A Comparative Study of Life Insurance and Private Insurance Companies

“A COMPARATIVE STUDY OF LIFE INSURANCE AND
PRIVATE INSURANCE COMPANIES”

A project submitted to
University of Mumbai
for partial completion
of the degree of
Master in commerce (semester 4)
Under the faculty of commerce
By
Dhanashree Sanjay More
Under the guidance of
CA Tushar Karanjekar
Rayat Shikshan Sanstha’s Karmaveer Bhaurao Patil College
Vashi, Navi Mumbai
Academic year 2018-2019

“A COMPARATIVE STUDY OF LIFE INSURANCE AND
PRIVATE INSURANCE COMPANIES”
A project submitted to
University of Mumbai
for partial completion
of the degree of
Master in commerce (semester 4)
Under the faculty of commerce
By
Dhanashree Sanjay More
Under the guidance of
CA Tushar Karanjekar
Rayat Shikshan Sanstha’s Karmaveer Bhaurao Patil College
Vashi, Navi Mumbai
Academic year 2018-2019

Acknowledgment
To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimension’s in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project. I would like to thank my Principal, Dr. V. S. Shivankar for providing the
necessary facilities required for completion of the project.
I take this opportunity to thank our coordinator Dr. V. H. Bhoir for his moral support
and guidance. I would also like to express my sincere gratitude towards my project
guide CA Tushar karanjekar Sir Whose guidance and care made the project
successful.
I would like to thank my college library, for have provided various reference Books
and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my parents and peers who supported
me throughout my project.
Declaration by learner
I this undersigned Miss Dhanashree Sanjay More. here by, declare that the work
embodied in this project work title ““A Comparative study of Life insurance
and Private insurance companies” forms my own contribution to the research work
carried out under the guidance of CA Tushar karanjekar Sir is a result of my own research
work and has not been previously submitted to any other university for any other
Degree/Diploma to this or any other University.Whenever reference has been made to
previous works of others, it has been clearly indicated as such and included in the
bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
Name and Signature of the leaner.
Certified by:
Name and Signature of the guiding teacher
Certificate
This is to certify that Miss Dhanashree Sanjay More has worked and duly
completed her Project Work for the of Master In Commerce under the Faculty of
Commerce in the subject of Advance Financial Accounting and her project is entitled “
“A Comparative study of Life insurance and Private insurance companies”under
my supervision .I further certify that entire work has been by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.
It is her own work report by her personal finding and investigations.
Seal of the college
CA Tushar karanjekar
(Name and Signature of guiding teacher)
Date of submission: -
Table of content
Chapter No. Particulars Page no.
1 Introduction of Study 2-37
2 Hypothesis and objective of study 38-39
3 Research Methodology 40-42
4 Data analysis and interpretation 43-62
5 Findings and suggestion 63-69
5.1 Findings 63-64

5.2 Hypothesis testing 65
5.3 Conclusion 66-67
5.4 Bibliography 68-69
1
CHAPTER 1
INTRODUCTION OF STUDY
2
INTRODUCTION OF STUDY:
This study is mainly related to life insurance business in India and privatizarion of
life insurance sector.LIC was monopoly in insurance with the entrance of private
player,the scenario of the insurance business has changed. My study helps to make
comparison between the LIC with the new private life insurance companies on the
basis of quality of services, consumer view point with the respect to their company.
1. CONCEPT OF 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 life
cycle risks - a new source of insecurity which includes the changing demands of
family life, separation, divorce and elderly dependents are tormenting the society.
Risk has become central to one's life. 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 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
3
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
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What is Insurance :
The business of insurance is related to the protection of the economic values of assets.
Every asset has a value. The asset would have been created through the efforts of the
owner. The asset is valuable to the owner, because he expects to get some benefit
from it. The benefit may be an income or some thing else. It is a benefit because it
meets some of his needs. In the case of a factory or a cow, the product generated by is
sold and income generated. In the case of a motor car, it provides comfort and
convenience in transportation. There is no direct income.
Every asset is expected to last for a certain period of time during which it will
perform. After that, the benefit may not be available. There is a life-time for a
machine in a factory or a cow or a motor car. None of them will last for ever. The
owner is aware of this and he can so manage his affairs that by the end of that period
or life-time, a substitute is made available. Thus, he makes sure that the value or
income is not lost. However, the asset may get lost earlier. An accident or some other
unfortunate event may destroy it or make it non-functional. In that case, the owner and
those deriving benefits from there, would be deprived of the benefit and the planned
substitute would not have been ready. There is an adverse or unpleasant situation.
Insurance is a mechanism that helps to reduce the effect of such adverse situations.
Insurance, in law and economics, is a form of risk management primarily used to

hedge against the risk of a contingent loss. Insurance is defined as the equitable
transfer of the risk of a potential loss, from one entity to another, in exchange for a
premium. Insurer, in economics, is the company that sells the insurance. Insurance
rate is a factor used to determine the amount, called the premium, to be charged for a
certain amount of insurance coverage. Risk management, the practice of appraising
and controlling risk, has evolved as a discrete field of study and practice.
5
ORIGIN OF INSURANCE
PRACTICE OF INSURANCE IN INDIA: 1818-1956
It is claimed that insurance was practiced in India even in Vedic times in one form or
the other. The Sanskrit term "Yogakshema" in the Rigveda meant some kind of
insurance, which was practiced by the Aryans in India nearly 3000 years ago.
During the Mughal
period insurance took firm roots. There are even references to the cover against war
risks. Losses due to the passage of royal troops through farms were compensated by
the State as a gesture of goodwill.
The year 1818 is an epoch -making year in the history of our country. The first Life
Insurance Company on India soil appears to have been started in this year. A group of
Europeans pioneered the establishment of the Oriental Life Insurance Society to
afford relief to the distressed relatives of European. The venture was not quite
successful but the company was reformed in 1829.The renewed Company also got
into trouble in 1833 when Agency House of Calcutta, partners of the same, fell. Prince
Dwarkanath Tagore was the only solvent partner & the sole responsibility for
carrying on the institution developed on him. Meanwhile, early in Janury1834, the
Government made up its mind to establish a Public Insurance Company & a
Committee was set up for this purpose .A number of foreign Insurance Companies
then operating in the country viewed this move with alarm. They set up Committees
of their own enquire into their individual affairs. Dwarkanath Tagore, too, had a
Committee appointed to look into the affairs of the Oriental. As a result, another
company was born out of the previous one in the name of "New Oriental Company"
In the reorganization of the "Oriental" in the year 1834, two other gentlemen were
associated. One was Ramtanu Lahiri and the other Rustamjee Cowasjee. The latter
was another prominent figure of the business world. Rustamjee entered insurance
business in 1828, he was already known to the community and the Government as a
wealthy Parsi merchant. Rustamjee's connection with insurance also started with
"Laudable Societies", but he was later on associated with Companies like "Sun Life
Office (1834) ", New Oriental (1835),Universal Life (1835) , New Laudable (1840) ,
and Indian Laudable (1841) . He was also on the Committee of the Union Insurance
6
Company which was formed by a group of five persons. This Company was issuing
policies covering river- risks only. He was intimately connected with the Committee
of Insurance Offices in Calcutta. Rustamjee Cowasjee & Dwarkanath Tagore was
probably the first Indians to join in partnership business with the Europeans & in the
field of insurance they were pioneers on this side of the country.
Apart from Calcutta, several enterprising people in Bombay started in 1823 the
"Bombay Life" Assurance Company. The company went into liquidation soon and
could not revive.
In 1829, the "Madras Equitable "was formed. It finally ceased to function in 1921 due
to financial difficulties after the First World War.
The effort to set up a public insurance company at the government level also went in
vain, mainly from objection of private operators. Majority of the early attempts to
form insurance offices were in the province of Bengal. This was due to its political &
economic importance at that time.
The contribution of Raja Ram Mohan Roy, one of the greatest social reformers of
India, to the development of life insurance is very great. He was deeply concerned
about the sad plight of desperate widows and helpless orphans.
OVERSEAS INSURERS
Initially, when Life Offices were established in large numbers in Britain, some of
them ventured to issue sterling policies to the British residents in India. Premiums
collected here were credited to England largely for British beneficiaries. Business
seems to have been brisk and profitable and was usually under short term policies.
Insurance mortality tables and insufficient mortality data of Englishmen in India
made the premiums heavy-heavier than at home. Insurance was denied to the
"natives" even if they wanted it- for their lives were always considered risky and
7
sometimes valueless. When Indian lives were accepted as a very special case, the
extras charged were still heavier.
Prominent amongst the companies which came to India around this period was the
"Medical Invalid and General" incorporated in London in 1841. As more areas were
annexed and the ruling power, with vested interests in developing trade, took charge ,
the "Medical" extended its area of operation, established large connections, absorbed
the" Agra Life" and in 1835, took over the "New Oriental". P.M. Tate, the then
manager of the "Medical", was a keen businessman, widely liked, influential and
shrewd. With W.F. Ferguson, who was the manager of the "New Oriental" before
amalgamation, he commenced very active operations which were temporarily
affected by the 1857 "Mutiny".
The Universal Life Insurance Company established in England in 1836 opened its
Indian Branch in 1840 and enjoyed a long period of successful operations until it was
taken over by the "North British" in May 1901. Insurance exceeding Rs. 10 crores
were issued in India during this period.
Another English Company operating in India at that time was the Colonial Life
Assurance Company. It was established in 1846 under the auspices of the Standard
Life Assurance Company. The original prospectus of this company declared its
purpose as "extending to the Colonies of Great Britain and to Indian the full benefit
of Life Assurance". It appointed agents with local boards which were first established
on Calcutta, Bombay, Madras and Colombo. Later on this company was taken over
by the "Standard Life" and made valuable contribution to investigations into the
mortality experience of assured lives in India. Eventually it ceased its operations in
India in 1938.
It is difficult to say which was the oldest Life Policy in India, but the oldest known
appears to be one sold by the Royal Insurance (which commenced business in India in
1845) on the life was to Cursetjee Furdonjee on 6th January 1848, no reference to any
earlier policy being available. In the year 1853, the Liver pool and London and Globe
Insurance Company established in England in 1836, commenced business in India.
Sir Charles Forbes was its first agent, succeeded by M/s. Forbes, Forbes and
8
Campbell. It accepted only European lives and commenced insuring Indian lives only
after 1929.This too, was mainly to oblige good agents of the Company for classes
other than life business. The North British and Mercantile was the next company to
appear on the Indian scene.
It started fire insurance business in the year 1861 and life business 1864. The London
Assurance started life business in 1864, limited principally to European lives and
closed down its life department when the Life Assurance Companies Act 1912 made
submission of returns compulsory.
On 3rd December, 1870, seven earnest men of Bombay with just seven rupees for
initial expenses gave shape to a plan of offering insurance to the public without the
risk of ruin and the "Bombay Mutual Life Assurance Society" came into existence.
This was followed by the Oriental Life Assurance Company in1874, the Bharat in
1896 and the Empire of India in 1897.
THE BIRTH OF INDIAN INSURERS:

With the advent of the 20th century, the glorious renaissance of swadeshi days
dawned. At the same time, well- to do Indians realized the potentiality of Indian
Insurance business. 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
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one of the rooms of the Jorasanko House of the great poet Rabindranath Tagore, in
Calcutta. The Indian Mercantile (1907) was started in Bombay, General Assurance
(1908) at Ajmer and the Swadeshi Life (Later Bombay Life) in Bombay in 1908.
The end of the First World War (1914-18) witnessed an influx of insurance
companies in India. Famous Indian business houses started new insurance companies.
Industrial and Prudential Bombay, Western India, Satara, were floated before the war,
but by 1919, companies like Jupiter General, New India, Vulcan Insurance Company
etc. came into being. Pandit K.Santhanam with blessing of Lala Lajpat Rai and Pandit
Motilal Nehru started Laxmi Insurance Co. Similarly, Andhra Insurance was started
in Masulipatnam, with the initiative of stalwarts like Dr. Pattabhi Sitaramaiah. From
political platforms also, national leaders supported this cause. It is duty to every
Indian to support only Indian Insurance. The keynote of our Swaraj is in placing all
our insurance with our Indian companies", said Mahatma Gandhi in his message. "I
hope Indians will realize the importance of patriotism only through Indian insurance
institution", stated Pandit Jawaharlal Nehru. Thus, the cause of Indian insurance
became a national issue. The pursuit to boost Indian insurance represented a crusade
to extricate the Indian economy from foreign domination.
PROGRESS IN INSURANCE BUSINESS
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
10
(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
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INSURANCE ACT, 1938
The Insurance Act, 1938, was the first comprehensive legislation governing not only
life but also non- life branches of insurance to provide strict state control over
insurance business. In sub- sections to dealt with provident companies, mutual offices
and co- operative societies as well.
The silent features of the Act were as follows:

· (A) Constitution of a Department of Insurance under a superintendent vested with
wide powers of supervision and control over all kinds of insurance companies.
· (B) Regulation for the compulsory registration of insurance companies and for filing
of returns of investment and financial conditions.
· (C) Provisions for deposit, to prevent insurers of inadequate financial resources of
speculative concerns for commencing business.
· (D) Provisions that 55% of the net life fund of an Indian or non- Indian insurer should
invested in Indian Government and approved securities with at least 25% in Indian
Government Rupee securities.. All other companies, i.e., foreign companies must
invest 100% of their Indian liabilities in Indian Government and approved securities,
with at least 33.3% Indian Government securities.
· (E) Prohibition of rebating, restriction of commission, licensing of agents etc.
Maximum rates of commission were fixed at 40% of the first premiums and 5% of the
renewal premium in respect of life assurance business. The agent must be licensed, to
improve the status of the profession.
· (F) Periodical valuation of Indian Insurance business of foreign companies and the
business of Indian companies.
· (G) Provision for policyholders' directors, making it possible for the representatives of
policyholders to be on the Board of directors.
(H) Standardization of policy conditions required all companies to file standard forms
and tables of premium approved by an Actuary. Under this requirement, the initial
deposit for life insurance business was raised from Rs. 25000 in Government securities
to Rs. 50000 in cash approved securities, which was subsequently to be raised by
installments to Rs. 2 lakh within a specified time limit.
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Nationalization
THE LIFE INSURANCE CORPORATION OF INDIA: 1956
This was the first step taken towards the nationalization of life insurance business in
India. On 20th January, 1956 all life insurance companies were taken over by 43
nominated custodians. The custodians were experienced senior executives of private
insurance companies, reporting directly to the Finance Ministry. From the word go,
the complex task of running the industry on a permanent basis and continuing the
services to policy holders without interruption were their major concerns. The actual
work of integration had to await legislation. The custodians managed the insurance
companies till 1-09-1956, when Life Insurance Corporation was established under the
general direction and control of the Ministry of Finance.
The Ordinance provided for the transfer of the control of 154 Indian insurers, 16 non
Indian insurers and 75 provident societies. These arrangements were designed to
ensure that no inconvenience whatsoever was caused to the policy holders. With the
Government take over the management aimed towards the evolution of a common
uniform premium rate, policy conditions and service and working procedures and
above all to help promote team spirit.
The corporation, a body corporate shall consist of not more than 15 members
appointed by the Central Government, one of them being appointed by the government
as chairman.
The capital of the corporation was at Rs 5 crore provided by the central government.
INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
13
R.N. Malhotra was formed to evaluate the Indian Insurance industry and
recommended 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 over all
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:
(1) STRUCTURE
 Government stake in the Insurance Companies to be brought down to 50%.
 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
(2) COMPETETION
 Private Companies with minimum paid up capital of Rs.1 bn should be allowed to
enter the industry.
 No Company should deal in both Life and General Insurance through a single
entry.
 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.
(3) REGULATORY BODY
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 The Insurance Act should be changed
 An Insurance Regulatory Body should be set up.
 Controller of Insurance (Currently a part from the Finance Ministry)should be

made independent
(4) INVESMENTS
 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).
(5) CUSTOMER SERVICE

 LIC should pay interest on delays on 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 service and increase
the coverage of insurance industry should opened up to competition. But at the same
time, the committee felt the need 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.
15
.
Liberalization :
OPENING UP OF INSURANCE SECTOR – 1999 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.
The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDA's online service for issue and renewal of licenses to agents.
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 products, which are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has put in a framework
of globally compatible regulations. In the private sector 14 life insurance companies
have been registered.
ENTRY OF PRIVATE COMPANIES

Under the IRDA Act, private companies can now operate in India's insurance industry.
However, they must obtain a license from the IRDA before being permitted to write
business.
To have its license application considered, a domestic private company must be
registered in accordance with the Companies Act of 1956 and have approximately US$
20 million of investment capital. The specific licensing requirements that Private
Indian Companies must fulfill are set forth in the Registration on Indian Insurance
Companies Regulations, published by the IRDA 2000.
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LIFTING OF BARRIERS TO FOREIGN INVESTMENT
The IRDA Act also lifts certain barriers to foreign direct investment in Indian
insurance industry.
Global insurers are now permitted to set up and register a domestic company in order
to write business in India. However, regulations stipulate that they have a capital base
of at least US $ 20 million, and their investment in such company is capped at 26
percent. Thus, to participate in the market, they must form a joint venture with an
Indian partner that is able to invest the remaining funds.
The equity investments limit is the same for global reinsures seeking to write business
in India, but they are required to put up a capital of approximately US$ 45 million in
order to establish a domestic company.
Since the IRDA first enacted these rules, 13 new life insurance companies have
entered the market.
On the other hand, no global reinsurer has established a domestic company. Instead,
most of the top international reinsurance companies operate from their overseas
offices by sharing the reinsurance risks picked up by the GIC. A recent proposal has
been put forward to increase foreign direct investment to 49 percent. In addition,
global companies are pushing for the right to establish branch offices in India. These
changes are likely to substantially increase the presence of international insurers,
reinsurers, and brokers in India.
The IRDA Insurance Brokers Act in India 2002 permitted overseas insurance and
reinsurance brokers to enter the market, but with the same equity cap as that
governing the operations of foreign insurers and reinsurers. Thus, foreign brokers
must also form a joint venture with an Indian partner in order to establish an Indian
broking house.
The 2002 IRDA legislation established four broker categories, one of which brokers
must select when applying for a license:
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1. Category 1A : Direct General Insurance Broker
2. Category 1B : Direct Life Insurance Broker
3. Category 2 : Reinsurance Broker
4. Category 3: Composite Broker
5. Category4: Others, for example Insurance Consultants and Risk Management

Consultants.
Each category has different solvency margins and capital adequacy ratios, and all
categories need to carry professional indemnity insurance at different minimum
levels.
In the years since market liberalization was initiated, the insurance sector has
witnessed some impressive changes. The needs of insurance and reinsurance
buyers have grown; the market is introducing new products to address these needs;
and the services of brokers are now seen as critical to making informed insurance and
reinsurance decisions.
OVERVIEW OF THE CURRENT INSURANCE MARKET
In the years since the IRDA Act initiated market reforms, the insurance sector has
experienced some remarkable changes.
The entry of a large number of Indian and Foreign private companies in life insurance
business has to lead greater choice in terms of products and services. Increased
consumer awareness of the benefits and importance of insurance and reinsurance has
generated many more buyers; and new distribution channels_ among them brokers,
bank assurance, the Internet, and corporate agents_ have provided additional ways of
getting products and services to customers.
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Private insurance companies have to date written a small percentage of business in
this sector during the last three years, but they have ushered in a competitive
environment that has accelerated market growth.
State owned insurers still write the bulk of insurance business, and they have the net
worth required to underwrite large corporate risks without depending almost entirely
on reinsurance support. However, their focus on restructuring is beginning to put them
at a disadvantage against private competitors.
Over the next few years, the share of the market held by the public insurers is
expected to drop substantially, with private companies assuming a growing
percentage of the business written.
At present there are 15 private insurers with two standalone private players and
remaining private-foreign joint venture.
Purpose and Need of Insurance :
Assets are insured, because they are likely to be destroyed through accidental
occurrences. Such possible occurrences are called perils. Fire, floods, breakdowns,
lightening, earthquakes, etc, are perils. If such perils can cause damage to the asset,
we say that the asset is exposed to that risk. Perils are the events. Risks are the
consequential losses or damages. The risk to a owner of a building, because of the
peril of an earthquake, may be a few lakhs or a few crores of rupees, depending on the
cost of the building and the contents in it.
The risk only means that there is a possibility of loss or damage. The damage may or
may not happen. Insurance is done against the contingency that it may happen. There
has to be an uncertainty about the risk. Insurance is relevant only if there are
uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be
insured against. In the case of human being, death is certain, but the time of death is
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uncertain. In the case
of person who is terminally ill, the time of death is not uncertain, though not exactly
known. He cannot be insured.
Insured does not protect the asset. It does not prevent its loss due to peril. The peril
cannot be avoided through insurance. The peril can sometimes be avoided through
better safety and damage control management. Insurance only tries to reduce the
impact of the risk on the owner of the asset and those who depend on that asset. It
only compensates the losses and that too, not fully.
Only economic consequences can be insured. If the loss is not financial, insurance
may not be possible. Example of non-economic losses are love and affection of
parents, leadership of managers, sentimental attachments to family heirlooms,
innovative and creative abilities, etc.
How Insurance Works?
The mechanism of insurance is very simple. People who are exposed to the same risks
come together and agree that, if any one of them suffers a loss, the others will share
the loss and make good to the person who lost. All people who send goods by ship are
exposed to the same risks, which are related to water damage, ship sinking, piracy,
etc. Those owning factories are not exposed to these risks, but they are exposed to
different kinds of risks like, fire, hailstorms, earthquake, lightning, burglary, etc. Like
this, different kinds of risks can be identified and separate groups made, including
those exposed to such risks. By this method, the heavy loss that any one of them may
suffer (all of them may not suffer such losses at the same time) is divided into
bearable small losses by all. In other words, the risk is spread among the community
and the likely big impact on one is reduced to smaller manageable impacts on all.
If a Jumbo Jet with more than 350 passengers crashes, the loss would run into several
crores of rupees. No airline would be able to bear such a loss. It is unlikely that many
Jumbo Jets will crash at same time. If 100 airline companies flying Jumbo Jets, come
20
together into an insurance pool, whenever one of the Jumbo Jets in the pool crashes,
the loss to be borne by each airline would come down to a few lakhs of rupees. Thus,
insurance is a business of sharing .
There are certain principles, which make it possible for insurance to remain a fair
arrangement. The first is that it is difficult for any one individual to bear the
consequences of the risks that he is exposed to. It will become bearable when the
community shares the burden. The second is that the perils should occur in an
accidental manner. Nobody should be in a position to make the risk happen. In other
words, none in the group should set fire to his assets and ask others to share the costs
of damage. This would be taking unfair advantage of an arrangement put into place to
protect people from risks they are exposed to. The occurrence has to be random,
accidental, and not the deliberate creation of the insured person.
The manner in which the loss is to be shared can be determined before-hand. It may
be proportional to the risk that each person is exposed to. This would be indicative of
the benefit he would receive if the peril befell him. The share could be collected from
the members after the loss has occurred or the likely shares may be collected in
advance, at the time of admission to the group. Insurance companies collect in
advance and create a fund from which the losses are paid.
The collection to be made from each person in advance is determined on assumptions.

While it may not be possible to tell beforehand, which person will suffer, it may be
possible to tell, on the basis of past experiences, how many persons, on an average,
may suffer losses. The following two examples explain the above concept of
insurance:
Example 1
In a village, there are 400 houses, each valued at Rs. 20000. Each year, on the
average, 4 houses get burnt, resulting into a total loss of Rs. 80000. If all the 400
owners come together and contribute Rs. 200 each, the common fund would be Rs.
80000. this is enough to pay Rs. 20000 to each of the 4 owners whose houses got
burnt. Thus, the risk of 4 owners is spread over 400 house-owners of the village.
21
Insurance of ‘Human Asset’
A human being is an income generating asset. One s manual labour, professional

skills and business acumen are the assets. This asset also can be lost through
unexpectedly early death or through sickness and disabilities caused by accidents.
Accidents may or may not happen. Death will happen, but the timing is uncertain. If it
happens around the time of
one s retirement, when it could be expected that the income will normally cease, the
person concerned could have made some other arrangements to meet the continuing
needs. But if it happens much earlier when the alternate arrangements are not in place,
there can be losses to the person and dependents. Insurance is necessary to help those
dependent on the income.
A person, who may have made arrangements for his needs after his retirement, also
would need insurance. This is because the arrangements would have been made on the
basis of some expectations like, likely to live for another 15 years, or that children will
look after him. If any of these expectations do not become true, the original
arrangement would become inadequate and there could be difficulties. Living too long
can be as much a problem as dying too young. Both are risks, which need to be
safeguarded against. Insurance takes care.
Insurance of Intangibles :
The concept of insurance has been extended beyond the coverage of tangible assets.
Exporters run risk of losses if the importers in the other country default in payments
or in collecting the goods. They will also suffer heavily due to sudden changes in
currency exchange rates, economic policies or political disturbances in the other
country. These risks are insured. Doctors run the risk of being charged with
negligence and subsequent liability for damages. The amounts in question can be
fairly large, beyond the capacity of individuals to bear. These are insured. Thus,
insurance is extended to intangibles. In some countries, the voice of a singer or the
legs of a dancer may be insured.
22
Types of Insurance :
Any risk that can be quantified can potentially be insured. Specific kinds of risk that
may give rise to claims are known as "perils". An insurance policy will set out in
detail which perils are covered by the policy and which are not.
Below is a (non-exhaustive) list of the many different types of insurance that exist. A
single policy may cover risks in one or more of the categories set forth below. For
example, auto insurance would typically cover both property risk (covering the risk of
theft or damage to the car) and liability risk (covering legal claims from causing an
accident). A homeowner's insurance policy in the U.S. typically includes property
insurance covering damage to the home and the owner's belongings, liability
insurance covering certain legal claims against the owner, and even a small amount of
health insurance for medical expenses of guests who are injured on the owner's
property.
 Automobile insurance known in the UK as motor insurance, is probably the

most common form of insurance and may cover both legal liability claims
against the driver and loss of or damage to the insured's vehicle itself.
Throughout most of the United States an auto insurance policy is required to
legally operate a motor vehicle on public roads.
 In some jurisdictions, bodily injury compensation for automobile accident
victims has been changed to a no-fault system, which reduces or eliminates the
ability to sue for compensation but provides automatic eligibility for benefits.
 Aviation insurance insures against hull, spares, deductible, hull war and
liability risks. Boiler insurance (also known as boiler and machinery insurance
or equipment breakdown insurance) insures against accidental physical
damage to equipment or machinery.
 Builder's risk insurance insures against the risk of physical loss or damage to
property during construction. Builder's risk insurance is typically written on an
"all risk" basis covering damage due to any cause (including the negligence of
the insured) not otherwise expressly excluded.
23
 Business insurance can be any kind of insurance that protects businesses
against risks. Some principal subtypes of business insurance are (a) the various
kinds of professional liability insurance, also called professional indemnity
insurance, which are discussed below under that name; and (b) the business
owners policy (BOP), which bundles into one policy many of the kinds of
coverage that a business owner needs, in a way analogous to how homeowners
insurance bundles the coverage that a homeowner needs.
 Casualty insurance insures against accidents, not necessarily tied to any

specific property. Credit insurance repays some or all of a loan back when
certain things happen to the borrower such as unemployment, disability, or
death. Mortgage insurance (which see below) is a form of credit insurance,
although the name credit insurance more often is used to refer to policies that
cover other kinds of debt.
 Crime insurance insures the policyholder against losses arising from the
criminal acts of third parties. For example, a company can obtain crime
insurance to cover losses arising from theft or embezzlement.
 Crop insurance "Farmers use crop insurance to reduce or manage various risks
associated with growing crops. Such risks include crop loss or damage caused
by weather, hail, drought, frost damage, insects, or disease, for instance."
 Defense Base Act Workers' compensation or DBA Insurance provides

coverage for civilian workers hired by the government to perform contracts
outside the US and Canada. DBA is required for all US citizens, US residents,
US Green Card holders, and all employees or subcontractors hired on
overseas government contracts. Depending on the country, Foreign Nationals
must also be covered under DBA. This coverage typically includes expenses
related to medical treatment and loss of wages, as well as disability and death
benefits. Directors and officers liability insurance protects an organization
(usually a corporation) from costs associated with litigation resulting from
mistakes incurred by directors and officers for which they are liable. In the
industry, it is usually called "D&O" for short. Disability insurance policies
24
provide financial support in the event the policyholder is unable to work
because of disabling illness or injury. It provides monthly support to help pay
such obligations as mortgages and credit cards.
 Total permanent disability insurance provides benefits when a person is

permanently disabled and can no longer work in their profession, often taken
as an adjunct to life insurance.
 Errors and omissions insurance: See "Professional liability insurance" under
"Liability insurance".
 Expatriate insurance provides individuals and organizations operating outside
of their home country with protection for automobiles, property, health,
liability and business pursuits. Financial loss insurance protects individuals
and companies against various financial risks. For example, a business might
purchase cover to protect it from loss of sales if a fire in a factory prevented it
from carrying out its business for a time.
 Insurance might also cover the failure of a creditor to pay money it owes to
the insured. This type of insurance is frequently referred to as "business
interruption insurance." Fidelity bonds and surety bonds are included in this
category, although these products provide a benefit to a third party (the
"obligee") in the event the insured party (usually referred to as the "obligor")
fails to perform its obligations under a contract with the oblige.

 Health insurance policies will often cover the cost of private medical
treatments if the National Health Service in the UK (NHS) or other publicly-
funded health programs do not pay for them. It will often result in quicker
health care where better facilities are available.
 Home insurance or Homeowners insurance: See "Property insurance".
 Liability insurance is a very broad superset that covers legal claims against the
insured. Many types of insurance include an aspect of liability coverage. For
example, a homeowner's insurance policy will normally include liability
coverage which protects the insured in the event of a claim brought by
someone who slips and falls on the property; automobile insurance also
25
includes an aspect of liability insurance that indemnifies against the harm that
a crashing car can cause to others' lives, health, or property. The protection
offered by a liability insurance policy is twofold: a legal defense in the event
of a lawsuit commenced against the policyholder and indemnification
(payment on behalf of the insured) with respect to a settlement or court
verdict. Liability policies typically cover only the negligence of the insured,
and will not apply to results of willful or intentional acts by the insured. o
Environmental liability insurance protects the insured from bodily injury,
property damage and cleanup costs as a result of the dispersal, release or
escape of pollutants. o Professional liability insurance also called professional
indemnity insurance, protects professional practitioners such as architects,
lawyers, doctors, and accountants against potential negligence claims made by
their patients/clients. Professional liability insurance may take on different
names depending on the profession. For example, professional liability
insurance in reference to the medical profession may be called malpractice
insurance. Notaries public may take out errors and omissions insurance
(E&O). Other potential E&O policyholders include, for example, real estate
brokers, home inspectors, appraisers, and website developers.
 Life insurance provides a monetary benefit to a decedent's family or other

designated beneficiary, and may specifically provide for burial, funeral and
other final expenses. Life insurance policies often allow the option of having
the proceeds paid to the beneficiary either in a lump sum cash payment or an
annuity.
 Annuities provide a stream of payments and are generally classified as

insurance because they are issued by insurance companies and regulated as
insurance and require the same kinds of actuarial and investment management
expertise that life insurance requires. Annuities and pensions that pay a
benefit for life are sometimes regarded as insurance against the possibility that
a retiree will outlive his or her financial resources. In that sense, they are the
complement of life insurance and, from an underwriting perspective, are the
mirror image of life insurance.
26
 Locked funds insurance is a little-known hybrid insurance policy jointly
issued by governments and banks. It is used to protect public funds from
tamper by unauthorized parties. In special cases, a government may authorize
its use in protecting semi-private funds which are liable to tamper. The terms
of this type of insurance are usually very strict.
 Marine insurance and marine cargo insurance cover the loss or damage of
ships at sea or on inland waterways, and of the cargo that may be on them.
When the owner of the cargo and the carrier are separate corporations, marine
cargo insurance typically compensates the owner of cargo for losses sustained
from fire, shipwreck, etc., but excludes losses that can be recovered from the
carrier or the carrier's insurance. Many marine insurance underwriters will
include "time element" coverage in such policies, which extends the
indemnity to cover loss
 Pet insurance insures pets against accidents and illnesses - some companies
cover routine/wellness care and burial, as well.
 Political risk insurance can be taken out by businesses with operations in

countries in which There is a risk that revolution or other political conditions
will result in a loss.
 Pollution Insurance A first-party coverage for contamination of insured
property either by external or on-site sources. Coverage for liability to third
parties arising from contamination of air, water or land due to the sudden and
accidental release of hazardous materials from the insured site. The policy
usually covers the costs of cleanup and may include coverage for
 Property insurance provides protection against risks to property, such as fire,
theft or weather damage. This includes specialized forms of insurance such as
fire insurance, flood insurance, earthquake insurance, home insurance, inland
marine insurance or boiler insurance.
 Social insurance can be many things to many people in many countries. But a
summary of its essence is that it is a collection of insurance coverage
27
(including components of life insurance, disability income insurance,
unemployment insurance, health insurance, and others), plus retirement
savings, that mandates participation by all citizens. By forcing everyone in
society to be a policyholder and pay premiums, it ensures that everyone can
become a claimant when or if he/she needs to. Along the way this inevitably
becomes related to other concepts such as the justice system and the welfare
state. This is a large, complicated topic that engenders tremendous debate,
which can be further studied in the following articles (and others):
 Social welfare provision
 Social security
 Social safety net
 National Insurance
 Social Security (United States)
 Social Security debate (United States)
Terrorism insurance provides protection against any loss or damage caused by

terrorist activities. Title insurance provides a guarantee that title to real property is
vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It
is usually issued in conjunction with a search of the public records performed at the
time of a real estate transaction.
Travel insurance is an insurance cover taken by those who travel abroad, which
covers certain losses such as medical expenses, lost of personal belongings, travel
delay, personal liabilities, etc.
28
Advantages of Life Insurance :
Life insurance has no competition from any other business. Many people think that
life insurance is an investment or a means of saving. This is not a correct view. When
a person saves, the amount of funds available at any time is equal to the amount of
money set aside in the past, plus interest. This is so in a fixed deposit in the bank, in
national savings certificates, in mutual funds and all other savings instruments. If the
money is invested in buying shares and stocks, there is the risk of the money being
lost in the fluctuations of the stock market. Even if there is no loss, the available
money at any time is the amount invested plus appreciation. In life insurance,
however, the fund available is not the total of the savings already made (premiums
paid), but the amount one wished to have at the end of the savings period (which is
the next 20 or 30 years). The final fund is secured from the very beginning.
One is paying for it later, out of the savings. One has to pay for it only as long as one
lives or for a lesser period if so chosen. There is no other scheme which provides this
kind of benefit. Therefore life insurance has no substitute.
Even so, a comparison with other forms of savings will show that life insurance has
the following advantages.
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.
There is a certain amount of compulsion to go though the plan of savings. In

otherforms, if one changes the original plan of savings, there is no loss. In insurance,
there is a loss.
Certain cannot claim the life insurance moneys. They can be protected against
attachments by courts. There are tax benefits, both in income tax and in capital gains.
Marketability and liquidity are better. A life insurance policy is property and can be
Transferred or mortgaged. Loans can be raised against the policy.The following
tenets help agents to believe in the benefits of life insurance. Such faith will enhance
their determination to sell and their perseverance.
29
Life insurance is not only the best possible way for family protection. There is no
other way.
Insurance is the only way to safeguard against the unpredictable risks of the future. It
is unavoidable.
The terms of life are hard. The terms of insurance are easy.
The value of human life is far greater than the value of property. Only insurance can
Preserves it.
Life insurance is not surpassed by many other savings or investment instrument, in
terms of security, marketability, stability of value or liquidity.
Insurance, including life insurance, is essential for the conservation of many
businesses, just as it is in the preservation of homes.
Life insurance enhances the existing standards of living. Life insurance helps people
live financially solvent lives.
Life insurance perpetuates life, liberty and the persuit of happiness. Life insurance is
a way of life.
30
The Business of Insurance :
Insurance companies are called insurers. The business of insurance is to (a) bring
together persons with common insurance interests (sharing the same risks), (b) collect
the share or contribution (called premium) from all of them, and (c) pay out
compensation (called claims) to those who suffer. The premium is determined on the
same lines as indicated in the examples above, but with some further refinements.
In India, insurance business is classified primarily as life and non-life or general. Life
insurance includes all risks related to the lives of human beings and General
insurance covers the rest. General insurance has three classifications viz., Fire
(dealing with all fire related risks), Marine (dealing with all transport related risks and
ships) and Miscellaneous (dealing with all others like liability, fidelity, motor crop,
personal accident, etc.). Personal accident and sickness insurance, which are related
to human beings, is classified as non-life in India, but is classified as life , in many
other countries. What is Non-life in India is termed as Property and Casualty in some
other countries.
The premium is based on expectations of the losses. These expectations are based on
studies of occurrences in the past and the use of statistical principles. There is, in
statistics, a law of large numbers . When you toss a coin, the chance of a head or tail
coming up is half. If the coin is tossed 10 times, one cannot be sure that the head will
come up 5 times. If the coin is tossed 1 million times, the number of heads will be
closer to half a million proportionately than in the case of 10. The variation will be
less as a percentage. So also, the larger the numbers (of risks) included in the pool,
the better the chances that the assumptions regarding the probability of the risk
occurring, which is the basis of premium calculation, will be realized in practice. In
order to be amenable to statistical predictions, insurers have to insure large numbers
of risks. Larger the spread of business better is the experience in relation to
expectations.
The business of insurance is nothing but one of sharing. It spreads losses of an

individual over the group of individuals who are exposed to similar risks. People who
suffer loss get relief because their loss is made good. People who do not suffer loss are
31
relieved because they were spared the loss.
32
The insurer is in the position of a trustee as it is managing the common fund, for and
on behalf of the community of policyholders. It has to ensure that nobody is allowed
to take undue advantage of the arrangement. That means that the management of the
insurance business requires care to prevent entry (into the group) of people whose
risks are not of the same kind as well as paying claims on losses that are not
accidental. The decision to allow entry is the process of underwriting of risk.
Underwriting includes assessing the risk, which means, making an evaluation of how
much is the exposure to risk. The premium to be charged depends on this assessment
of the risk. Both underwriting and claim settlements have to be done with great care.
Criticism of Insurance Companies :
Some people believe that modern insurance companies are money-making businesses
which have little interest in insurance. They argue that the purpose of insurance is to
spread risk so the reluctance of insurance companies to take on high-risk cases (e.g.
houses in areas subject to flooding, or young drivers) runs counter to the principle of
insurance. Other criticisms include:
Insurance policies contain too many exclusion clauses. For example, some house
insurance policies do not cover damage to garden walls.
Most insurance companies now use call centre and staff attempt to answer questions
by reading from a script. It is difficult to speak to anybody with expert knowledge.
Role of Insurance in Economic Development :
For economic development, investments are necessary. Investments are made out of
savings. A life insurance company is a major instrument for the mobilization of
savings of people, particularly from the middle and lower income groups. These
savings are channeled into investments for economic growth.
As on 31.3.2002, the total investments of the LIC exceeded Rs. 245000 crores, of
which more than Rs. 130000 crores were directly in Government (both State and
33
Centre) related securities, more than Rs. 12000 crores in the State Electricity Boards,
nearly Rs. 20000 crores in housing loans and Rs. 4000 crores in water supply and
sewerage systems. Other investments included road transport, setting up industrial
estates and directly financing industry. Investments in the corporate sector (shares,
debentures and term loans) exceeded Rs. 30000 crores. These directly affect the lives
of the people and their economic well-being.
A life insurance company will have large funds. These amounts are collected by way
of premiums. Every premium represents a risk that is covered by that premium. In
effect, therefore, these vast amounts represent pooling of risks. The funds are
collected and held in trust for the benefit of the policyholders. The management of life
insurance companies are required to keep this aspects in mind and make all its
decisions in ways that benefit the community. This applies also to its investments.
That is why successful insurance companies would not be found investing in
speculative ventures. Their investments, as in the case of the LIC, benefit the society
at large.
Apart from investments, business and trade benefit through insurance. Without
insurance, trade and commerce will find it difficult to face the impact to major perils
like fire, earthquake, floods, etc. Financiers, like banks, collapse if the factory,
financed by it, is reduces to ashes by terrible fire. Insurers cover also the loss to
financiers, if their debtors default.
34
2. GLOBAL INSURANCE INDUSTRY :
The global insurance industry is one of the largest sectors of finance. It ranges
from consumer to corporate and industrial insurance, and even reinsurance, or
insurance of insurance.
The major insurance markets of the world are obviously the US, Europe, Japan, and
South Korea. Emerging markets are found throughout Asia, specifically in India and
China, and are also in Latin America.
With the internet and other forms of high-speed communication, companies and
individuals are now able to purchase insurance and related financial products from
almost anywhere in the world. Increasing affluence, especially in developing
countries, and a rising understanding of the need to protect wealth and human capital
has led to significant growth in the insurance industry.
Given the evolving and growing socio-economic conditions worldwide, insurance
companies are increasingly reaching out across borders and are offering more
competitive and customized products than ever before.
Over the past ten years, global insurance premiums have risen by more than 50%,
with annual growth rates ranging between 2 and 10%.In 2004, global insurance
premiums amounted to $3.3 trillion.
The majority of insurance comes from developed nations such as most of Europe, the
US, and Japan. In 2004, premiums in North American amounted to $1,217 billion,
while the European Union generated $1,198 billion, and Japan produced $492 billion.
The UK amounted to $295 billion.
The four biggest generators of insurance premiums comprised almost two-thirds of
premiums for 2004, the US and Japan amount to half, while they only make up 7% of
the world s population.
In contrast, the emerging markets that make up 85% of the world s population
produced only 10% of the premiums.
34
The leading global insurance companies are:
 Zurich Financial Services,
 AXA
 Berkshire Hathaway/ Berkshire Hathaway Re
 Allianz
 Aviva
 ING Group
 Munich RE Group
 American International Group (AIG)
 Nippon Life Insurance
 Assicurazioni Generali
35
3. PERFORMANCE OF INDIAN INSURANCE INDUSTRY :
Insurance premium growth saw a decline in 2017-18. According to the data released
by the Insurance Regulatory and Development Authority of India (Irdai), the 34-odd
general insurers have grown 16.9 per cent in FY18 in terms of gross direct premium
collected, while life insurers’ premiums rose 10.8 per cent. In 2017-18, general
insurers collected Rs 1,333.5 billion in premium revenue, compared to Rs 1,140.2
billion collected in 2016-17. Life insurers collected Rs 1,938.6 billion in premium
revenue in 2017-18, against Rs 1,750.2 billion in 2016-17.
General insurers had posted a growth rate of 32 per cent in 2016-17, while for life
insurers, the figure stood at 26.3 per cent. The data showed that premium growth in
2017-18 is nearly half of what was registered at the end of March 31, 2017. Gross
direct premium revenue for standalone private health insurers rose to Rs 82.9 billion
in 2017-18, from Rs 58.6 billion in 2016-17. The premium collection grew 41.6 per
cent on a year-on-year basis for 2017-18.
Public general insurance companies, including New India Assurance, United India
Insurance, National Insurance Company and Oriental Insurance, have grown slower
this financial year than in the previous one. During 2017-18, these companies
experienced a premium growth of 12.8 per cent compared to a growth of 24.46 per
cent during 2016-17.
New India Assurance’s premiums grew 25.85 per cent in 2016-17, and slowed down
to 18.74 per cent in 2017-18. United India’s premium growth slowed to 7.7 per cent in
2017-18 from 26.53 per cent in 2016-17, while Oriental Insurance’s premium growth
in 2016-17 was 29.79 per cent compared to 6.6 per cent in 2017-18.
National Insurance saw its premium growth slowing down from 2016-17 by 120 basis
points in 2017-18 to 15.7 per cent.
In life insurance, private insurers collected around Rs 593.14 billion in premium

revenue during 2017-8 across both individual and group products, against Rs 506.3
billion in 2016-17. The annual premium growth for private life insurers stood at 17.16
36
per cent for 2017-18.
During 2017-18, the Life Insurance Corporation of India collected Rs 1,345.5 billion
in premium revenue, against Rs 1,244 billion in 2016-17, registering an annual
growth rate of 8.16 per cent. The premium revenue for individual non-single
life insurance covers grew by 38.5 per cent to Rs 52.2 billion for the year ended
March 31. Group non-single life insurance premium revenue fell for both LIC and
private life insurers. For private players, premium growth fell 85.4 per cent from Rs
47.4 billion in 2016-17 to Rs 6.92 billion in 2017-18, whereas premiums in this
category for LIC fell from Rs 40.41 billion in 2016-17 to Rs 20.8 billion in 2017-18.
Overall group non-single premium revenue have fallen by 68.4 per cent across all
life insurance companies between 2016-17 and 2017-18.
Winners and losers
The fastest growing general insurer in 2017-18 is

Aditya Birla Health Insurance Company, which registered an annual premium growth
rate of 346.78 per cent, followed by Kotak Mahindra General Insurance with a
premium growth rate of 126 per cent for 2017-18.
The Export Credit Guarantee Corporation’s premium growth slowed down by 2.15
per cent, followed by Shriram General Insurance Company, which saw a slowdown of
0.08 per cent for 2017-18
37
CHAPTER 2: HYPOTHESIS AND OBJECTIVES
38
HYPOTHESIS OF RESEARCH :
 There is no significant difference in the growth of number of new
policies issued among LIC and other private life insurance companies.
 There is no significant difference in the growth in income of LIC and

Private life insurance companies.
RESEARCH OBJECTIVES:
1. To compare the performance of LIC and private insurance companies in India.

2. To find out the performances of LIC and private insurance companies in each
category (size. growth, productivity and efficiency)
LIMITATIONS:
1. Could reach to a limited number of documents of different insurance companies in
regard to the management and other policies and resultant figures so as to identify the
exact cause of their lag in performance.
2 . Due to the limited time could not study all the insurance companies original
documents individually.
SIGNIFICANCE OF THE STUDY:
The Detailed Study has been done with the purpose of finding out the relative share of
LIC and Private Insurance in India. It is useful for the people associated with the
Insurance Industry and the research associates related to the Insurance Sector in India.
This study will acquaint them with the data of all the banks complied at one place
along with the findings, conclusion and recommendations.
39
CHAPTER 3
RESEARCH METHODOLOGY
40
RESEARCH DESIGN :
a. Type of research design : Analytical Research

b. Data collection : Secondary Sources
c. Statistical tools : Ratio analysis, Bar Graph
RESEARCH PROCESS
In this research my research objective was to compare the performance of LIC and
Private insurance companies. For this purpose I decided the four broad categories
under which I have compared the LIC and Private insurance companies. These are:
1. Size
2. Growth
3. Grievances
Under these Broad Categories I have analyzed 13 factors which are:
1. Size
 Total Premium
 Total Income
 Size of Balance Sheet
 Total number of Policies
 Total number of Branches
41
2. Growth
 Growth in Premium
 Growth in Income
 Growth in number of Policies
 Growth in Market share
3. Grievance Handling
I have used the Secondary data of last two financial years. I have collected data from
the various balance sheet of LIC and other private insurance companies, web sites. I
tried to find out most of the information required to compare the LIC and private
insurance companies.
42
CHAPTER 4
ANALYSIS AND INTERPRETATION
43
1. SIZE :
(A) TOTAL PREMIUM :
(Rs. In crores)
FY 16-17 FY 17-18
124451.42 134551.58
LIC
50626.25 59314.55
Private
Insurers
175077.67 193866.13
TOTAL
(Source : Annual reports of IRD FY 16-17 and 17-18)
LIC TOTAL PREMIUM

136000
134000
132000
130000
128000 LIC
126000
124000
122000
120000
118000
2016-17 2017-18
44
PVT INSURER TOTAL PREMIUM
136000
134000
132000
130000
128000
PVT INSURER
126000
124000
122000
120000
118000
2016-17 2017-18
Avg. Premium ( In
Crores) Rank
LIC 129501.5 1
Private Insurance Co. 54970.4 2
Average premium of LIC is much more than that of all insurance companies
altogether. LIC s average premium of the last two years is nearly two times the
average premium of the all other private insurance companies.
It can be said that up to that time their were less number of private players in the field
of insurance but then also undoubtedly LIC is the king.
45
(B) TOTAL INCOME :
FY 16-17 FY 17-18
180117 193865.32
LIC
193860 133350
Private
Insurers
373977 327215.32
TOTAL
LIC TOTAL INCOME

200000
195000
190000
LIC
185000
180000
175000
170000
2016-17 2017-18
46
PVT LIFE INSURER TOTAL INCOME
250000
200000
150000 PRIVATE LIFE INSURER
100000
50000
0
2016-17 2017-18
Avg. Income ( In
Crores) Rank
LIC 186991.16 1
All over income of LIC is much more than than of private players. It is due to the fact
that LIC being a government agency is being trusted by lot of companies and has
large number of shares in big corporates.
47
(C) SIZE OF BALANCE SHEET :
(Rs. In crores)
FY 16-17 FY 17-18
2231.74 2446.41
LIC
7732 7880
Private Insurers
9963 11135
TOTAL
SIZE OF BALANCESHEET OF LIC

3000
2500
2000
LIC
1500
1000
500
0
2016-17 2017-18
48
SIZE OF BALANCESHEET PVT INSURER
7900
7850
7800 Private insurer
7750
7700
7650
2016-17 2017-18
Size
( In Crores)
LIC 2339.075
Private Insurance co. 7806.000
Total average size of balance sheet of private insurance companies in the last
Two years is certainly higher than that of LIC. There is a huge gap in this
value. It is obvious that private insurance companies has bigger balance sheet
as being working in the insurance field for quite large time. As compared to
average balance sheet size of 7806.000 crores of private insurance companies,
LIC s average balance sheet size goes to as that of 2339.075 crores.
49
(D) TOTAL NUMBER OF POLICIES :
FY 16-17 FY 17-18
769386 739082
LIC
Private 100297 112050
Insurers
869683 851132
TOTAL
50
TOTAL NUMBER
OF POLICIES
900000
800000
700000
600000
500000
400000
300000
200000 FY 16-17
100000 FY 17-18
0
LIC PRIVATE INSURER
51
Avg. number of
policies Rank
LIC 1508468.0 1
LIC is an undoubted leader in the field of average number of policies per year
in the last TWO years. It is seen that private insurance companies are gaining
momentum and are trying to defeat LIC in case of new insurances. Main reason
behind LIC having such a large number of policies is the trust of a common
man. LIC being a government agency has got a faith of Indian mass. People are
not yet prepared to give their savings in the hands of private players.
52
(E) NUMBER OF BRANCHES :
FY 16-17 FY 17-18
2048 4826
LIC
Private Insurers 11141 11977
13189 16803
TOTAL
NUMBER OF BRANCHES
14000
12000
10000
8000
FY 16-17
6000
FY 17-18
4000
2000
0
LIC PRIVATE INSURER
53
NO OF GROWTH RANK
IN BRANCHES
LIC 2778 1
PRIVATE 836 2
INSURERS
When the matter of total number of branches comes its very much obvious that LIC,
being the oldest existing insurance company in India, has the large number of offices
in the countryby any single insurance company. Since the number of private
insurance companies is increasing, with continuous expansion in their business, now
the number of branches of all private players has crossed the number of branches of
LIC.
54
2. GROWTH :
(A) FIRST PREMIUM :

(Rs. In crores)
FY 16-17 FY 17-18
25299.17 18748.16
LIC
9376.04 10423.15
Private
Insurers
34675.21 29171.31
TOTAL
LIC FIRST PREMIUM
30000
25000
20000
LIC
15000
10000
5000
0
FY 16-17 FY 17-18
55
PRIVATE INSURER FIRST PREMIUM
10600
10400
10200
10000
9800 PRIVATE INSURER
9600
9400
9200
9000
8800
FY 16-17 FY 17-18
NO OF GROWTH IN % RANK
GROWTH IN
PRIMIUM
LIC (6551.53) (26) 2
PRIVATE 1047.11 11 1
INSURERS
Though PRIVATE INSURERS has attained more growth in absolute terms i.e.
Rs.1047.11 crores a dream come true growth of 11 % which is certainly a matter of
pride for them.
56
(B) GROWTH IN INCOME :
GROWTH IN INCOME %
FY 16-17 FY 17-18
14.9 20.7
LIC
1.65 109.3
Private
Insurers
TOTAL 17.8 24.6
GROWTH IN INCOME
25
20
15 LIC
PVT INSURER
10
0
FY 16-17 FY 17-18
57
GROWTH IN GROWTH IN RANK
INCOME IN INCOME IN
TERMS OF ABSOLUTE TERM
PERCENTAGE
LIC 8.16 13748.32 1
PRIVATE 17.16 (60510) 2
INSURER
Here LIC has neither attained more growth in absolute terms i.e. Rs.19887
crores as compared to 25714 crores of private players nor has got more growth
in terms of percentage.this shows that private players are doing great job in
enhancing their business.
58
(C) INCREASE IN NUMBER OF POLICIES :
FY 16-17 FY 17-18
5.79 5.99
LIC
5.80 8.47
Private Insurers
TOTAL 11.59 14.46
GROWTH IN NUMBER OF POLICIES

9
8
7
6
LIC
5 PVT INSURER
4
3
2
1
0
FY 16-17 FY 17-18
GROWTH IN RANK
POLICIES (%)
LIC 5.99 2
`PRIVATE INSURERS 8.47 1
Private players are doing extremely well as they are increasing their customer base
rapidly.
59
(D) MARKET SHARE :
MARKET SHARE
80
70
60
50
LIC
40 PVT INSURER
30
20
10
0
FY 16-17 FY 17-18
LIC is still the market leader in insurance industry with 69.39 % share. But we cannot
forget that in last two years market share of LIC has decreased. It was 71.81% in year
2016-17 which came down to 69.39 % in 2017-18
60
3. GRIEVANCE HANDLING :
TOTAL NUMBER OF GRIEVANCES :
FY 16-17 FY 17-18
80944 64750
LIC
198048 139951
Private
Insurers
NUMBER OF GRIEVANCES RESOLVED :
FY 16-17 FY 17-18
80944 64750
LIC
193119 145125
Private
Insurers
% OF GRIEVANCES RESOLVED :
FY 16-17 FY 17-18
100 100
LIC
97.51 103.69
Private
Insurers
61
LIC
90000
80000
70000
60000
TOTAL GRIEVANCES
50000
GRIEVANCES RESOLVED
40000
30000
20000
10000
0
FY 16-17 FY 17-18
PVT INSURER
250000
200000
150000 TOTAL GRIEVANCES

GRIEVANCES RESOLVED
100000
50000
0
FY 16-17 FY 17-18
62
% OF GRIEVANCES
106
104
102
LIC
100 PVT INSURER
98
96
94
FY 16-17 FY 17-18
% Grievances
resolved Rank
LIC 100 1
Grievance Handling is one of the major issues in any organization. It plays an

important role in Insurance sector. People do attract towards companies who
handles their grievances.
Here we see that private players are much ahead of LIC when the matter comes
to grievance management. In the last Two years LIC has resolved 100% of
cases brought in front of them while the percentage of cases resolved in case of
private players is 97.31 %.
This shows that LIC players are very serious about their image and are
working hard to provide the solution of the problems of the people as early as
possible.
63
CHAPTER 5
FINDINGS & CONCLUSIONS
64
FINDINGS
 LIC is the giant of the insurance sector. The overall size of LIC is much more
than that of all private insurance companies. Private insurers are in expansion mode
and are increasing their size but are still much behind LIC. A total premium deposit in
LIC is much higher than the private insurance companies. Total premium of LIC in
FY 17-18was 134551.68 crores which three times more than that of private insurance
companies.
 Income of LIC is much greater than private insurance companies. Last year total
income from investments of LIC was 193865.32 crores which was much more than
equal to the total income of the all private insurance companies. By this we can
imagine how big the LIC is.
 Size of balance sheet of private insurance companies are lagging much behind
LIC. Balance sheet of LIC is seven times bigger than that of private insurance
companies.
If we see the total number of policies issued by LIC and private insurance companies,
we find that there is a huge gap between them. No doubt that LIC is a well established
player in the field of insurance and many private companies have just started their
business. Hence it is obvious that LIC is having large number of policyholders.
Number of branches of private insurance companies is increasing as the new players

are entering in this market. Also the established players are in expansion phase and
hence are expanding there business. There are many private insurance companies and
hence there total number of branches has gone past LIC in the last financial year. But
offices of private insurance companies are mostly in urban areas and still it is LIC
which covers most of the area.
Hence we see that LIC is leading when it comes to size. It is giant in insurance
sector having huge network and customer base.
65
HYPOTHESIS TESTING:
 H1-
Private life insurance first premium (11%) is more than the LIC. So it can be
sad that difference in growth rate of insurance premium of LIC and private
Insurance companies is not significant. It proves the NULL Hypothesis is H01
“ There is no significance difference in the growth of first life insurance
premium between LIC and private life insurance companies.”
 H2-
As per chart 2.c Growth of new policies in Private insurance companies (8.47)
is more than the LIC (5.99). So it can be said that difference in growth rate of
new insurance policies
LIC and Private insurance companies is not significant. It proves the NULL
hypothesis is H02 “ There is no significant difference between growth of new
insurance policies between LIC and private life insurance companies”
66
CONCLUSION
 We see that due to excellent service quality and attractive offers private insurance
companies have started getting a number of customers. They are growing rapidly.
Though LIC is also increasing its customer base but private insurance companies are
moving at a fast pace.
 Though the income of private insurance companies is negligible when compared

with LIC but then also the pace with which they are increasing their income is
tremendous. Private insurance companies are expanding their business and will
certainly going to give a tough competition to LIC in the coming days.
 LIC is certainly having a large customer base. Private insurance companies are
not having that much number of customer base but they are increasing it rapidly.
They have registered a decent growth of in number of 8.47% new policies in the
year 2016-18. Last year also their growth rate was 5.80%
 LIC, being the oldest player in the existing insurance market, has the biggest
market share of 69.39 % which was 71.81 earlier year. We see that private insurance
companies are penetrating in the customer base of LIC.
 LIC has shown their good concern when the matter of grievance handling comes.
Private insurance companies are far ahead in this matter. LIC resolved 100% cases in
the last 2 years while private insurance companies have resolved nearly 97% cases.
This is a matter from where customer shift starts. We have seen the rapid increase in
customer base of private insurance companies which can be very much affected by
this factor.
67
Overall we have seen that still LIC is very famous but private insurance
companies are growing at exceptionally fast pace. Private companies show due
concern in grievance management and brings innovative schemes to attract the
customers. Right now they are giving good competition to LIC and they give
very tough competition to Life Corporation of India
Overall we can see that private insurance companies are giving a tough
competition to the LIC and will certainly create a good business for themselves
in the coming days.
68
BIBLIOGRAPHY :
 Data on Indian Insurance from http://www.irdaindia.org
 Different statistics from http://www.rbi.org.in
 Journals published by Insurance Regulatory & Development Authority.
 Management of financial institutions by R.M. Srivastava
 http://www.businesstoday.com
 http://www.businessworld.com
 http://www.economictimes.com
 Different Survey on Insurance sector conducted by IIRC.
 Profile of Indian Insurance Companies by IRDA.
 www.licindia.co.in
 www.sbilife.co.in/
 www.tata-aig-life.com
 www.bharti-axalife.com/
 www.hdfcinsurance.com/
 www.reliancelife.co.in/
 www.bajajallianz.com/
69
 www.metlife.co.in/
 www.birlasunlife.com
70

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“A COMPARATIVE STUDY OF LIFE INSURANCE AND

PRIVATE INSURANCE COMPANIES”

for partial completion

Master in commerce (semester 4)

Under the faculty of commerce

Dhanashree Sanjay More

Under the guidance of

Rayat Shikshan Sanstha’s Karmaveer Bhaurao Patil College

Vashi, Navi Mumbai

Academic year 2018-2019

for partial completion

Master in commerce (semester 4)

Under the faculty of commerce

Dhanashree Sanjay More

Under the guidance of

Rayat Shikshan Sanstha’s Karmaveer Bhaurao Patil College

Vashi, Navi Mumbai

Academic year 2018-2019

Name and Signature of the leaner.

Seal of the college

Chapter No. Particulars Page no.

1 Introduction of Study 2-37

2 Hypothesis and objective of study 38-39

3 Research Methodology 40-42

4 Data analysis and interpretation 43-62

5 Findings and suggestion 63-69

5.1 Findings 63-64

Insurance, in law and economics, is a form of risk management primarily used to

THE BIRTH OF INDIAN INSURERS:

PROGRESS IN INSURANCE BUSINESS

 Compulsorily register all Life Insurance companies.

The silent features of the Act were as follows:

THE LIFE INSURANCE CORPORATION OF INDIA: 1956

INSURANCE SECTOR REFORMS

(3) REGULATORY BODY

 Controller of Insurance (Currently a part from the Finance Ministry)should be

(5) CUSTOMER SERVICE

 Computerization of operations and updating of technology to be carried out in the

Hence, it was decided to allow competition in a limited way by stipulating the

ENTRY OF PRIVATE COMPANIES

3. Category 2 : Reinsurance Broker

4. Category 3: Composite Broker

5. Category4: Others, for example Insurance Consultants and Risk Management

OVERVIEW OF THE CURRENT INSURANCE MARKET

Purpose and Need of Insurance :

How Insurance Works?

The collection to be made from each person in advance is determined on assumptions.

A human being is an income generating asset. One s manual labour, professional

 Automobile insurance known in the UK as motor insurance, is probably the

 Casualty insurance insures against accidents, not necessarily tied to any

 Defense Base Act Workers' compensation or DBA Insurance provides

 Total permanent disability insurance provides benefits when a person is

 Home insurance or Homeowners insurance: See "Property insurance".

 Life insurance provides a monetary benefit to a decedent's family or other

 Annuities provide a stream of payments and are generally classified as

 Political risk insurance can be taken out by businesses with operations in

 Social welfare provision

 Social safety net