Prof. Vipin Agarwal Submitted by:- Biplab Banerjee(PG-22) Manish Chaurasia(PG-37) Moumita Ghosh(PG-42) Prasant Kumar(PG-54) INSURANCE:- What does insurance mean for people? The simple bookish definition is that making life secures from every kind of calamities and worst situation is called insurance. The real concept of insurance is much broader than that. In ancient time people used to sacrifice the lives of animals to make God happy so that God would protect them from calamities and in bad situations.
This was also a type of insurance and the premium was scarification of animals. It is typical human psychology that they want to protect themselves from future crisis. In history we will find a thousand of stories where people(even king also)took help of foreseer to know about future and if something wrong, tried to make that right . With the development of civilization this psychology became more and more flatter and people instead of depending upon God and foreseer tried to protect their future themselves. In the same way, the concept and psychology of insurance got its definition.
Now in these days, insurance company takes premium in the form of small amount and helps in the bad time of insured person and his family. HISTORY OF INSURANCE SECTOR IN INDIA:- IN India, the history of insurance sector began with the establishment of ORIENTAL LIFE INSURANCE COMPANY in Kolkata in 1818 by an Englishman. Later on in 1850 general insurance company was established. The insurance sector got its real shape of business industry in the earlier days of 19th century. In 1912, The Indian life assurance act was formed by British government to regulate Indian life insurance industry.
In 1928, The Indian insurance companies act was made by Govt. to gather statistical data of life insurance and non life insurance sector. In 1938, important amendment was done in Indian insurance act, to protect the interests of customers i. e. insured people. In 1956, 245 Indian and foreign insurance companies were merged together by central govt. In this way a new company emerged, which was named “Life Insurance Corporation” BUSINESS AND SOCIAL OBJECTIVE OF LIFE INSURANCE CORPORATION The business objective of LIC is complement with its social objectives.
Its main objective was to spread life insurance to every corner of India & every citizen of India. LIC has been successful in achieving its objective so far. It also focus on rural areas especially to socially and economically backward classes and provide them life and health insurance cover at low price. Other objective is to encourage people for saving so that people will not face financial problem in future. For it LIC provide more insurance linked savings schemes which make it more secure and more attractive. People also like these products because they find it profitable in two ways •As an investment solution Insurance i. e. life cover The funds created by LIC are used in the key investment areas of country like agriculture, health, education and other social welfares. The insurance business is conducted with the feeling that LIC is a trustful venture to insure public life. Even today after 50 years of its establishment its social objective doesn’t change much. Although there are few changes observed in recent time like expectations of customers and the business environment on which insurance sector does operate. This is because of globalization, which opened the door of insurance sector in India for private players.
ABOUT LIC:- Chairman- TS VIJAYAN Paid up capital=100 cr Since inception LIC has been the dominant player in Indian insurance sector and it has the majority of market shares. Now LIC is working with 2048 branch offices, 100 divisional offices and 8 zonal offices. So it has a huge presence all over the India. According to annual report 2008-09 of LIC it has total policies and assets worth more than 3. 4 trillion in Indian currency. To provide customers online facility and making payment through Banks LIC has tied up with a number of banks and online service providers .
If we look at LIC’s financial growth, we will find that it was of 200. 00 cr corporation in 1957. But in 1969-1970 its capital raised to 1000. 00 cr. Again after 10 years LIC crossed the mark of 2000. 00 cr. But in 1985-86 LIC was reorganized and as a result of that consolidation it crossed the miracle level of 7000. 00 cr sum was assured of new policies. In terms of selling policies LIC has been a champion. Every year more than 1crore policies are sold by LIC, and it is increasing at a healthy rate of 16. 67% . The business of LIC now has spreaded in 12 countries and Over 1 million agents are employed in LIC.
So LIC is now enjoying global presence also. SUBSIDIARY COMPANIES OF LIC- LIC own the following subsidiaries- 1. Life Insurance and Corporation of India International- This is joint venture Company promoted by LIC which starts its operation in July 1989 with the objectives of offering US dollar determinate insurance policies to Non Residential Indians (NRIs) 2. LIC NEPAL – Incorporated in 2001 3. LIC LANKA- Formed in 2003 4. LIC Housing finance- Formed in 19 June 1989. Its main objective is to provide long term finance for construction or purchase of houses or apartments.
It has an office in Dubai also. 5. LICHEL Care Homes-A wholly owned subsidiary of LIC housing finance. It builds and operates assisted community living for senior citizens. Besides all these, LIC has entered into the global market. For example it has started business in Fiji, Mauritius, and United Kingdom. LIC is associated with joint ventures abroad in the field of insurance namely Ken INDIA INSURANCE company limited, Nairobi, United Oriental Assurance Company Limited, Kualalampur and Life Insurance Corporation, Baharin.
Types of Insurance LIC sell: It mainly sells following insurance 1. Life insurance 2. Health insurance 3. Different products in the basket of LIC: CHILDREN POLICY: Komal Jeevan Jeevan Kishore Education Annuity ENDOWMENT POLICY Jeevan Mitra New Janraksha Jeevan Anand GROUP POLICY Janashree bima yojana Grouping linked Insurance scheme JOINT LIFE POLICY Jeevan Sathi MONEY BACK POLICY Moneyback with profit Jeevan surabhi Jeevan bharti PENSION PLANS SPECIAL PLANS LIC and its competitors:-
Since inception till 1990’s LIC enjoyed its monopoly over insurance sector. But on late 1990 when Indian economy came under globalization or liberalization, the door of insurance sector opened for private players. Because of the potential of Indian market, lots of private players of India as well as of other countries entered into the Indian market. Let us look at the major players who entered the insurance sector and eating up the insurance market. Name of the company Nature of holding 1) Allianz Bajaj Life Insurance Co.
Private 2) Aviva Life Insurance Private 3) Birla Sun Life Insurance Co. Private 4) HDFC Standard Life Insurance Co. Private 5) ICICI Prudential Life Insurance Co. Private 6) MAX Newyork Life Insurance Private 7) OM Kodak Mahindra Life Insurance Private 8) Reliance Insurance Private 9) TATA AIG Life Insurance Private 10) Met Life Insurance Co.
Private MARKET SHARE:- Till early 1990’s has enjoyed over 80 % market share. But the increase in competition with private players it is continuously losing its market share. If we compare the market share of LIC in last 9 years we will find that LIC is losing its market share continuously, though it’s a market dominant in this sector. YEAR MARKET SHARE(%) 2001-2002 83. 64 2002-2003 76. 03 2003-2004 75. 04 2004-2005 73. 71 2005-2006 74. 53 2006-2007 75. 6 2007-2008 74. 18 2008-2009 70. 23 2009-2010 64. 86 IN 9 YEARS LIC HAS LOST OVER ALL MARKET SHARE OF 18. 76 Thus we can find that all is not well for LIC. Though it’s still no. 1 in insurance sector but its share has started decreasing in market. Let us understand it with the help of a graph of last five years Market share of LIC in last 5 years. There is a downward trend in the market capture of LIC. So LIC has to relook in its policies and should try to recapture its previous market share.
As one can see that the market share of LIC has eaten up by private sector but still now LIC continues to be a market leader of Indian customer. Factors that give competitive advantage to the company 0ver competitors:- The first and foremost factor that gives competitive advantage to LIC is being Nationalistic. Since it’s nationalized and established earlier in the Indian market people has blind faith on it. Important factors are as follows:- 1)Distribution- Since distribution is a key determinant for the success of any insurance company.
So being a nationalized company get advantage to penetrate every corner of the country. There is no boundary, no limit of states, government rules and and other factors. 2) Variety of products- The products of LIC are varied and focus on the need of Indian customers. Thus even in small village there is a LIC policy holder. But private players don’t get it easy to penetrate to each and every part of the country. 3)Trust and faith- Being Govt. ruled subsidiary and existent since 1956, people of India have real faith and are confident in keeping their valuable saving with LIC. ) Large workforce of agent- As it is in operation since 1956 it has large and scattered human resource which is very important to target large population. But the private players don’t have large number of agents. Thus by keeping all the factors in mind we can say that despite of the globalization of Indian market and tough competition, LIC has retained its No. 1 position in Insurance sector. Its closest rivals are far behind it in terms of market shares as well as good will in the public.
Though all the private players are trying together to grow and eating up market of LIC but still LIC stands like a rock in the market. It is also true that LIC has to adopt few changes according to the current market situation for sustaining its position. Thus G. krishanamurty once rightly said about LIC that “LIC is not just a company, it is the heart of our nation, and it is the love and faith of our people. So LIC will remain as long as India and world will remain. ” ** All the data used in this case study are secondary and taken from different sources.