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LIFE INSURANCE CORPORATION OF INDIA

Introduction to Insurance

Insurance is not necessarily an investment from

which one expects to get one's money back. Nor

is it gambling. A gambler takes risks, while

insurance offers protection against risks that

already exist. Insurance is a way to share risk

with others. Since ancient times, communities

have pooled some of their resources to help

individuals who suffer loss.

"Insurance is a contract between two parties

whereby one party called insurer undertakes in

exchange for a fixed sum called premiums, to

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pay the other party called insured a fixed

amount of money on the happening of a certain

event."

“Insurance is a protection against financial loss

arising on the happening of an unexpected

event. Insurance companies collect premiums to

provide for this protection. A loss is paid out of

the premiums collected from the insuring public

and the Insurance Companies act as trustees to

the amount collected.”

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CONCEPT OF LIFE INSURANCE :

Life has always been an uncertain thing. To be secure against unpleasant possibilities, always requires the utmost resourcefulness and foresight on the part of man. To pray or to pay for protection is the spirit of the humanity. Man has been accustomed to pray God for protection and security from time immemorial.

In modern days Insurance Companies want him to pay for protection and security. The insurance man says "God helps those who help themselves"; probably he is correct.

Too many people in this country are not in employment; and work for too many no longer guarantees income security. Several millions are part-time, self employed and low-earning workers living under pitiable circumstances where there is no security cover against risk.

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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.

Therefore, it goes without saying that an appropriate life insurance policy within the paying capacity and means of the insured to pay premium is one of the social security measures envisaged under the Indian Constitution.

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

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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.

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.

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

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and the planned substitute would not have been ready.

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.

Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage.

Purpose and Need of Insurance :

Assets are insured, because they are likely to be destroyed through accidental occurrences.

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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.

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 uncertain.

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, innovative and creative abilities, etc.

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History of Insurance in India

Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community.

In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary.

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However, it still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is National Insurance Company Ltd, which was founded in 1906 and is doing business even today. The Insurance industry earlier consisted of onlytwo state insurers: Life Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General Insurance Corporation of India (GIC).

GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from parent company and made as independent insurance companies:

a) Oriental Insurance Company Limited,b) New India Assurance Company Limited, c) National Insurance Company Limited and d) United India Insurance Company Limited.

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Risk sharing in Insurance

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 thesame 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

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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 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.

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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 following two examples explain the above risk sharing in 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.

Example 2

There are 1000 persons who are all aged 50 and are healthy. It is expected that of these, 10 persons may die during the year. If the economic value of the loss suffered by the family of each dying person is taken to be Rs. 20000, the total loss would work out to Rs. 200000. If each person in a group contributed Rs. 200 a year, the common fund would be Rs.

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200000. This would be enough to par Rs. 20000 to the family of each of the ten persons who die. Thus, the risks in the case of 10 persons, are shared by 1000 persons.

INTRODUCTION OF LIC

1.ABOUT THE ORGANIZATION

In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and

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periodical valuations of companies should be certified by an actuary.

But the act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in force as Rs. 22.44 crore, it rose to 176 companies with total business-in-force as Rs. 298 crore in 1938. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business.

However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization, nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill.

The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas

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with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956.

As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation.

It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business.

But with re-organization happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office.

LIC’s Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network.

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LIC has tied up with some Banks and Service providers to offer on-lint premium collection facility in selected cities.

LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities.

With a vision of providing easy access to its policyholders, LIC has launched its “ SATELLITE SAMPARK” offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future.

LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2009, posting a healthy growth rate of 16.67% over the corresponding period of the previous year.

From then to now, LIC ha crossed many milestones and has set unprecedented performance records in various aspects of life insurance business.

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Mission , Vision & Objectives of LIC

Mission

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

Vision

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

OBJECTIVES

· Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.

· Maximize mobilization of people's savings by making insurance linked savings adequately attractive.

· Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose

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money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return.

· Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.

· Act as trustees of the insured public in their individual and collective capacities.

· Meet the various life insurance needs of the community that would arise in the changing social and economic environment.

· Achievement of Corporate Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.

· Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards the achievement of the goal.

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Members on the board of the corporation

Shri. T.S. Vijayan (Chairman)

Shri. D.K. Melhrotra (Managing Director - LIC)

Shri. Thomas Mathew T. (Managing Director – LIC)

Shri. A.K. Dasgupta (Managing Director - LIC)

Shri. Ashok Chawla (Finance Secretary, Ministry of Finance, Govt. of India)

Shri. G.C. Chaturvedi (Additional Secretary, Department of Financial Services, Ministry of Finance, Govt. of India.)

Shri. Yogesh Lohiya (Chairman cum Managing Director, GIC of India)

Shri D.L. Rawal (Chairman & Managing Director , Dena Bank)

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ORGANIZATION STRUCTURE OF LIC

Chairman

Managing Director

Executives Directors

Chiefs

Zonal Managers

Regional Managers

Divisional Managers

100 Seniors Divisional Managers

Marketing Managers

Sales Managers

Senior Branch Managers (Head of the Branch)

Assistant Branch Managers Sells

Development Officers

Different Agent

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Rules and code of conduct of LIC

Admission Of Age :

Age is the main basis of calculation of premium under life insurance policies. The following are accepted as evidence of age:

Certified extract from Municipal or Local Body’s records made at the time of birth.

Certified Extract from School or College records, if age or date of birth is stated therein.

Certified Extract from Service Register in the case of Govt. employees and employees of Quasi-Govt. Institutions or

Passport issued by the Passport Authorities in India.

Payment Of Premium:

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By cash, local cheque (subject to realization of cheque), Demand Draft at Branch Office.

The DD and cheques or Money Order may be sent by post.

You can pay your premiums at any of our Branches as 99% of our Branches are networked.

Many Banks do accept standing instructions to remit the premiums. So by providing a standing instruction to your Bank to debit your account for the premium amount and send it vide a banker’s cheque to LIC, on the due dates and months mentioned on your policy bond.

Through Internet : Payment of premiums can be made through Internet through Service Providers viz.HDFC Bank, ICICI Bank, Times of Money, Bill Junction, UTI Bank, Bank of Punjab, Citibank, Corporation Bank, Federal Bank and Bill Desk.

Premium payment can also be made through ATMs of Corporation Bank and UTI Bank.

Premium payment can also be made through Electronic Clearing Service (ECS) which has been launched at Mumbai, Hyderabad, Chennai, Kolkata, New Delhi, Kanpur, Bangalore, Vijaywada, Patna, Jaipur, Chandigarh, Trivandrum, Ahmedabad, Pune, Goa and Nagpur, Secunderabad & Visakhapatnam. A policyholder having an account in any Bank which is a Member of the local Clearing House can opt for ECS debit to pay premiums.

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Days Of Grace:

Policyholder should pay the premiums on due dates. However, a grace period of one month but not less than 30 days will be allowed for payment of yearly/half-yearly/quarterly premiums and 15 days for monthly premiums.

When the days of grace expire on a Sunday or a public holiday, the premium may be paid on the following working day to keep the policy in force.

If the premium is not paid before the expiry of the days of grace, the policy lapses.

Revival Of Lapsed Policy:

If the policy has lapsed, it can be revived during the life time of the life assured, within a period of five years from the date of the first unpaid premium but before the date of maturity subject to certain conditions.

The Corporation offers three convenient schemes of revival viz., Ordinary Revival, Special Revival and Installment Revival. Policies can also be revived under Loan-cum-Revival and SB-cum-Revival schemes.

Change Of Address And Transfer Of Policy Records:

The policyholder should immediately intimate the change of his/her address to the Branch Office servicing the policy. The correct address facilitates better service and quicker settlement of claims.

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Policy records can also be transferred from one Branch Office to another for servicing, as requested by the policyholder.

Loss Of Policy Document:

The Policy Document is an evidence of the contract between the Insurer and the Insured. Hence the policyholder should preserve the Policy Bond till the contracted amount under it is settled.

Loss of the Policy Document should be immediately intimated to the Branch Office where it is serviced.

Loans:

Loans are granted on policies to the extent of 90% of Surrender Value of the policies which are in force and 85% of the Surrender Value in case of policies which are paid-up, inclusive of the cash value of bonus. The rate of interest charged at present is 9% p.a. payable half-yearly.

Loans are not granted for a period shorter than six months. The Conditions and Privileges printed on the back of the Policy Bond states whether a particular policy is with or without the loan facility.

Nomination:

Nomination is a right conferred on the holder of a Policy of Life Assurance on his own life to appoint a person/s to receive

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policy moneys in the event of the policy becoming a claim by the assured’s death. The Nominee does not get any other benefit except to receive the policy moneys on the death of the Life Assured. A nomination may be changed or cancelled by the life assured whenever he likes without the consent of the Nominee.

Survival Benefit/Maturity Claims:

LIC settles survival benefit/maturity claims on or before the due date.

Policyholder are intimated well in advance by the Branch Office which services the policy regarding the payment, and the necessary Discharge Voucher is also sent for execution by the assured. In case the policyholder does not get any intimation from the Branch Office concerned, he/she should contact them, quoting the Policy Number.

Survival Benefit payment up to Rs.60,000/- are settled without insisting for Policy Bond and Discharge Voucher.

Death Claims:

If the life assured dies during the term of the policy, death claim arises. The death of the policyholder should be immediately intimated in writing to the Branch Office where the policy is serviced along with the following particulars:

1.The No./s of the policy/ies2.The name of the policyholder

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3.Death Certificate issued by concerned Authority

4.The date of death5.The cause of death and6.Claimant’s relationship with the

deceased On receipt of the intimation of death,

necessary claim forms are sent by the Branch Office for completion along with instructions regarding the procedure to be followed by the claimant.

The claims which have arisen after a period of three years are treated as non-early claims and settled within 30 days from the date of receipt of all requirements.

The claims that have arisen within a period of two years from the date of commencement of the policy, are treated as early claims and investigation is compulsory in such cases.

Claim Review Committee:

The Corporation settles a large number of Death Claims every year. Only in case of fraudulent suppression of material information is the liability repudiated. This is to ensure that claims are not paid to fraudulent persons at the cost of honest policyholders. The number of Death Claims repudiated is, however, very small. Even in these cases, an opportunity is given to the claimant to make a representation for consideration by the Review Committees of the Zonal office and the Central Office. As a result of such review, depending on the merits of each case, appropriate decisions are taken.

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Insurance Ombudsman: The Grievance Redressal Machinery has

been further expanded with the appointment of Insurance Ombudsman at different centers by the Government of India. At present there are 12 centers operating all over the country.

Initiatives In Policy Servicing Areas:

All 2048 Branches of LIC are fully computerized covering all policy servicing aspects to give prompt computerized services from new policy introduction, acceptance of renewal premium, revivals, loans, etc to final claims settlement.

Green Channel facility has been introduced for the speedy completion of proposals.

Payment of premiums can be made through internet through service providers, viz., HDFC Bank, ICICI Bank, Times of money, Bill Junction, UTI Bank, Bank of Punjab, Citi Bank, Corporation Bank, Federal Bank and Bill desk.

Important Milestones in the Life Insurance Business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.

1870: Bombay Mutual Life Assurance Society,

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http://www.licindia.in/grievances.htm


the first Indian life insurance company started its business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

PLANS OFFERED BY LIC

Jeevan Anurag Komal Jeevan

CDA Endowment Vesting At

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Marriage Endowment

Or

Educational Annuity CDA Endowment Vesting At

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Jeevan Kishore Jeevan Chhaya

Child Career Plan Child Future Plan

Child Fortune Plus

Jeevan Aadhar

Jeevan Vishwas

The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment

Jeevan Mitra(Double Cover Endowment Plan)

Jeevan Mitra(Triple Cover Endowment Plan)

Jeevan Anand

New Janaraksha Plan

Jeevan Amrit

Jeevan saral

Jeevan Shree-I

Jeevan Pramukh

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The Money Back Policy-20 Years

The Money Back Policy-25 Years

Jeevan Surabhi-15 Years



Bima Bachat

Jeevan Bharati - I

The Whole Life Policy

The Whole Life Policy- Limited Payment

The Whole Life Policy- Single Premium

Jeevan Anand

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Jeevan Tarang

Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy

Anmol Jeevan-I

Amulya Jeevan-I

Jeevan Saathi Plus

Jeevan Saathi

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Current status & Subsidiaries

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Over its existence of around 50 years, Life Insurance Corporation of India, which commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses, and contributed around 7 % of India's GDP in 2008.

The Corporation, which started its business with around 300 offices, 5.6 million policies and a corpus of INR 459 million, has grown to 2,048 offices servicing around 180 million policies and a corpus of over INR 3.4 trillion.

The organization now comprises 2048 branches, 100 divisional offices and 8 zonal offices, and employs over 1 million agents.

It also operates in 12 other countries, primarily to cater to the needs of Non Resident Indians. With the change in the India's economic philosophy from the early 1990s, and the subsequent relaxation of state control over several sectors of the economy, the monopolistic position of the Life Insurance Corporation of India was diluted, and it has had to compete with a number of other corporate entities, Indian as well astransnational Life Insurance brands.

In the financial year 2007-08 Life Insurance Corporation of India's number of policy holders are said to have crossed a whopping 200 million

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(fourth in terms of population of the countries of the world)

Subsidiaries

LIC owns the following subsidiaries:

Life Insurance Corporation of India International:

This is a joint venture offshore company promoted by LIC which commenced operations in July, 1989 with the objectives of offering US$ denomimated policies to cater to the insurance needs of NRIs and providing insurance services to holders of LIC policies currently residing in the Gulf. LIC International operates in all GCC countries.

LIC Nepal : A joint venture company formed in 2001 with the Vishal Group of Industries, Nepal.

LIC Lanka : A joint venture company formed in 2003 with the Bartleet Group of Companies, Sri Lanka.Related Acts:-

The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts, with the first one being the insurance Act, 1938.

The Insurance Act, 1938

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The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only in January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was enacted in the same year to,form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity.

There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006.

General Insurance Business (Nationalization) Act, 1972

The General Insurance Business (Nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were

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amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities.

Insurance Regulatory and Development Authority (IRDA) Act, 1999

Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance.

Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In recent years many private players entered in the Insurance sector of India.

Information Techogy in LIC

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LIC has been one of the pioneering organizations in India who introduced the leverage of Information Technology in servicing and in their business. Data pertaining to almost 10 crore policies is being held on computers in LIC. We have gone in for relevant and appropriate technology over the years.

FRONT END OPERATIONS

With a view to enhancing customer responsiveness and services in July 1995, LIC started a drive of On Line Service to Policyholders and Agents through Computer. This on line service enabled policyholders to receive immediate policy status report prompt acceptance of their premium and get Revival Quotation, Loan Quotation on demand. Incorporating change of address can be done on line. Quicker completion of proposals and dispatch of policy documents have become a reality. All our 2048 branches across the country have been covered under front-end operations.

METRO AREA NETWORK

A Metropolitan Area Network, connecting 74 branches in Mumbai was commissioned in November, 1997, enabling policyholders in Mumbai to pay their Premium or get their Status Report, Surrender Value Quotation, Loan Quotation etc. from ANY Branch in the city. The System has been working successfully. More than 10,000 transactions are carried out over

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this Network on any given working day. Such Networks have been implemented in other cities also.

WIDE AREA NETWORK

All 7 Zonal Offices and all the MAN centres are connected through a Wide Area Network (WAN). This will enable a customer to view his policy data and pay premium from any branch of any MAN city. As at November 2005, we have 91 centers in India with more than 2035 branches networked under WAN.

INTERACTIVE VOICE RESPONSE SYSTEMS (IVRS)

IVRS has already been made functional in 59 centers all over the country. This would enable customers to ring up LIC and receive information (e.g. next premium due, Status, Loan Amount, Maturity payment due, Accumulated Bonus etc.) about their policies on the telephone. This information could also be faxed on demand to the customer.

LIC ON THE INTERNET

Our Internet site is an information bank. We have displayed information about LIC & its offices . Efforts are on to upgrade our web site to make it dynamic and interactive. The addresses/e-mail Ids of ur Zonal Offices, Zonal Training Centers, Management Development Center, Overseas Branches, Divisional Offices

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and also all Branch Offices with a view to speed up the communication process.

PAYMENT OF PREMIUM AND POLICY STATUS ON INTERNET

(You have to register for these services)LIC has given its policyholders a unique facility to pay premiums through Internet absolutely free and also view their policy details on Internet premium payments. There are 11 service providers with whom L I C has signed the agreement to provide this service.

INFORMATION KIOSKS

We have set up 150 Interactive Touch screen based Multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. These KIOSKS are enable to provide policy details and accept premium payments.

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Channels of Distribution

Individual Agent:

The individual agent has been in the marketing of insurance, especially life insurance. The professional agent has been the strongest link between the life insurer and the customer. The professional agent has the onerous role of explaining the concepts, terms and conditions, benefits and privileges of the insurance contract. He has to analyze the financial requirements and risks faced by the customers and market insurance plans suited to the needs and means of the customers. All insurance companies, and life insurance companies in particular, have recognized the paramount importance of this channel. The number of agents has grown at a spectacular rate. The total number of agents on they roll is

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11,03,047 as on 31.03.2007 as against 10,52,283 as on 31.03.2006.

Corporate Agents:

The number of corporate agents has grown in recent years. Corporate agent is a concept introduced with a view to taking advantage of the presence of a large number of entities with a sizeable client base, contacts and Goodwill already operating in the market. With multi locations and a network of people Assisting them, these entities have a different structure and purpose. Hence their existing network could be utilized to market insurance. The corporate agent could thus bedefined as a person - meaning a firm or company formed under the Companies Act, 1956 or a banking company or a Bank/RRB or a co-operative society registered under the Co-operative societies Act, 1912 or a panchayat or a NGO/MFI covered under the Cooperative Societies Act or a NBFC registered with RBI or any other institution.

Brokers: Brokers are permitted to sell products of more than one insurer. Brokers have been very predominant in the non life arena. Large risks require quite sophisticated expertise. Brokers have played a very key role in this area both in selling products and in servicing of Insurance claims. Brokers have now also entered the Life Insurance market.

42


Bancassurance:

Bancassurance is developing as an important channel in India. This is due to the large reach and customer base of banks in both urban and rural areas in India. The persistency rate in Bancassurance, due to the continuous contact with the client is better than in other channels. The ease of payment of premium and the facility of maturity/claim payments through the bank account make it a customer friendly channel.

Referrals:

This is a new concept very similar to getting a prospecting list and leads to effect sales with customers. It is evident that in addition to banks, there could be various other entities which could act as a referral provider due to the large database of members/clients, like credit cardholders association members, society members etc. In short, such institutions could share or market their database to provide leads to the intermediaries to sell insurance products.

Direct Marketing:

In the new technological environment, new innovative marketing systems have evolved. The use of inter-net, web based sales, e-marketing, telecalling, mobile SMS have made giant strides in reaching out to customers. This is an emerging channel which in future may

43


grow in size and proportion of sales. This channel requires active regulation which should be on issues of transparency, disclosure, privacy, contract, TRAI guidelines etc. It would be necessary to give full complete information through soft copies of proposal forms, schedules, policies etc.

Swot Analysis

The SWOT analysis involves an in depth study of

the strength and weakness of the provided

organization and it also provides information to

the promoter, consultant, other agencies and

helps in long term viability of the project.

Strength :

44


1.It is the oldest and most well experienced

player having a Pan India presence.

2.LIC has a strong and very well developed

distribution network.

3.It is having a huge consumer base and is

evolved as one of the most powerful brands

of the country.

4.It has a large product portfolio and claim

settlement is easier to get.

5.It has the advantage of government

guarantee is accompanied with it.

6.Largest insurance Company in the world in

Customer Base (23 crore customers)

7.No.1 insurance company in the world in

terms of agency (about 1.1 Million agents)

8.LIC is No.1 insurer in the world in Volume &

Sold around 3.75 Cr.Policies in 2007-2008.

9.2nd Biggest Real Estate Owner next to

Indian Railways.

10. LIC is one of the Highest income tax

paying Organization. For Financial Year

2007-08, LIC has paid advance Tax Rs.2627.

14 Cr. & Service Tax Rs.1292. 15 Cr.

45


11. Has Highest insurance Professionals

( Club Member agents

12. Only 4 countries in the world have more

population that LIC`s policy holders.

13. No.1 insurance Company in the world in

terms of claims paid.

14. LIC Settles 2.21 claims per second, LIC

settled 139 lakhs claims during the year

2007-2008.

15. Prompt settlement of claims (97%

maturity claim settled on or before due

date)

Advanced Technology-For better

Customer Service

1.Computerized and networked 2048 branch

offices and 159 satellite offices throughout

the country.

2.Use of High Tech-WAN,LAN,IVRS & EDMS

3.LIC is second largest PC user in the country.

4.EDMS to make LIC a paperless office-

Enabling Policy servicing & payments

through all branchs in the country.

46


5.Premium Payment Facility extended

through networked 2048 branches, ECS,

ATM's through internet, online portals,

collecting bank (Axis Bank), AP online,

through SMS, through selected agents, Now

LIC Premium can also be paid through.

6. "Suvidha info Serve KIOSKS" all over

India.

Social Strength

LIC - an institution builder promoting many

financial and insurance institutes like NSE,

NCDEX, LIC Mutual Fund, Stock Holding

Corporation of India, National insurance

Academy, insurance institute of India etc.

LIC has foreign operations in Mauritius, Fiji

and London .

LIC is known as "Pension Provider" of the

country.

1st Pension company in India is floated by

LIC as "LIC Pension Fund Ltd" on 21st Nov

2007.

First to create waves in micro insurance

sector by insuring people below the poverty

47


line. In year 2007-2008, 8.54 lac policies

sold through "Jeevan Madhur"Plan.

Widest range of plans (about 48) for every

need of the customer of 0 to 79 years of

age.

Biggest Portfolio of Group insurance

schemes available.

"Jeevan Saral" one of the product of LIC got

"Best innovation product " award from

I.R.D.A.

LIC has covered lick Risk of 1.13 crore

citizens through "AAM ADMI BIMA YOJANA"

& " JANASHREE BIMA YOJANA".

Very Unique Salary saving Portfolio.

Financial Strengths

LIC's investment income in 2007-08 was

Rs.40,655 crores. Out of Total income of Rs,

1,76,559.28 Crs.

Total Assets of the corporation as on

31.3.07 were Rs. 6,74,514.78 Crs.

Largest institutional investor in Share

Market. On an average Rs.100 crore

invested every day. During theyear 2007 LIC

48


earned the profit Rs.10,000 Crs. from the

Sale of Equity.

Weakness :

Its employees and other staff are lethargic

and least motivated to render prompt and

sincere customer service.

After sales customer grievance redressal

mechanism is inefficient.

Agents not taking into account the needs of

people and promote policies having high

commissions only.

Very slow decision making process and

internal problems between top management

and lower cadre staff.

The top management or bosses are

mediocre and there is large scale corruption

in main office.

The development officers and agents who

are the foundation pillars of LIC are not

provided with extra funds and powers to

promote its products aggressively.

49


Opportunity :

Emergence of a huge middle income

consumer market in the country.

People becoming more aware and

demanding so there is scope for a whole lot

of innovative products.

Pension markets, health insurance and

large real estate portfolio.

Today’s human life becomes full uncertain,

so they prefer protection against the risk.

Therefore they prefer life insurance. This is

the opportunity for the life insurance

sector.

Easy accesses to development in the more

advance market provide further opportunity

to upgrade their working. Technological,

financial or specific area based avenues of

absorbing improved system are also now

more easily available.

To enter into rural market where customer

awareness about insurance is low by

effective and efficient marketing strategies.

To sell insurance products through

electronic Medias.

50


Growing population: the growth in the

population (approximately 1.7%) is very

high. It is said that one Australia is added in

our country every year. Thus potential

customers for the life insurance industry. It

has become an opportunity or the life

insurance industry.

India has traditionally been a highly

savings oriented country. Needless to say, if

the insurance market is properly tapped, it

is possible to raise life insurance premium

as a percentage of GDP from its existing

level. Thus, it has become an opportunity

for the life insurance industry

Threats:

Private entrants are naturally targeting the

profitable and more lucrative segments, by

providing better service, new products and

flexibility. They are targeting the bigger

corporate the other clients in the well

established metropolitan center.

These new entrants succeeded in eating

share of the existing entities. This creates

threat among rival firms itself.

51


Interest rate of P.F and bank saving create

threat to insurance sector. All other saving

is obviously the threat for life insurance

sector.

Increasing intensity of competition among

industry rivals-may cause squeeze (fall) on

profit margins. Consumer’s education-

consumers are more and more confused

because the market players are offering

large number of product range. As at

present the awareness level is not much, it

is only because the education level is only

62 %( in which only 10% are well educated).

Fraud in insurance sector: the major

problem fraud, which affects the life

insurance sector.

The flight of talent to new entrants is

already in evidence, and could be on the

rise for some time to come. Retaining

qualified and competent executives will be

considerable challenges for existing

companies.

One very serious danger that the

government on units is likely to face is that

52


even if at some point of time, the

government does decide to disinvest a

portion of its equity; they may not be fully

free from government interference. They

could face a peculiar problem that although

paper and in terms of legal definition they

would not be public sector units. In effects,

their working could be no different from

what it was before their ownership pattern

change.

53


PROGRESS BY LIC

Headquartered in Mumbai, which is considered the financial capital of India, the Life Insurance Corporation of India currently has :

a) 8 zonal Offices and

b)101 divisional offices located in different parts of India

c)2048 branches located in different cities and towns of India.

d) Contributed around 7 % of India's GDP in 2006.

54


e) It also funds close to 24.6% of the Indian Government's expenses.

f) It has assets estimated of 5 Trillion Rupees.

g) 1.2 million agents and Employs over .

h) In the financial year 2006-07 Life Insurance Corporation of India's number of policy holders are said to have crossed a whopping 200 million (fourth in terms of population of the countries of the world)

i) It also operates in 12 other countries.

j) The recent Economic Times Brand Equity Survey rated LIC as the No. 1 Service Brand of the Country. 1,12,184.

Major players of industry

1. Bajaj Allianz Life Insurance Co. Ltd.

2. Birla Sun Life Insurance Co. Ltd. (BSLI)

55


3. HDFC Standard Life Insurance Co. Ltd. (HDFC

STD LIFE)

4. ICICI Prudential Life Insurance Co. Ltd. (ICICI

PRU)

5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA)

6. Max New York Life Insurance Co. Ltd. (MNYL)

7. MetLife India Insurance Co. Pvt. Ltd.

(METLIFE)

8. Kotak Mahindra Old Mutual Life Insurance Co.

Ltd.

9. SBI Life Insurance Co. Ltd. (SBI LIFE)

10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)

11. AMP Sanmar Assurance Co. Ltd. (AMP

SANMAR)

12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)

13. Sahara India Life Insurance Co. Ltd.

(SAHARA LIFE)

14. Shriram Sunlam

56


57


Awards won by LIC

58


INDY's Silver Award for best Corporate Film

World Brand Congress Award

OUTLOOK MONEY -- NDTV PROFIT AWARD 2009 in

" BEST LIFE INSURER CATEGORY

NDTV PROFIT BUSSINESS LEADERSHIP, AWARDS

2009

CNBC AWAAZ CONSUMER AWARD 2009 for

ASIA PACIFIC HRM Congress, 2009 Award for

59


" Most preferred insurance company "

INNOVATIVE HR PRACTICES

Brand Equity Most Trusted Brand 2009 Top in Insurance Category

Golden Peacock Innovative Product / Service Award - 2009

Loyalty Award - 2009 Reader's Digest Trusted

Brand Award, 2009

CNBC Awaaz Consumer Awards 2008

NDTV Profit Business Leadership Award 2008

60


INDY's Silver Award for Best Corporate Film

NASCOM IT USER Award 2008

Business Superbrand India 2009

ASIA BRAND CONGRESS BRAND LEADERSHIP

AWARD, 2008

61


REAEARCH METHODOLOGY & INTERPRETATION

The study will conduct on the bases of survey through questionnaires given to respondents.

Sampling DesignPopulation: MUMBAISample Size: Population of 50Statistical Tools: Correlation.

QUESTIONARE ONLIFE INSURANCE CORPORATION OF INDIA

(LIC)V/S

PRIVATE INSURANCE COMPANIES(PIC)

NAME : AGE : CONTACT NO :

Q1) Do you have insurance ? If yes , of which company ?

62


60%

40%

0%

10%

20%

30%

40%

50%

60%

70%

yes no

Q2) Have you heard about LIC anytime ?

98%

2%0%

20%

40%

60%

80%

100%

120%

yes no

Q3) According to you , which insurance company you will prefer to go for ?

63


60%

40%

0%

10%

20%

30%

40%

50%

60%

70%

LIC PIC

Q4) Whose schemes are interesting and appealing ?

71%

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

LIC PIC

Q5) Which schemes of insurance company will you like to opt for ?

64


30%

20%

40%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

endowementplans

pensionplans

whole lifeplans

childrensplan

Q6) Why do you prefer private insurance companies ?

60%

10%5%

25%

0%

10%

20%

30%

40%

50%

60%

70%

high returns security tax benefit less risk

Q7) Why do you prefer LIC’S schemes ?

65


38%

32%

20%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

largestpublic sector

co

widelyacceptable

guaranteedreturns

flexible

Q8) How do you rate the quality of service provided by private insurance companies ?

41%

9%

5%

10%

35%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

good bad can't say average very good

Q9) How do you rate the quality of service provided by LIC ?

66


47%

22%

11% 13%

7%

0%5%

10%15%20%25%30%35%40%45%50%

Q10) According to you , which is the most trusted company of the following ?

76%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

LIC PIC

Q11) According to you , at the time of claims / maturity settlement which company is better ?

67


67%

33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

LIC PIC

Q12) Which of the following company gives you the better returns in the form of Bonus ?

66%

34%

0%

10%

20%

30%

40%

50%

60%

70%

LIC PIC

Q13) According to you , which company is better in building good customer relationships ?

68


76%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

LIC PIC

Q14) Which company better serves your need ?

79%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

LIC PIC

THANK YOU DATE : SIGNATURE

Project Analysis and Personal experience

69


AS AN LIC AGENT ,I JINESH MEHTA WOULD LIKE TO SHARE MY PERSONAL EXPERIENCE THROUGH THIS PROJECT. The Positive side of LIC as well as Negative side of LIC. I encourage other readers to correct me if I am wrong and also add light to any point that I may have missed.

First let’s talk about the Positive side of LIC

1. LIC is owned by the government and therefore it is the only company besides the PPF that has the sovereign guarantee of the govt. of India. It is a different story that today LIC has become so powerful that the govt. leans on LIC every time that the Stock Market crashes. Imagine having an Asset base of over Rs 6 Lac Crore. . That’s a 14 digit number! No company in India can boast of such figures. Mind boggling.

2. LIC is the only Life Insurance Company making profits. Most of the Private Insurers including the self proclaimed market leaders like ICICI and Bajaj Allianz are booking heavy losses. Check IRDA website in the Annual Report column. The point is that if an insurance company makes losses year over year, then how will they manage to pay the Claim amount? After all no Insurance company is here to do charity business.

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3. When it comes to paying claims, again LIC is Number One with the claims settlement ratio of more than 99%. Private Insurers cannot match LIC’s ability on claims settlement. Again, please visit IrDA’s website to see the claims settlement performance of various companies.

4. LIC has the world’s largest sales force, yes over 10 lac agents and now universities in western countries are trying to study how a company managed to appoint such a large sales force. A sales force of over 1 million! Truly a remarkable achievement.

5. Many people argue that LIC has not been able to penetrate the market as it has insured only 15% of the population. My point is, in a poor country like India where there are so many people living below the poverty line, so many people who die of starvation, so many people who don’t have access to basic medication, so many people who don’t have basic necessities of life like food, shelter, education and clothing. Will such a person first feed his children or buy Insurance ? Lets not forget that a majority of the Indian population is poor and a substantial percentage is living below the poverty line. At a personal level i feel that LIC has done a satisfactory job of insuring people.

# NOW THE NEGATIVE POINTS OF LIC #

The Administrative staff in LIC is in deep slumber. Try writing a complaint to them and they wont even bother to reply back. If

71


you ask the Branch Manager for the complaints book, he probably wont have it in place. If an Agent complains against any staff, then the Agent is black listed and next time onwards his work is not done.

In order to show a better performance & achieve branch targets, Agents are motivated by the Managers to split the policies. This not only adds to the in convenience of the policyholders but it also increases the expenses of LIC.

Competitions for Agents are held with Prizes being offered on the number of policies sold and not on the number of lives insured. Therefore many Agents are tempted to split the policies in order to get better prizes. However if an agent wants the forms or sales literature, most of the time its out of stock. But surprisingly just a week before any scheme is about to close, the office is flooded with forms & sales literature. This is very disturbing.

As I earlier said, LIC is lacking in Effective Leadership in recent times. Managers having designations like Marketing Manager or Sales Manager do not have the capability to motivate an audience at a meeting. Yes this is true even in a city like Mumbai. Even the Senior level managers cannot make effective presentations or design a sales strategy. Their only mantra at an Agents

72


meeting is "Friends, bring more policies!’. If you ask them how to bring more policies, they wont know. Its a pity !

Though LIC has more than 2000 branches, they are not systematically located. In Mumbai’s Fort area, LIC has more than 20 branches within a radius of 1.5kms. Whats the use ? In the suburbs where most of the people reside, there are no branches at all. LIC has no branches in Bandra East, Khar East & West, Santacruz East, Vile Parle East, Andheri West, Jogeshwari West, Mahim, Matunga, etc. If LIC gives a thought to systematic relocation of its offices, it will immensly help the policyholders

Even though LIC claims to have taken several initiatives in the IT sector, policyholders still face problems in revival of their policies, payment of premium in several branches, change of mode, change of address, etc. The After-sales policy services department needs to be revamped. Policyholders feel that LIC agents are humble while selling a policy and thereafter they fail to provide any service to the client.

To sum up, i would say that LIC will never cheat a Policyholder in payment of claim, but at the same time everyone will agree that LIC is not responsive to the needs of the customer. If you have purchased an LIC policies then dont forget to pay the premium on time, and when your policy gets

73


matured LIC will honestly pay your Maturity amount on time.

The employees are sometimes rude in their behaviour with the Policyholder. If a claim cheques is handed over by a courteous and smiling employee of LIC, it will enhance the image of LIC in the mind of the policyholder.

Today LIC is not just an Insurance Company, LIC is a Movement, LIC is a Cult, LIC is a Religion. Imagine 10 lac agents and 1 lac employees serving 16 crore policyholders in India. You cannot deny that LIC has become the way of life in India. Daily you can hear someone or the other talking of LIC in local trains,at restaurants, on News Channels, in your own offices, etc.

74


The Life Insurance Corporation of India has been a nation-builder since its formation in 1956. The Corporation has deployed the funds to the best advantage of the policyholders as the community as a whole.

Year on year LIC’s productivity and profitability provides shareholders with an improving dual return - as co-operative shareholders through a wider range of services and products and as

75


investors in the business, with a useful return on capital and an increasing share price.

The LIC investment strategy is very clear. It is based on their investment policy, IRDA regulations, Insurance Act and the LIC Act. According to the guidelines, 50 per cent of the total investible funds must be in government securities - 25 per cent should be in central government securities, and up to 50 per cent in both state and central government securities.

The market has come down by about 50 per cent from its peak in January, but the value of their investments have come down by only 15-20 per cent.

For LIC, the situation has turned out to be a boon, as the public is now more biased towards public sector entities like them instead of investing in private companies.

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1 ) Wings ready reckoner -2010 edition

2 ) Insurance principles and performance - DR. Harish M. chandarana

1.WWW.GOOGLE.COM 2.WWW.YAHOO.COM

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3. WWW.WIKIPEDIA.COM 4. WWW.LIC .COM

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http://WWW.LIC/

http://WWW.WIKIPEDIA.COM/

lic final proj of 83

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