the investment of funds, the primary obligation to its

INSURANCE SECTOR REFORMS

Only one State Level Life Insurance Company should be allowed to

in a limited way by stipulating the minimum capital requirement of Rs.100