JAMSHEDPUR CO-OPERATIVE COLLEGE, JAMSHEDPUR

(A constituent unit of Kolhan University, Chaibasa)

Working and Regulatory Framework of

Life Insurance Corporation of India
DISSERTATION

Submitted for the partial fulfilment of the Degree of

MASTER OF COMMERCE

In the

Faculty of Commerce

Jamshedpur Co-operative College,

Jamshedpur

Under the Supervision of

Ashok Kumar Rawani, Asst. Prof.

Faculty of Commerce

Jamshedpur Co-operative College

Jamshedpur

Submitted By

Name: Neha Kumari

Class & Roll No.: M.com, 90

Session: 2017-19

University Registration No. : KU1721630/2017

University Exam Roll No. : 180606448576

1
 CERTIFICATE

This is to certify that the dissertation report entitled “Working and Regulatory
Framework of Life Insurance Corporation of India” submitted to the Faculty of
Commerce, Jamshedpur Co-operative College, Jamshedpur ( Kolhan
University, Chaibasa) in partial fulfilment for the award of the degree of Master
of Commerce, is a record of bona fide work carried out by Ms. Neha Kumari,

University Registration No. KU1721630/2017, University Roll No.

180606448576 under my supervision and guidance.

____________

Date: Ashok Kumar Rawani

2
 CONTENTS

Certificate of Supervisor………………………………………………………………... 2

Acknowledgement……………………………………………………………………… 4

Chapter I

1.1 Introduction………………………………………………………………… 5

1.2 Objectives of LIC…………………………………………………………... 6

1.3 Mission/ Vision & Board of Directors……………………………………… 7

1.4 Hypothesis…………………………………………………………………... 15

Chapter II

2.1 Review of literature………………………………………………………… 16

2.2 Statement of Problem………………………………………………………. 17

2.3 Objectives of The Study……………………………………………………. 21

2.4 Significance of The Study………………………………………………….. 21

Chapter III

3.1 The IRDA Act, 1999………………………………………………………... 22

Chapter IV

4.1 Data Collection, Result and Interpretation………………………………… 28

4.2 Findings and Suggestions………………………………………………….. 32

4.3Conclusion…………………………………………………………………. 38

4.4 Reference………………………………………………………………….. 38

3
 ACKNOWLEDGEMENT

I am in a delightful mood rather than in a conventional mood in expressing a few sentences,

which comes spontaneously from the inner core of my heart. I consider myself lucky to have
worked under the guidance of my esteemed teacher Prof. Ashok Kumar Rawani Assistant
professor, faculty of commerce, Jamshedpur Co-operative College, Jsr. At the very outset, I
owe my deep sense of gratitude to him for giving me his valuable time in spite of his busy
schedule. It was his excellent guidance, constant encouragement, genuine advises, line-by-line
comments that acted as the key, without which this work would not have seen the light of the
day.

I am indebted to Prof. Dr Sanjeev Kumar Singh, Head of department of commerce,

Jamshedpur Co-operative College, Kolhan University for their constant encouragement and
blessings. I would like to thank all the faculty members and staff of the faculty of commerce
who made this work possible by assisting me in so many ways.

The libraries attended by me deserve my sincere thanks for their invaluable cooperation.

I have to offer my sincere thanks to the following organizations for supplying me valuable
research material and reports (Life insurance Corporation of India, Jamshedpur division).

My special thanks are due to my guide Prof. Ashok Kumar Rawani, my brother Bipin
Kumar and my friend Rajnish Kumar Singh for being supportive at every moment and help in
many ways during the course of study. I also acknowledge the encouragement and help
received from my family and friends for their moral support and best wishes.

I have no words to express my feelings to my friends for his co-operation and patience
without which this work could not have been completed.

4
 CHAPTER I

1.1 Introduction

Brief History of Insurance:

The story of insurance is probably as old as the story of mankind. The same instinct that
prompts modern businessmen 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 6000years.

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
company 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 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 Assurance at
Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its
birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath 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,

5
and the Provident Fund Act were passed. 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.

1.2 Objectives of LIC

 » Spread Life Insurance widely and in particular to the rural areas and to the socially
and economically backward classes with a view to reaching all insurable persons in the country
and providing them adequate financial cover against death at a reasonable cost.
 » 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;
the funds to be deployed to the best advantage of the investors as well as the community as a
whole, keeping in view national priorities and obligations of attractive return.
 » Conduct business with utmost economy and with the full realization that the moneys
belong to the policyholders.
 » Act as trustees of the insured public in their individual and collective capacities.
 » 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.
 » Promote amongst all agents and employees of the Corporation a sense of
participation, pride and job satisfaction through discharge of their duties with dedication
towards achievement of Corporate Objective.

6
 1.3 Mission / Vision

Mission
"Ensure and enhance the quality of life of people through financial security by providing
products and services of aspired attributes with competitive returns, and by rendering resources
for economic development."

Vision
"A trans-nationally competitive financial conglomerate of significance to societies and
Pride of India."

1.3 Board of Directors

Members on The Board Of The Corporation

 » Shri. M R Kumar, Chairman, LIC of India
 » Shri. T.C. Suseel Kumar, (Managing Director, LIC of India)
 » Shri Vipin Anand Managing Director, LIC of India
 » Shri. Girish Chandra Murmu, Secretary(Expenditure), Department of Financial
Services, GOI
 » Ms. Padmaja Chunduru, MD & CEO, Indian Bank
 » Shri. Bimalendu Chakrabarti,Non-Official Member
 » Shri. R N Chaturvedi, Non-Official Member
 » Shri. R.Chandrasekaran, Non-Official Member

The state sponsored Life Insurance Corporation (hereinafter referred to as LIC) of India
was the sole player in the Indian life insurance market before 2000. With the entry of private
players, LIC has lost considerable market share to private players although both market size
and insurance premia, are on the rise. In India life insurance products were/are bought more as
investments for tax savings rather than risk protection. The brand preference in this category
has never been explored in depth. It has been largely assumed that life insurance is an unsought
product and customer satisfaction a ‘paradox’. The proposition that has been examined is that
customer satisfaction can provide business opportunities in this under penetrated market. It can
be a vehicle for identifying new avenues for cross selling, up selling and referrals. It also

7
attempts to identify the dimensions of service quality which are important to a customer.
SERVQUAL scale was used to discern the different dimensions of service quality and mean
scores were used to find out if there is any gap between customer expectations and perceptions.
Primary research was used to collect data on RATER scale among LIC customers in Delhi.
(Timira Shukla, 2011)
Retaining a customer is four time cheaper than acquiring a new one. The retention of the
customers is of utmost importance in the insurance industry in specification. Insurance
business is of the relationship building process. were one customer leads to the building of
other one. A satisfied customer is like a word of mouth advertisement for the company. The
needs of the existing customers should be identified and satisfied well rather than only
concentrating at the new accounts. All possible measures needs to taken to retain the
customers as it is lesser costlier as well as provides stability to the business.
It wasn’t too long back when the good old endowment plan was the preferred way to
insure oneself against an eventuality and to set aside some savings to meet one’s financial
objectives. The traditional endowment policies were investing funds mainly in fixed interest.

Government securities and other safe investments to ensure the safety of capital. Thus the
traditional emphasis was always on security of capital rather than yield. However, with the
inflationary trend witnessed all over the world, it was observed that savings through life
insurance were becoming unattractive and not meeting the aspirations of the policyholders.
The policyholder found that the sum assured guaranteed on maturity had really depreciated in
real value because of the depreciation in the value of money. The investor was no longer
content with the so called security of capital provided under a policy of life insurance and
started showing a preference for higher rate of return on his investments as also for capital
appreciation. It was, therefore found necessary for the insurance companies to think of a
method whereby the expectation of the policyholders could be satisfied. The object was to
provide a hedge against the inflation through a contract of insurance. Decline of assured return
endowment plans and opening of the insurance sector saw the advent of ULIPs on the
domestic insurance horizon. Today, the Indian life insurance market is riding high on the unit
linked insurance plans.
At national as at individual level the excess of income after consumption level savings as
funds for investment. Surplus funds can be invested in either real asset or in financial assets.
Purpose of investment is to protect one’s wealth against erosion of value due to inflation and
to earn risk adjusted return. There are three motives which drive people to purchase insurance

8
products in India. _ Desire to cover risk _ Tax benefit _ Saving motives It is argued that in this
paper that in the changing scenario for the insurance sector there is going to be a good
opportunities for insurance sector to expand its market base. For this purpose there is need to
improve the features of the insurance products to make them more liquid or short term
schemes could be increased. It is shown that although rewards implied by the insurance
products particularly by the tax benefits are quite close to those observed in banks and small
saving scheme of the governments. The performance of mutual funds which come in many
different types is found to be reasonable compared to the risk involved. The survey indicates
that it may not be very difficult to win over the confidence of small investors towards
insurance policies if good marketing techniques are adopted to educate the targeted population
about the uses of insurance policies from investment point of view.
Insurance is one product which is not demanded by a customer, but supplied to him by
massive education and drive marketing. Insurance ought to be bought not sold. The new
concept of demand side innovation focuses more on customer’s social and economic reality
striving to deliver maximum value to the customer at an affordable price. Therefore, when the
customer becomes the primary focus including him in the invention process becomes
mandatory. But, there are certain areas of insurance innovations where the customers cannot
be involved. A case in point is the recent insurance product invention called Telemetric Auto
Insurance. It’s a product by the Progressive Auto Insurance, which monitors the driving
behavior of its auto insurance policyholder. The new machine grabs information and
automatically transmits it to the insurer. This information received is regularly analyzed to
judicially conclude the intensity of risk the person is exposed and the corresponding premium
he is eligible to pay. This is an example of supply side innovation, where it is strictly not
possible to include the customer in the innovation process. Though, there are instances where
the customer is involved in the testing phase, his inclusion in the conception phase makes an
innovation demand-driven.
The findings of the study demonstrate that five-factor structure as proposed by Suresh
Chandar et al. (2001) has been refined to seven factor construct (consisting of 34 items)
representing Proficiency; Media and presentations; Physical and ethical excellence; Service
delivery process and purpose; Security and dynamic operations; Credibility; and
Functionality. Besides, the study also investigates the relationship between each of the
generated service quality dimensions and customers overall evaluation of life insurance
service quality. It reveals that among these seven factors, three viz., Proficiency; Physical and
ethical excellence; and Functionality have significant impact on the overall service quality of

9
Life Insurance Corporation of India. Managerial implications and directions for further
research have also been discussed.
Sales personnel by providing enough information to the customers, enables them in
forming their assessment about the products or services, which ultimately becomes customer
value. Customer satisfaction and acumen orientation significantly influence the future business
opportunities and if the salespersons are able to foster their relationships with the clients,
clients will be more satisfied and more willing to trust, and thus secure the long term demand
for the services (Tam and Wong, 2001).
According to Crosby et al. (1990) the lack of concreteness of many services of which
insurance is one, increases the value of the persons responsible for delivering them. Putting
the customer first, and, exhibiting trust and integrity have been found essential in selling
insurance (Slattery, 1989). In marketing life insurance, insurance agents are often considered
to be marketing complex services (Nik Kamariah, 1995). Insurance sales agents fully
understand the customers’ needs and requirements as well as build a trusting relationship
between themselves and their clients to promote long-term mutually beneficial relationship
(Crosby et al., 1990).
The agent has to deal with the dilemma between making sales (self interest) and providing
service (customer benefit) (Oakes, 1990). Customers are, therefore, likely to place a high
value on their agent’s integrity and advice (Zeithaml et al., 1993).
Insurance agents who sell policies are not employees of the insurance companies. Rather,
they work on a commission basis and thus are motivated by the volume of sales made
(Annuar, 2004). This is because; insurance agents are involved in long-term commitment and
a continual stream of interaction between buyer and seller. After the sale, agents also provide
follow-up service and help customers make policy changes in response to changing needs
(Noor and Muhamad, 2005).
The company – agent link is stronger than the agent – company link, which in turn, is
stronger than the customer – company link. Customer loyalty depends on how strong the
agents’ link with the customer is (Balachandran, 2004). Agents are the indeed ambassadors
and the backbone of the insurance industry (Malliga, 2000).
Life Insurance Corporation of India (LIC), the capital intensive business, provides the
most important financial instrument to customers aimed at protection as well as long term
savings. The Corporation reaches out to the people through the main traditional route of the
agency model for the selling processes of the numerous complex need-based products. The
gigantic superstructure that LIC has evolved into over the years is in fact built on the singular

10
efforts of the salesperson, the primary contact point of the customers who motivates and
persuades them to buy an insurance product. Such a salesperson, a sole player must display
highest degree of integrity and ethics to foster a trusting relationship with his clients who
would be more than satisfied and willing to be buyers. At present, LIC has around 2.70
million agents and they represent more than 60 percent of the life insurance business
(www.licindia.com; Lepaud, 2008). They concentrate their efforts on seeking out new clients
and maintaining relationships with the old ones. If policy holders experience a loss, agents
help them to settle their insurance claims.
The liberalization of Indian economy ushered in an era of competitive marketing leading
to the radical changes in the entire gamut of products and services. The service sector, hitherto
limited in nature and scope, changed into an aggressive mode appropriating the front stage
touching almost every sphere of human activity, viz., banking, insurance, information
technology, welfare etc. and accounted for approximately two-thirds of worldwide GNP right
from the beginning of the twenty first century (Kara et al., 2005).
Delivering quality service is considered an essential strategy for success and survival in
today's competitive environment (Dawkins and Reichheld, 1990; Parasuraman et al., 1985;
Reichheld and Sasser 1990; Zeithaml et al., 1990). In the literature, the construct of quality is
conceptualized based on perceived service quality (Hishamuddin et al., 2008).
Perceived service quality is defined as „global judgment, or attitude, relating to the
superiority of the service‟ (Parasuraman et al., 1988). In the huge service sector, insurance
sector is one of the most important entities which has been growing relatively fast in India. At
present there are twenty three players in the Indian life insurance industry out of which Life
Insurance Corporation is one of the leading public companies, holds largest number of
policies in the world to suit different financial requirement of an individual. With a greater
choice and an increasing awareness, there is a continuous increase in the customers‟
expectations and they demand better quality service. Therefore, to sustain in the market, service
quality becomes a most critical component of competitiveness for Life Insurance Corporation
of India. Although, by providing quality services to its customers, the Corporation can
differentiate itself from other service firms and will able to improve its profitability. The
purpose of the present study is to measure customers ‟ perception towards service quality of
Life Insurance Corporation of India by applying a framework developed by Sureshchandar et
al. (2001). Moreover, the study also identifies the relationship between each of generated
service quality dimensions and customers‟ overall evaluation of service quality in India.
In spite of the growing importance of service quality (Qualls and Rosa, 1995), it remains

11
an abstract and elusive construct that is difficult to define and measure (Brown and Swartz,
1989; Carman, 1990; Crosby, 1979; Gravin, 1983; Parasuraman et al., 1985, 1988; Rathmell,
1966). In the empirical literature, there are many alternative service quality models and
instruments developed for measuring service quality. Sasser et al. (1978) suggested three
different attributes (levels of material, facilities, and personnel) all apparently dealing with the
process of service delivery. Gronroos (1984) argued that service quality can be divided into
two generic dimensions: technical quality (what is provided) and functional quality (how the
service is provided), with image quality (the organization’s reputation for quality) mediating
the impact of these two dimensions on overall perceived quality.
Subsequently, Gronroos (1990) identified six specific dimensions viz., professionalism
and skills, reliability and trustworthiness, attitudes and behavior, accessibility and flexibility,
recovery, and reputation and credibility, on which service quality could be measured.
However, these dimensions have not been subject to any rigorous empirical testing, although a
number of studies have used scales based on such principles (e.g., Lehtinen and Lehtinen,
1991). Lehtinen and Lehtinen (1982) discussed three dimensions viz., physical quality,
involving physical aspects; corporate quality, involving a service firms image and
reputation; and interactive quality, involving interactions between service personnel and
customers.
In the mid-1980’s one of the most systematic research programs in service quality was
conducted by Parasuraman et al. (1985). They revealed ten dimensions viz., tangibles,
reliability, responsiveness, competence, courtesy, credibility, security, communication,
understanding, and access in the original model of service quality. But in the subsequent study
of Parasuraman et al. (1988), these ten dimensions were condensed into five viz., tangibles,
reliability, responsiveness, assurance, and empathy. This led to the development of a 22-item
SERVQUAL scale for measuring service quality. According to the SERVQUAL scale,
service quality can be measured by identifying the gaps between customers’ expectations of
the service to be rendered and their perceptions of the actual performance of the service.
Since most insurance companies are not adequately equipped to help their agents deal with
customer centered problems CRM insurance enables insurance organizations to survive in a
tough economic climate by using the data the insurance company has on the existing
customers and then use it to increase the level of profitability. It manages to enhance customer
relationships based on customer's unique requirements. CRM enables customers themselves to
do research on products, have answers to their questions etc. In addition to this policyholders
can check their claim status, change their account information, submit complaints etc. Insurers

12
find that CRM is assisting them in their marketing efforts as well through a comprehensive
understanding of the client base. CRM aids the insurance companies by ensuring that
campaigns are more affective.
Insurance is basically a customer-focused concept selling business where a policy is being
sold to the customer through appropriate channel of distribution. In the present days, agents
and banks are the two widely and important source of distribution to sell Insurance
Products. Banc assurance was a completely unknown insurance distribution channel in India
when the insurance sector opened up a decade ago. Today, it is expected to generate 40 per
cent of private insurers‟ premium income by 2012, which is significantly higher than the
current 25 per cent to 28 per cent. The shape of the Insurance Industry is being changed by
developments in distribution. It is the distributor who makes the differences in terms of
product quality, customer services in terms of after-sale and claim settlement. Multi-channel
distribution and marketing of insurance products will be the smart strategy for the Indian
market. The size of the country, a diverse set of people combined with problems of
connectivity in rural areas, makes insurance selling in India a very difficult proposition. Life
insurance companies require immense distribution strength and tremendous manpower to
reach out to such a huge customer base. Huge uninsured Indian market offers abundance
future scope for the growth and expansion of banc assurance.
Anuja Banerjee (2009) in her article studied the concept of Banc assurance and its role in
Insurance Industry. Banc assurance means selling insurance products by banks through their
distribution channels has become one of the major Para-banking activities of the banks. If
marketing of insurance products by banks is done efficiently and ethically, than it ensures a
win- win situation for all parties concerned, the bank, the insurance company as well as the
customer. There is a large potential and future development of Banc assurance in India and
many Insurers finding it as a attractive and profitable form of distribution channel for
distribution of their products.
Andhra Business Bureau (April 2010) in an article titled “Banc assurance to touch 40
percent of premium income by 2012”. Based on Towers Watson India Banc assurance
Benchmarking survey 2009-10, it is expected that that banc assurance would generate 40 per
cent of private insurers‟ premium income by 2012, Bright prospects for bank distribution in
India, given the impressive branch banking architecture that reaches every part of the country
and touches every economic segment of the population.
Gupta. M May (2005), published in monthly Insurance World Magazine, “Banc assurance:
The Buzzword in Insurance”, has clearly highlights significance of banc assurance for

13
Insurance Industry in India and strategies to popularize the tool for betterment of Indian
economy. Jay Narayan in IRDA Journal October 2008, Volume VI, No. 10, published an
article which emphasis on role of Intermediaries that has a key role to play in the
success of Insurance Business. Selling of life Insurance products largely depends on the skill
and efficiency of the distributor. The role of agent is very vital as compare to other forms of
marketing channels like brokers, corporate agents and banc assurance etc. Banc assurance
emerging as a new form of distribution channel where banks performed role of intermediary
and sell policies directly to the customers.
Kumar (2006),“Banc assurance-Opportunities and Challenges in India”, First Edition,
Hyderabad ICFAI publication has clearly mentioned in his book that how banc assurance will
be beneficial for banks, insurers and customers and also present challenges and opportunities
of banc assurance in India. He identified cultural differences between banks and insurance
companies could pose a major challenge to the growth of banc assurance. Large customer
base and people trust on bank is the main opportunity for the banks as a distribution channel
for insurance companies.
M. Rajkumari (2007) in the paper titled “A Study on Customers' Preference towards
Insurance Services and Banc assurance” examined the awareness, satisfaction and preferences
of customers towards various Insurance services and banc assurance. The study has been
undertaken by the researcher in order to identify the customer's attitude towards purchase of
insurance products and also their knowledge on the banc assurance formats available through
banks. He also gave suggestions to improve customer awareness on banc assurance and
performance of banks in selling insurance policies.
Pandey. N (2008) in his Dissertation report titled “Banc assurance as a strategic
management tool” has explained the present status of banc assurance and how it is gaining
world- wide acceptance and why in an Indian Insurance Industry it is seeing [as a strategic
management tool.
S Krishnamurthy, S V Mony, Nani Jhaveri, Sandeep Bakhshi, Ramesh Bhat and M R
Dixit (2005), in the paper titled, “Insurance Industry in India: Structure, Performance and
Future Challenges”, clearly explained the status and growth of Indian Insurance Industry after
liberalization and also presents future challenges and opportunities linked with the Insurance.
Insurance is the backbone of country’s risk management system and influence growth of an
economy in several ways. Penetration of Insurance largely depends on availability of
Insurance products, insurance awareness and quality of services. The future growth of this
sector will depend on how effectively the insurers are meeting the expectations of their

14
customers and able to change the perceptions of the Indian consumers and make them aware
of the insurable risks. The paper has also drawn attention on emerging structure, role of banc
assurance, agents and customer services in the success of life insurance business.
The giant public sector life insurance company in the study area with their thick
infrastructure facilities and network of branches enjoyed a monopoly status in spite of the
competition with private players on the basis of their service quality. The opinion survey with
the policyholders also brings to the fore that the LIC has served them well in regard to
dissemination of product knowledge, issue of policies, after sales service before and after
claim even though a slight discontent is reported by minority.

1.4 Hypothesis

The study proposes t o v e r i f y the following hypothetical prepositions:

1. In a country like India insurance sector develops as saving channels that
can produce very large amount for the developmental programs of the country.
2. Since life insurance sector has lifelong contacts with people, it acts as a tool
to mobilize savings; functions as financial intermediary and at time also indulge in direct
investment.
3. In developing economies life insurance sector plays an important role in
supplying the funds for relatively larger projects.
4. In our country the opening up of private sector for insurance companies
may result into cut-throat competition but the balance will remain undisturbed. The quality
of insurance will not get affected and the existing Indian companies will not loose revenue
in absolute numbers.
Despite the threat posed by private players, the trend towards liberalizing the insurance
industry is now irreversible.

15
 CHAPTER II
2.1 Review of Literature

Mishra and Das (1977) highlighted that insurance is an essential service, which a
welfare State must provide to its people and the State must assure the responsibility of
rendering this service to one and all. Anurag (2000) suggested that life insurance products
could become source of long-term contractual savings. Sonig (2001) has observed that
many developing countries also fear that subsidiaries of foreign companies may transfer
much of the premium income back to their head-quarters, a fear which was an important
motive for the establishment of domestic companies. Anuroop Singh (2000) pointed out that
“Experience in Life Insurance business in other markets has shown that actual investment in
a three to five year span is normally at least twice the initial equity”. Usha (2004) observed
that under the Section 64 UMH of Insurance Act 1938, IRDA has been conferred the power
to direct payment of claims. But, the IRDA’s, power to adjudicate has very limited scope.
She felt, there is a need to establish a full-fledged grievance redressal at the Centre as well
as the States to look into the problem. Meder (2001) observed that deregulation will make
the insurance market too competitive, resulting in rates that may not be sustainable.
According to an observation made by UNCTAD in (1993) the opening of markets to foreign
companies would hardly bring about better services and/or prices for domestic consumers,
as in smaller insurance markets there is a high probability that strong foreign insurers may
enjoy a dominant market position. The initial low premium rates offered to penetrate the
market may soon give way to oligopolistic or monopolistic pricing, and consumers may not
be
Better than before. With regards to regulation of insurance sector Ansari (2000)
observed that the regulatory approach being charted out is forward looking consultative,
consistent and in line with international best practices. Bodla and Garg (2003) in their work
on insurance procedures identified the problems of insurance companies in settling the
death claim. Palande and Shah (2003) gave the overall problems relating to early claim
settlement by LIC of India. Sandhya Rani Mahapatra and Sovan Kumar Patnaik (2007)
observed that through the investment the LIC has been providing solid support to social
sector activities like housing, electrification, drinking water etc.

16
 2.2 Statement of Problem

It can be seen that insurance in India has had a long and chequered history. It had its
roots in the British regime and continued with the practices developed then; keeping pace
with the changing times is a major challenge for the industry. On the one hand, the industry
grew enormously, but on the other, its spread was limited to certain areas and to certain
sections. With the result that a large mass of people remains bereft of insurance cover. In the
absence of effective control, certain malpractices crept into the business which was,
therefore, nationalized. But even in the nationalized set-up, certain shortcomings cropped up
which persuaded the govt. to favour liberalization and introduction of competition.

Since the early fifties or thereafter the developing countries started central planning as a
tool to speed up the growth processes in the economy. In the initial stages the govt.
intervened through strict controls to foster developments in all sectors including insurance
but after its initial success the flaws and drawbacks of centralized planning and
interventionist strategy surfaced, and over period of time, there was a swing in policy
toward liberalization. This ushered in era of reforms in all sectors in most countries of the
worlds. India included, with the main objective of accelerating the pace of developments.

In India, where the state sector had become the mainstay of the economy, this process
was unfortunately confined mostly to the manufacturing sector. Some changes no doubt
were introduced in two sub-segments of the services sector, viz, the banking and stock
markets, but precious little in insurance. Naturally, there was a
general expectation that in the insurance industry too, competition would be promoted,
if full privatization was not possible.

The report of the Committee on Reforms in the Insurance sector initiated the debate in
1994 with regard to the reforms in that sector. After its recommendations were accepted by
the Govt. in principle, change became imperative and implied structural reforms, change in
procedures and practices and most importantly, attitudinal change, disturbance in
established inter-relationships among different players, and change in the structure of
power centers. For the public sector, these became sensitive issue and involved questions of
delegation of authority, dismantling of artificial control, barriers etc. However, even if
change meant offending some vested interests, whichever instruments were likely to
produce the desired result, were the ones which India also had to adopt. Deregulation,
globalization and privatization are the routes that were found to have been successful in

17
many parts of the world. Accordingly, India too, has opted for these routes.

Of course, it is difficult to visualize an economy which is a purely market economy or a

controlled economy. Unlike in the pre- liberalization era when all decisions were made by
the Govt., they are now to be left to the market. However, markets are never so clearly
demarcated where either it is a controlled economy or it is a market-determined economy.
All economies have elements of both market and command. In the exercise of restructuring
too, the emerging economy will be marked by elements and characteristics of a market as
well as a command economy.
Apart from ideological considerations, on a more mundane and practical level, there are
other drivers of change such as the following-better spread of education and greater
financial knowledge, rapid development of information and communication technologies;
changing realities of globalization, liberalization, deregulation, mergers and acquisitions; a
large number of participants in the market; shrinking profit margins in the public sector
mould; the availability of new products; consumer pressure of efficiency and performance;
demand for larger cover for the common man and the weaker section; need for training and
research in insurance; cross-border financial services; and at the same time, need for
regulation of a different kind.

As far as India is concerned, some of the important factors leading to opening up of this
sector domestically and externally can be listed as follows:
 The global context.

 India’s initiatives in other sectors.

 Strengths and weaknesses.

 Dismantling restrictive barriers.

 Positive effects of competition.

 Benefits of globalization.

 Need for larger resources for infrastructure development.

 Need to spread insurance cover wider.

 Limited choice available to the customers.

 Competition favored by the customers.

18
 Insurance is a business of large numbers and generates huge amounts of funds overtime,
making its financial muscle very strong.
These funds arise out of policyholder’s funds in the case of life insurance, and technical
and free reserves in the non-life segment. The time lag between the procurement of
premium and the payment of claim provides an interval during which the funds can be
deployed to generate income. The power of the sector is evident from the fact that insurance
companies are among the largest institutional investors in the world. Assets managed by
insurance companies are estimated to account for over 40 percent of the world’s top 100
asset managers. In view of this fact, the investment function has a crucial role to play.

In life insurance although there was no element of compulsion to buy insurance,

whoever needed it had only one supplier to fall back upon. Therefore, the market network
of Indian insurers though extensive, remained weak in terms of efforts.

With the insurance industry in India shedding its monopolistic character, its market
dynamics are changing fast. The expected active presence of even more players, besides
those who have already entered the scene, will have a tremendous impact on the marketing
policies of all players. Marketing is now emerging as a crucial function and will, henceforth,
have to be founded on sound and substantial market research.

By its very character, the attention of the service industry has primarily to be centered
on marketing and customer service. Such a strategy cannot be formulated in isolation and all
the major elements of the organisation, viz, structure, systems, processes, staff, skills, and
managerial styles, have to be taken into account while finalizing it. Other consideration that
are influencing the strategy include the following- identification of the customer, his need,
the features of a
product or a service that he values; and the extent to which he is willing to pay for those
features. In the initial years of operation, the strategy would be to emphasize brand building,
customer education, customer segmentation, and product design/packaging.

Unless the nationalized insurance entities reform their marketing set-up and strategies,
flight of business, especially in the non-life sector cannot be totally ruled out. The areas of
their weakness are providing opportunities for the new players, and hence it is important for
the industry in the public sector to pay special attention to these aspects. Corporate clients,
for obvious reasons, already extract the best service and discounts, but medium and small
industries and individuals, who feel neglected, will surely look for better service and new

19
products. Unfortunately, despite these clear signals, no significant improvement has been
noticed in the nationalized sector.

In this sector, market considerations will dictate even structural changes. Most of the
present policies, procedures, practices pertaining to marketing were borrowed from the
West. Many of the covers are also modeled on the pattern of products available in the
U.K. However, in the changing market conditions, the Indian industry will
be compelled to develop its own models, incorporating sufficient flexibility.

The marketing of insurance has some unique features. It has to identify uncertainties in
the lives of individuals and groups and in the operations of an economic system and offer
suitable insurance covers for them. The requirements of different groups of insurance
seekers will be different. Thus, a couple with a dual income because both
husband and wife are working, and have grown up children has significantly different
insurance needs from those of a young couple just starting out in life. Individuals and
families need covers to sustain their standard of living upon death or disablement of the
breadwinner. They may also require insurance linked saving with reasonable return to take
care of their consumer needs, old age and some periods of uncertainly in their lives. Social
regulations require employers to secure the lives of their employees by obtaining group life
insurance covers for them.

20
 2.3 Objectives of The Study

The present study is an attempt to analyze contributions of LIC for socio economic
development in India in the era of economic reform. The dimensions of these broad
objectives are:

i. To discuss the interface between insurance and human welfare.

ii. To examine the growth and diversity of LIC during the period of study.

iii. To assess the overall working and performance of LIC.

iv. To analyze the contribution of LIC to social

sector development in India.

v. To make an appraisal of different insurance plans undertaken by LIC in

order to benefit the people living below poverty line.

vi. To examine the role of agents in mobilizing funds for LIC particularly

in the rural sector.

vii. To study the important provisions of IRDA Act in view of the socio-

economic development of the people.

2.4 Significance of the Study

The scope of the study covers the role of LIC to develop the components of social
sectors like education, health, electricity, water supply development etc, in India. The role
of LIC in the economic development like, capital formation, contribution to GDP,
investment pattern etc has also been covered. In addition the analysis of the growth,
development, investment pattern and various activities of LIC also come within the scope of
the work. The territorial coverage has been taken as the country as a whole, because specific
data relating to particular zone, Divisions and Branches are not available. The period of
study spreads over last one decade from 1997 to 2007.

21
 CHAPTER III
3.1 The IRDA Act, 1999

The IRDA Act 1999 was passed, by Parliament in Dec. 1999 by which the Insurance Act
1938 and Life Insurance Corporation Act, 1956 and General Insurance Business Act, 1972
were amended to remove the exclusive privilege of nationalized insurance companies to
transact life

and general insurance business and allow for entry of private sector players in the
insurance sector. The Act also provided for the setting up of a statutory regulatory authority
to regulate, promote and insure orderly growth of insurance industry.
1. The IRDA has been established on 19th April, 2000. The authority has made
regulations in all major areas of operation in insurance industry.
2. The Insurance Act, 1938 allows for only Indian insurance companies
registered under the Companies Act, 1956 to transact insurance business in India after
registration with the IRDA.
3. It is expected that the entry of co-operative insurance sector would increase the
insurance coverage especially in the rural areas.
Insurance Bill 2002 inter-alia contains provisions relating to payment of commission and
fee for insurance intermediaries allowing flexibility qualification for corporate agent.
Flexibility mode of payment of premium through credit card, smart card or internet etc.
IRDA opened the market in August 2000 with the invitation for application for registration.
Foreign companies were allowed ownership upto 26%.
Even prior to the IRDA Act a number of multinational companies had begun exploring
the possibility of setting up operation in India in anticipation of the deregulation of the
industry. Certain Indian companies were also keen to enter the insurance market and
themselves seeking international partners the authority has been empowered under section 26
of the IRDA Act to make regulation in consultation with the insurance advisory committee,
consequently following important regulation related to life insurance come into force for the
proper implementation of the IRDA Act, 1999. Different regulation from IRDA Act:
a) IRDA (Registration of Insurance Company’s Regulation, 2000).

b) IRDA (Insurance, Advertisement and Disclosure Regulation,

2000).

22
 c) IRDA (Licensing of Insurance Agent Regulation 2000).

d) IRDA (Obligation of Insurers of Rural-Social Sector Regulation, 2000).

e) IRDA (Life Insurance and Reinsurance Regulation Act, 2000).

Composition of Authority

The Authority shall consist of the following members namely:

a. A Chairperson;

b. Not more than five whole-time members;

c. Not more than four part-time members.

To be appointed by the Central Government from amongst persons of ability, integrity

and standing who have knowledge or experience in life insurance, general insurance,
actuarial science, finance, economic, law, accountancy, administration or any discipline
which would, in the opinion of the Central Government, be useful to the Authority.

Provided that the Central Government shall, while appointing the chairperson and the
whole-time members, ensure that at least the person is having knowledge or experience in
life insurance, general insurance or actuarial respectively.
Main Provisions of IRDA Act

Preamble of IRDA Act, 1999 read. “An Act to provide for the establishment of an
authority to protect the interests of holders of insurance policies, to regulate, promote and
ensure orderly growth of the insurance industry and for matters connected therewith and
incidental there to”. Sections 14 of IRDA Act, lays the duties, powers and function of the
authority. The power and functions of the authority shall include the following.

a. Issue to the applicant a certificate of registration, to review, modify,

withdraw, suspend or cancel such registration.

b. To protect the interest of policyholders in all matters concerning

nomination of policy, surrender value of policy, insurable interest, and settlement of
insurance claims, other term and conditions of contract of insurance.

23
 c. Specifying requisite qualification and practical training
for insurance intermediary and agents.

d. Specifying code of conduct for surveyor and loss assessors.

e. Promoting deficiency in the conduct of insurance business.

f. Promoting efficiency in the conduct of insurance business.

g. Promoting and regulating professional regulation connected with the

insurance and reinsurance business.

h. Specifying the form and manner in which books of accounts will be

maintained and statement of accounts rendered by insurer and insurance intermediaries.

i. Adjudication of disputes between insurers and intermediaries. Specifying

the percentage of life insurance and general business to be undertaken by the insurers in
rural or social sectors, etc.

j. Section 25 provides that Insurance Advisory Committee will be

constituted and shall consist of not more than 25 members.

k. Section 26 provides that authority may in consultation with insurance

advisory committee make regulation consistent with this Act and the rules made there under
to carry out the purpose of this Act.

l. Section 29 seeks amendment in certain provisions of Insurance Act, 1938

in the manner as set out in first schedule. The amendment to the insurance Act is
consequential in order to empower IRDA to effectively regulate, promote, and insure
orderly growth of the insurance industry.

m. Section 30 and 31 seeks to amend LIC Act, 1956 and GIC Act 1972.

The role of IRDA in the present liberalized market is such that it has to regulate the
business of the insurance companies to ensure accelerated and balanced development of
insurance market. While protecting the right of the policy holders and by providing equal
opportunities to the insurers, agents, brokers and other intermediaries. The IRDA must
formulate the accounting principles to be adopted by the private sectors. The IRDA also
hopes to promote its product on the internet without having to be supplemented with the

24
paper work. This could only be possible with the major amendments in the insurance Act of
1938. This Act lays down certain operating guidelines which makes its compulsory for the
insurance company to follow there guidelines in order to make
The contract legally valid. Section 64 V.B. which states that the premium must be
received in advance, needs some amendments to make way for payment through credit
cards. Another provision relates to the affixing of stamps on the policy in order to make the
contract valid in the court of law the stamps should be affix on it as per the present
regulation. This regulation also needs relaxation if the transactions are to be carried out on
the net.

How the insurance companies are equipping themselves to cope up with these
developments is yet to be seen and there worth will be soon put to test. It is high time that
these companies review their marketing strategies, budget allocation, sales target, staff
training adopting sophisticated technology, office automation in order to compete with their
counter parts emerging in the scenario. It is very important to set goals for the new
millennium in such a fashion that it does not allow the new entrants to lure the old
customers with their baits.

It is possible for India to push its share in the world insurance market which has
stagnated around 0.21 percent for many years (as against 4.5 percent total share of the
developing third worlds). According to the IRDA, in the year 2000, the share of India in the
world market, both for life and non-life insurance was a mere 0.34 percent as against
China’s share of 0.67 percent. The vast potential is waiting to be tapped. How for the Indian
players will take advantage of the same is to be seen. Given the political will, and some
effort, it should not be too difficult to derive the full benefits of the emerging situation.
Privatizing Insurance Sector

Recently, the government of India permitted private companies of foreign countries with
Indian partner for doing life insurance business under the rules and regulations of insurance
Regulatory and Development Authority (IRDA). One of the reasons and why insurance
sector is opened for the private players is that in order to cover this huge distance India
needs many more players. That is the justification for opening up insurance to the private
sector. Despite so many life and non-life insurance companies functioning in India, it still
has a long way to go.
Major Private life insurance companies, which entered the Indian market, are given in

25
table.

Table

Pvt. Life Insurance Companies with Foreign Partners

S. Name Name of Name of Country

No. Indian Partner Foreign Insurance
Co.
1. ICICI Prudential Life I.C.I.C.I Prudential U.K.
Insurance Co. td.
2. H.D.F.C Standard Life H.D.F.C Standard Life U.K.
Insurance Co. Ltd.
3. Birla Sun Life Aditya Birla Sunlife Canada
Insurance Group
Co. Ltd.
4. Om Kotak Mahindra Kotak Old mutual South
Life Insurance Co. Ltd. Mahindra Africa
5. Max- AIG Life Max India Old New U.S.A.
Insurance York
Co. Ltd. Life
6. Tata AIG Life Tata Group A.I.G U.S.A.
Insurance
Co. Ltd.
7. S.B.I Life Insurance State Bank of Cardiff France
Co. Ltd. India
8. ALIANZ Bajaj Life Bajaj Auto Allianz German
Insurance Co. Ltd.
9. ING- VYSYA Life Vysya Bank ING Group Netherlan
Insurance Co. Ltd. GMR Group ds
10. AVIVA a Life Daubour C.G No. O U.K.
Insurance India
Co. Ltd.

26
11. AMP Sanmar Sanmar Amp Australia
Assurance Group
Co. Ltd.
12. Met Life Insurance M.Palljonji Pvt. Matro U.S.A.
Co. Ltd. Co. Policita
life ltd. J. and Bank Ltd.

27
 CHAPTER IV

4.1 Findings and Suggestions

Government’s Reluctance

The major beneficiary in the mandated regime was the government, which had an
assured access to low-cost funds for its use. Through the insurers, the government was able
to garner and deploy substantial amounts of funds for infrastructure development.
Obviously it is most reluctant to give up its control on this dependable source. The demand
for funds for this purpose is ever increasing and in the present financial problems faced by
most developing countries, its importance in the financial services sector cannot be
overstated. In fact, it is not just in the developing world, but even in advanced nations that a
large proportion of funds for infrastructure development are drawn from the insurance
sector. Therefore, mobilization and proper utilization of such resources have to be
encouraged and yet strictly monitored by the government.

Another important consideration is that the life and non-life insurance companies have
been paying large amounts to the government by way of a portion of actuarial surplus in the
case of the LIC and dividends by the non-life companies. However, since the government
increasingly needs more money for the various development programmes, it naturally was
not in a hurry to give up its hold over such large funds.

However, the government, which expected the other sectors of the economy to adjust to
the changed circumstances, in turn, had also to accept the consequences thereof on its own
finances. As a result, recently the element of discretion with the insurers has been enlarged
to the extent possible. It is hoped that in times to come, there could be further relaxations.

While there is no doubt that these funds did contribute substantially to national
development, a better method would have been to allow the public sector companies to
charge market rates for these investments, which would have improved their bottom line.
The subsidy element in respect of socially oriented schemes which were undertaken at the
behest of the government should have been passed on to the intended beneficiaries directly
from the government budget. This would, on the one hand, make the companies more
accountable for their performance and on the other, introduce a much needed transparency
in all such transactions. This would have also meant greater accountability in respect of
individual schemes.

28
 LALGI and IRDP beneficiaries’ schemes, in the case of the LIC, and PASS and HUT in
the case of the general insurance companies, are purely welfare schemes meant to provide
relief to the affected persons and do not involve any element of insurance. They should,
therefore, as suggested by the Malhotra Committee, be handled by the concerned
government department. Somehow, that recommendation has not been acted upon.

IRDA Prescriptions

In August 2000, the IRDA came out with regulations for the investment of insurance
funds. These were revised subsequently form time to time. These regulations apply equally
to all the entities and the private firms are also obliged to invest their funds in the social and
physical infrastructure. There could be some reservations in the minds of the shareholders
of the private companies on this account because to that extent, there will be limitations on
the profitability of the companies. It is inevitable to ensure a level playing field that the
same set of rules should to apply to both for private and public entities alike. For the same
reason, government companies alone should not be burdened with social and other similar
obligations if the private entities are not going to be under an obligation to do the same.

While there cannot be any quarrel with the IRDA regulations, the practical problems
posed cannot be overlooked. For example, they mandate an investment of not less than 15
per cent of the controlled fund in the infrastructure and rural/social sectors. Considering the
size of the Life Fund of the LIC, this means an investment of around 300 billion. The
difficulty is that in the current recessionary situation in the country, enough avenues for
such investment are not available even if the LIC is willing to invest. They can, at best, find
worthwhile projects which will absorb barely Rs 40 to 50 billion.

The difficulty is compounded by the fact that only the bonds issued by the government
or otherwise rated as AA by an independent rating agency would qualify as approved
investment. Most of the infrastructure projects are implemented by new companies which
obviously cannot have a proven track record. They would not have AA rating, which means
they would not qualify for investment. In such a situation, these bonds will not be useful as
instruments of investment.

The IRDA requires a balance to be struck between infrastructure and social sectors. Its
implication is that for social structure alone, the investment will have to be of the order of

29
Rs 10 billion or thereabouts which is impossible.

Many infrastructure projects with foreign collaboration are implemented through private
limited companies. But the law restricts investment in private limited companies, which
means investments in such infrastructure would not qualify for being included in the
statutory category and hence there may be a hesitation on the part of the insurance
companies to consider such investments. In other words, a part of the investible funds
cannot flow to infrastructure projects even when projects are available.

As far as the social sector is concerned also, there is a practical problem in meeting the
legal requirements. The beneficiaries under this category are mostly individuals to whom,
obviously, the insurance companies cannot lend. In these circumstances, the companies
would find it extremely difficult to comply with the requirements even when they are keen,
and hence would get branded as defaulters on this count.

The IRDA will have to give serious thought to this ground reality and find a practicable
solution. One way out would be for the regulator to allow insurance companies to lend to
rural organizations by way of refinancing and that should be accepted as an investment in
the social sector.

There are two aspects of quality of investment viz. ‘approved investment’ and ‘rating of
investment. The former is easily defined and presumably takes care of the safety element.
Rating of investment is also from the point of view of safety and does give some comfort to
the investors. The problem is that the rating can change from time to time and in case it is
downgraded after the investment is actually made, it is very difficult for the insurer to
offload it on the market. To that extent, the said investment may not strictly conform to the
regulations in the subsequent year.

A restrictive policy severely constrained the utilization of funds of the LIC and the four
general insurance companies, who had to forego an opportunity of investing them in better
paying financial instruments and were compelled to put them in the low-paying government
securities which affected their profitability. The complaint was that such directed
investment of funds, mostly at below market rates of interest, was excessive and yet the
companies were held responsible for not being able to generate a large enough surplus
through investment operations. Excessive regulation is costly and in the long run, the
consumer bears the cost of regulation.

30
 Of course, the assumption here is that the companies themselves are very keen to
exercise much discretion in this regard. At least in the case of nationalized units, this is not
fully substantiated, as can be inferred from the fact that they preferred to invest even the
funds that were free for their discretion, mostly in government securities only. Though low-
paying, that was the safest strategy for them since no accusing finger could be pointed at
them. As long-term players, they hold the securities to maturity and do not need to provide
for market fluctuations. In that sense, not much of a judgment about the desirability of
investing in that instrument is involved.

It is contended that if overseas investment by Indian insurance and pension

companies/funds were to be allowed, that could provide the benefit of market
diversification. Currently, this choice does not exist and the policyholders/pensioners have
perhaps lost out as a result. There are strong pros and cons of this argument and an
unequivocal verdict is not possible. On the one hand, it is possible to contend that Indian
policyholders/investors were deprived of a share in the growth of the western equity market.
It could also be averred that there is a downside risk as well, because with greater global
integration, risks in one country could easily be passed on to another.

The past history of movement of Indian currency against major hard currencies is only
in one direction-downward. The overall trend of the equity market in India in the nineties
has been more or less flat while the equity markets in the UK and the USA gained over
two and a half times in that period. In such a case, the argument is that it is possible that
certain benefits would have occurred to the Indian insurers if they had been allowed to
invest in equities the UK or the USA in the nineties.

It is true that the new money market instruments like currency swap could have
minimized such risks arising due to market volatilities/fluctuation. However, that would still
be a matter of chance. It is possible to argue that viewed purely form the consumers’
interest, overseas investment by institutional investors, though not entirely free of some
problems, should be good in the long run. Yet, because of the risks involved, the
government has to be cautious in allowing such transactions. In any case, it is difficult to
jump to conclusions one way or the other.
In a sense, regulation of investments makes both the regulator and the investment manager
responsible for the proper management of the investment portfolio. For this, the regulator has
to work closely with the industry. The point is whether both would be able to act in concert
with each other.
31
 4.2 Data Collection, Result and Interpretation

(a) Staff Strength

The number of employees of the Corporation as on 31.03.2018 is 1,11,979 as against

1,15,394 at the end of the previous financial year.

(b) Employees Relations

Cordial and harmonious relations amongst employees were maintained throughout the year
and the morale of the work force was sustained to combat the challenges being faced by the
industry.

(c) Empowerment of Women

At every stage in the Corporation, women officers/employees have contributed

significantly. The strength of women employees in the various categories as on 31.03.2018 is
as under:

Catego Total Number Female employees

Class-I Officers 32,803 7,041

Development Officers 22,830 1,148
Class III/IV employees 56,346 16,321
Total 1,11,979 24,510

In the Corporation, Committees for prevention of sexual harassment of women at

workplace are in place at Central Office, Zonal Office and Divisional Office level.

(d) Reservation – National Policy Implementation: -

1. Scheduled Castes, Scheduled Tribes and Other Backward Classes.

It is the endeavour of the Corporation to implement the instructions related to all

reservation matters of SCs/STs/OBCs issued by Government of India and to provide
reservation in recruitment and promotions in accordance with the provisions.

In order to discuss issues related to reservation policy and to have effective redressal of
the grievances of SC/ST/OBC/ XSM/PWD employees, Welfare Cells are actively functioning

32
at Central Office, Zonal Office and Divisional Office levels. Chief Liaison Officers have been
appointed for SC/ST/PWD/XSM employees and separately for OBC employees at Central
Office level. Zonal Liaison Officers for SC/ST/PWD/XSM and OBC employees separately
have been designated in all the eight Zones of the Corporation. Periodical meetings with All
India office bearers of SC/ST Welfare Association/s are organized at Central Office level in
presence of all the Liaison Officers for SC/ST/XSM/PWD and various issues related to
SC/ST employees are discussed during the said meetings. Periodical meeting with All India
office bearers of Welfare Association of OBCs are also held at Central Office.

Central Office has conducted workshops on reservation policies to impart up-to-date

knowledge / latest instructions about the reservation related areas to the officials dealing with
reservation matters, Liaison Officers as well as to the office bearers of SC/ST Welfare
Associations. Pre-promotion/Recruitment training programmes are being conducted at various
levels for desired SC/ST candidates. Pre-recruitment Training was arranged for interested
SC/ST candidates applied for the Post of Apprentice Development Officers.

Liaison Officers as well as the office bearers of SC/ST Welfare Associations are being
nominated by Central Office for training program on reservation matters through the
Government approved Institutes, specialized for organizing such trainings.

2) Persons with Disabilities: -

In accordance with the instructions issued by Government of India and with a view to help
and support rehabilitation of Persons with Disabilities, the Corporation has identified jobs for
recruitment of differently abled (Physically challenged) which include orthopaedically, hearing
and visually handicapped. The total reservation of vacancies relating to jobs/posts identified in
Class-I, III and IV is to the extent of 3%. Reservation in promotion is provided to the cadres of
Record Clerk and Higher Grade Assistants. Monetary benefit such as Conveyance allowance to
Blind, Orthopedically handicapped and Deaf & Dumb employees is also paid as per the
provisions made by the Government of India.

3) Ex-Servicemen: -
The Corporation has provisions for recruitment of Ex-Servicemen as per Government
guidelines.

BUSINESS PLANS FOR 2018-19

33
 During the financial year 2018-19, the corporation has planned for growth in new business
as under:

BUDGET FOR THE FY 2018-19

TOTAL POLICIES (IN CRORE) 2.50
SINGLE PREMIUM (` IN CRORE) 24,000
NON SINGLE PREMIUM (` IN CRORE) 19,000
TOTAL PREMIUM (` IN CRORE) 43,000

SUMMARISED RESULTS

NEW BUSINESS for the year 2017-18 2016-17

(` in cr) (` in cr)
INDIVIDUAL ASSURANCE
Sum Assured/ NCO/ MSB
a) Assurances 532897.48 472947.11
b) Annuities* 0.00 0.00
c) Pension* 562.10 867.73
d) Non Linked Health*** 14959.65 3013.26
e) Linked 796.45 191.18
No. of Policies (in lakh)
a) Assurances 207.27 196.18
b) Annuities 3.64 3.48
c) Pension 0.11 0.17
d) Non Linked Health 2.00 1.30
e) Linked 0.24 0.04
GROUP SCHEMES:
Sum Assured (incl Linked Business) 683601.40 195318.27
Annuities in Payment 789.38 721.09
Consideration for Annuities # 47421.94 46545.87
No. of Schemes:
Group Insurance(incl Linked Business) 26357 23201
Social Security Group Schemes 892 4812
Group Superannuation 229 245

34
No. of lives (in lakh)
Group Insurance (incl Linked Business) 227.99 298.34
Social Security Group Schemes 373.16 229.65
Group Superannuation 4.27 3.75
BUSINESS IN FORCE
At the end of the year ;
INDIVIDUAL INSURANCE
Sum Assured & Bonus/ APA/ MSB
a) Assurances 4985706.55 4635984.8

b) Annuities** 4046.96 2743.04

c) Pension** 2036.48 1899.26
d) Non Linked Health*** 22224.98 9989.01
e) Linked 42823.00 47970.01
No. of Policies (in lakh)
a) Assurances 2823.52 2807.55
b) Annuities 15.04 11.46
c) Pension 15.65 15.89
d) Non Linked Health 4.62 3.89
e) Linked 53.92 66.43
GROUP SCHEMES:
Sum Assured (incl. Linked Business) 1689088.82 1107659.7

Annuities in Payment 6053.71 5267.48

Consideration for Annuities # 276649.71 231563.41
No. of schemes:
Group Insurance (incl. Linked Business) 138013 138105
Group Superannuation 22938 22413
No of lives (in lakhs)
Group Insurance (incl. Linked Business) 1091.95 1072.83
Group Superannuation 86.63 72.91
NCO-Notional Cash Option, APA- Annuity Per Annum, MSB-Major Surgical Benefit

35
 *source Annual Report LIC (2017-2018)

* NCO Value ** APA Value *** Major Surgical Benefit # It represents the amount
available for future annuitisation

Expense of Management

Expenses of Management 2017-18 2016-17

(` in cr) (` in cr)

Commission etc. to Agents 18226.82 16590.07

Salary and other Benefits to Employees 21081.97 20629.37
Other Expenses of Management 9060.42 8315.28

Total 45534.72
48369.21

Other Outgo
Other Outgo (Taxes, transfers to reserves,etc.) 14015.19 11090.06
5% of Valuation Surplus paid to the Central Government 2421.82 2200.33

Total 13290.39
16437.01
Total Outgo 226449.38
262926.05

INVESTMENTS AS AT 31ST MARCH 2018

31-Mar-18 (` in Cr)

36
 Investment in India

I Loan* 1,12,217.85

II Securities, etc. 25,99,594.01

III Money market investments 21,349.25

TOTAL (in India) 27,33,161.11
Investment out of India

I Loan 174.76

II Securities, etc. 3,353.39

III Money market investments 73.10

TOTAL (Outside India) 3,601.25
TOTAL 27,36,762.36
* including Policy Loans & Mortgage Loans

4.3 Conclusion

37
 The main regulations that regulate the life insurance business are the Insurance Act,
1938, the Life Insurance Corporation Act, 1956 and IRDA Act, 1999 and regulations made
thereunder. The Indian Contract Act, 1872, governs most of the aspects of the insurance
contract. Additionally, the Foreign Exchange Management Act, 2000, Income Tax Act,
1961, Indian Stamp Act and the Hindu and Indian Succession Act, 1956 govern some aspects
involved in insurance. This chapter deals with
(i) The complexity of insurance legislation,
(ii) The study of the Insurance Act, 1938, The Life Insurance Corporation Act, 1956,
The IRDA Act, 1999, Taxation of Insurance Companies, different intermediaries in the life
insurance business, Principles of Insurance Law, Role and responsibilities of insurance
brokers under IRDA Act as also the amendments to the Insurance Laws vide the Insurance
Laws (Amendment) Bill, 2008.

4.4 Reference:

1. Palande, P.S. and R.S. Shah (2007), "Insurance in India," Changing

Policies and Emerging Opportunities. A division of Sage Publications
India Pvt. Ltd, New Delhi, pp 299-300.
2. Intelligent Investor, Outlook Money, 2001.

3. Meder, Robert C “Changes in the Global Insurance Market”, Insurance

Chronicle, Aug. 2001, p.26.
4. Mishra, M.N., "Insurance Principles and Practice."
(2005) S.Chand & Co. Ltd. New Delhi, pp.193-194
5. Intelligent Investor, Outlook Money, 2001.

6. Malhotra, R.N. Committee on Reforms in the Insurance Sector, Report,

Govt. of India, Ministry of Finance, New Delhi, January 1994, pp.
1,26,98.
7. Desai, Morarji, Tryst with Trust: The LIC STORY, Statement in
Parliament, LIC of India, Mumbai, Aug 25, 1958, p.102.
8. Vaidyanathan, R. “Investing Insurance Funds,” The Chartered Accountant:
January 2001, p. 29
9. LIC Annual Web Report 2017-2018.

38
 JOURNALS AND PERIODICALS

a. The Insurance Times.

b. Banking Finance.

c. Business India.

d. Yogakshema.

e. Journal of Accounting and Finance.

f. The Chartered Accountant.

g. Vikalpa.

h. The Management Accountant.

i. Business Today.

j. Arthvigyan.

k. Yojana.

NEWS PAPERS

l. The Economic Times.

m. The Financial Express.

n. Business Standard.

o. Times of India.

p. Business world.

WEBSITES

q. www.insuranceinstituteofindia.com

r. www.insure.com

s. www.insweb.com

39
t. www.irda.org

u. www.irdaindia.org

v. www.licindia.com

w. www.123bima.com

x. www.bimaonline.com

y. www.bimaguru.com

z. www.indiastat.com

40
41