International Journal of Social Science Tomorrow

Vol. 1 No. 2

Analytical Study on Indian Life Insurance Industry in Post Liberalization

Dr.Anshuja Tiwari, Assistant Professor, Barkatullah University Babita Yadav, Faculty of Managment

Abstract
India is fast emerging on the world map as a strong economy and a global power. With a huge population and large untapped market, life insurance happens to be a big opportunity in India. Soon after the liberalization, there was a remarkable improvement in the Indian life insurance industry. After 1991, the Indian life insurance industry has geared up in all respects, as well as it being forced to face a lot of healthy competition from many national as well as international private insurance players. The present descriptive and analytical secondary based study was conducted with an objective to analyze the condition of life insurance industry in postliberalization. Ten years of secondary data have been collected and analyzed by the researcher from the period 2001 to 2010. The study has been focused to analyze the overall impact of liberalization on life insurance business in terms of total premium income, total income, market share and number of policies. There is no significant impact of liberalization on the growth of Indian life insurance business is the main assumption of the present study. Private insurance companies are expanding their business and giving tough competition to LIC, continuous down fall in the market share of LIC after privatization, new business is increasingly going towards private insurance companies but still holding the dominant position and the most trusted brand among the people, in the post liberalization period, the life insurance industry of India witnessed a marvelous growth and touched its historical height are some of the major findings of study. The suggestions recommended by the researcher will be extremely useful for life insurers to bring further improvement in the business of life insurance and its penetration. Keywords: Competition, Liberalization, Life Insurance Industry, Insurance Growth, LIC, Private Life Insurers. ISSN: 2277-6168 April|2012 www.ijsst.com Page | 1

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1. Introduction
Life Insurance Corporation of India was the only company prior to liberalization and the monopoly of LIC breaks with the entry of private companies in life insurance business. The Indian insurance industry was opened for private insurers in the year 1999, with the enforcement and establishment of industrial regulatory and development authority act. Insurance sector in India is one of the booming sectors of the economy and presently growing at the rate of 35-40% per cent annually with a total insurable population of less than forty percent. Huge untapped population provides unlimited scope to life insurance companies for market expansion and penetration. There was a remarkable improvement in the Indian insurance industry soon after the Indian economic reform 1991 which is characterized by three important elements i.e. Liberalization, privatization, and globalization (lpg). In the post liberalization period, the life insurance industry of India witnessed a remarkable growth and it is being forced to face a lot of healthy competition from many domestic as well as international private insurance players.

1.1 Meaning Of Liberalization

Liberalization is the gateway of globalization and regulates the financial market by reduction of tariff and nontariff barriers, abolishment of industrial LICensing and by exercising control over foreign direct investment. The major purpose of liberalization was to free the large private corporate sector from bureaucratic controls. Liberalization of insurance industry has witnessed major structural transformations and growth in life insurance business. To end the monopoly of the life insurance corporation of India and to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers were some of the main motives behind liberalization. In the first year of insurance market liberalization (2001), ten private companies have registered under the life insurance category and this number has been increased to 22 in 2010. Today, a pubLIC giant LIC is facing direct competition with the rest 21 private life insurers. 1.1.1 Liberalization of Insurance Industry Liberalization means to free the economy from the direct control of the govt. And is an essential tool for privatization.the need for private sector entry has been justified on the basis of enhancing the efficiency of operations, achieving a greater density and penetration of life insurance in the country, and for a greater mobilization of long-term savings for an economy development. Until 1999, the business of life insurance in India was the monopoly of life insurance corporation of India. Privatization witnessed dynamic changes and phenomenal growth in life insurance businesses. Most of the private insurance companies are joint ventures with recognized foreign players across the globe. In the post-liberalized era in India, there has been phenomenal growth in the insurance sector. As of today, 22 private life insurers are competing with each other and most of the private insurance companies are joint ventures with recognized foreign players across the globe. In a period of over last ten years, the private players are able to expand the market (growing at the rate of 3035% annually) and also have significantly, improved their market share. On the contrary, the market share of LIC has been considerably declined from 99% (1999-2000) to 64.34 % in (2009-10). The private insurers are better in the areas of customer service, after-sales services, product innovation & flexibility, communication etc where insurance giant LIC is not performing effectively. Liberalization and privatization of insurance industry brought tremendous growth in life insurance business. Certain positive developments experienced by the industry are given as below: Wide range of products: private sector offer a huge range of new and innovative products for different segments of the population with a wide variety of benefits like competitive premium rates, rider options, maturity periods etc.. Now days, the consumers have flexible options to select as per their requirements. Insurance awareness: with increased level of advertising budgets, insurers now-a-days, have greater reach to almost every nook and corner of the country. Insurance penetration: life insurance penetration in India improved since liberalization in 2000. From 2.15% in 2001-02, insurance penetration rose to 4.0% in 2009-10. Expansion of business, wide range of innovative products, development and effective use of new distribution channels by private life insurance players. Increase contribution in gdp- the level of penetration which is the measure of premiums as a percentage of a countrys gdp in life insurance has a strong positive correlation to income levels. India, with its huge middle class households, exhibits untapped potential for the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. Thus India continues to be an attractive market for most insurance players both domestic and foreign.

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2. Review Of Literature

C. Barathi, C. D. Balaji and Ch. Ibohal Meithei (2011), in the research paper title I nnovative Strategies To Catalyse Growth Of Indian Life Insurance Sector-An Analytical Review have clearly discussed about the impact of global recession on the fastest growing Indian insurance market. He find the entry of many private companies has created a paradigm shift in insurance marketing in India in terms of products, tariffs; customer service etc. The paper is exploratory and secondary based in nature and explores the various strategic options that can be effectively implemented by the life insurers to improve the coverage and penetration of life insurance this paper explore the strategies that insurance companies can adopt in order to counter the negative impact of the global economic recession. The findings of the study is that companies instead of focusing only on improving the variety of products needs to focus on targeting new segments and implement innovative strategies in order to achieve sustained growth and ensure profitability of business as well as growth of insurance coverage. Krishnamurthy. S, Mony S.V, Jhaveri. N, Bakhshi.S, Bhat.S and Dixit M.R (2005), in the paper titled Insurance Industry in India: Structure, Performance and Future Challenges, has clearly explained the status and growth of Indian Insurance Industry after liberalization and also presents future challenges and opportunities linked with the Insurance. Insurance is the backbone of cou ntrys risk management system and influence growth of an economy in several ways. Penetration of Insurance largely depends on availability of Insurance products, insurance awareness and quality of services. The future growth of this sector will depend on how effectively the insurers are meeting the expectations of their customers and able to change the perceptions of the Indian consumers and make them aware of the insurable risks. On the demand side, the rises in income will trigger the growth of Insurance. The process of reforms has enhanced competition, provided a choice to the customers, improved the efficiency level of the Industry and obligated the insurers to provide social and rural sectors. LIC continues to remain strong in rural areas while in major urban and metros the private insurers have made their presence felt. Kundu (2003) in an article titled Whats next in Indias Insurance market discussed the changes in various issues of Insurance Industry after the entry of new players. Despite of having huge population, India still has a low insurance penetration. Today, people are increasingly looking not just at products but at integrated financial solutions that can offer stability of returns along with total protection. Technology will play an important role in aiding design and administrating of products as well in efforts to build long customer relationships. Kapse.S and Kodwani d.g (2003) in their article titled insurance as an investment option . It is argued that in the changing scenario for the insurance sector there is going to be a good opportunities for insurance sector to expand its market base. For this purpose there is need to improve the features of the insurance products to make them more liquid or short term schemes could be increased. It is shown that although rewards implied by the insurance products particularly by the tax benefits are quite close to those observed in banks and small saving scheme of the governments. Murthy, R.Babu and Ansari (2009) in the paper examined the performance of Life Insurance Corporation. Due to globalization of financial services and liberalization of economy, the Life Insurance Corporation of India (LIC) has been facing intense competition from the new entrants and is also playing a lead role in the life insurance industry. The purpose of the study is to analyze the growth and development of LIC business before and after liberalization, ways to improve customer services and to make appropriate suggestions for the improvement in LIC business. There is no doubt that, life Insurance Industry has grown significantly with the entry of private players but the market share of LIC has declined gradually over a period of years. The direct competition from the private players has forced LIC to look for effective marketing strategy with innovative products and better customer services in order to satisfy existing policyholders and policy seekers Creating a win-win situation for both the parties are the main aim of this study to achieve this healthier competition has to be intensified by both the sectors, to increase insurance-density and penetration levels in order to fulfill customer needs and reach their expectations of the Indian Insurance market. Paramita Chatterjee (2009) in her article titled Private insurers command majority share of life Insurance market. She evidently said private insurers recorded 62% growth rate in April -December 2008 against 45% in the same period of last fiscal. ICICI Prudential, HDFC Standard, SBI Life and Bajaj Allianz are the dominant players of the life Insurance sector. LIC a market leader recorded a decline of 28% and experts said the Industry has witnessed a reasonable growth despite the tight financial conditions. Rastogi. S and Sarkar.R (2006), in the research paper deals with enhancing competitiveness: the case of the Indian life insurance industry identifies the causes and the objectives with which the sector was reformed in 2000. Despite oh huge population and abundance growth opportunity, India was one of the least insured ISSN: 2277-6168 April|2012 www.ijsst.com Page | 3

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countries compared to the other developed nations. In view to increase market penetration, the life insurance sector was opened for private entry in the year 2000. Opening of the sector to private firms was aimed at fostering competition and innovation through a greater variety of products. The study was an effort at studying the trends emerging with in this sector and an attempt has been made to analyze whether the industry has benefited from the governmental reforms. Hence this paper is an endeavor towards analyzing the industry in its present form and comparing it with the pre-liberalized era, thereby understanding the alternate strategies that can facilitate the development of sound policies and practices leading to a globally competitive insurance industry within the country. Tripathi. S (2009) in his dissertation report on A comparative analysis of LIC and Private Insurance Companies. The main objective of the study is to compare the performance of LIC and private life insurance companies. The study was analytical and based on secondary data sources. Comparison between LIC and private insurers has been done on the basis of size, growth, productivity and grievances handling mechanism. Private companies are giving direct competition to LIC, LIC is a dominating player even after privatization and abundance scope of insurance expansion in the Indian market, LIC is having huge customer base being an old giant are some of the main findings of this study. He concluded that LIC is a most popular and leading brand but with aggressive marketing approach; private companies are giving direct competition to LIC.

2.1 Need of the Study

When compared with the developed foreign countries, the Indian life insurance industry has achieved only a little because of the lack of quality strategies adopted by the LIC, lack of standard education and awareness about savings, low capital per income and lack of employment opportunities. Since the introduction of new economic policy (lpg) in the year 1991, the shape of the Indian life insurance industry has been changing and it has geared up. The huge and ever rising population levels in our country provide an attractive opportunity for the global insurance majors to seek their fortunes here. That is the reason we find so many private players today competing with LIC the only life insurer prior to liberalization for insuring Indian lives. The study is basically intended to analyze the condition of life insurance industry after liberalization.

2.2 Importance of the Study

The insurance industry is one of the fastest growing industries in the country and offers unlimited growth potential. The LIC was the only company in life insurance business in India from 1956 to 1999. The low performance, poor customer services, ineffective marketing, low insurance penetration were some of the problem with LIC. In view to overcome these problems and improved market penetration; liberalization of Indian insurance industry were announced in an IrDA reform 1999. Hence the researcher has taken up the present study to analysis the present condition of life insurance in post liberalization and benefits to the industry after opening up of the sector to the private insurers.

2.3 Objectives Of The Study

To examine the need of liberalization in Indian life insurance industry. To analyze the condition of life insurance business in post-liberalization period. To analyze the impact of liberalization on Indian life insurance business. To compare the performance of LIC and private life insurers. To provide suggestion to improve the performance of life insurance business in India.

2.4 Hypothesis
H0: There Is No Significant Impact Of Liberalization On The Growth Of Indian Life Insurance Business. Ha: There Is A Significant Impact Of Liberalization On The Growth Of Indian Life Insurance Business.

3. Research Methodology
Type of Research Data Collection Statistical Tools : : : Descriptive and Analytical Research Completely Secondary Based Bar graphs and simple tabulation.

4. Data Analysis & Discussion

4.1 Post-Liberalization Period (2001-2010)
Since opening up the sector, the life insurance market in India witnessed dynamic changes and the entry of a number of global life insurers has increased competition in the Indian life insurance market. The present intense competition has forced the life insurance industry to improve its risk management abilities that has greatly benefited the policyholders. Today customers are more aware and conscious of the need of the life insurance to meet uncertainties like sudden death, accident or protection against old age. The number of private life insurers ISSN: 2277-6168 April|2012 www.ijsst.com Page | 4

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has more than doubled from 10 in 2001 to 22 in 2010 with expansion of existing as well as new players continuing to rise.

4.2 Impact of Liberalization on Life Insurance Industry

LIC and private life insurers have a significant role in the growth of an economy. A performance analysis of both the sectors have been done based on some important parameters such as total life insurance premium income, number of policies, total income and market share. Total Premium Income: Total premium income is one of the important and main indicators of the performance of the insurance business. The total premium income of LIC and the private players during 2001-02 to 2009-10 has been presented in table no. 1. This table presents the growth in total premium income of both the sectors and the industry in a period of over ten years. Table No. 1: Total Life Insurance Premium Income FY (2001-2010) FY LIC PRIVATE INDUSTRY
20012002 49821.91 272.55 50094.46 20022003 54628.49 1119.06 55747.55 20032004 63533.43 3120.33 66653.75 20042005 75127.29 7727.51 82854.80 20052006 90792.22 15083.54 105875.76 20062007 127822.84 28242.48 156065.32

Rs. In Crores
20072008 149789.99 51561.42 201351.41 20082009 157288.04 64497.43 221785.47 20092010 186077.31 79373.06 265450.37

Interpretation: It has been clearly pointed out from the table no.1, that the total premium income of LIC and private players during 2001-02 was Rs. 49821.91 crores and Rs. 272.55 respectively. There has been a constant increase in the total premium income of LIC being Rs. 49821.91 crores in 2001-02 to Rs. 54628.49 crores in 2002-03. It further increased to Rs. 75127.29 crores in 2004-05 and again increased to Rs. 90792.22 crores and 127822.84 crores respectively in the year 2005-06 and 2006-07. The premium income mounted to Rs. 149789.99 crores and Rs. 186077.31 crores respectively in the year 2008-09 and 2009-10. In case of LIC, the total premium income was maximum in the year 2001-02 & 2006-07 as against the previous years. Likewise, private life insurers have also witnessed a significant increase in the premium income from Rs. 272.55 crores in 2001-02 to 79373.06 crores in the year 2009-10. The growth in the total premium income was recorded maximum in the year 2002-03 and due to recessionary affect the downfall was more in the year 2008-09 as against the other years. The total premium income of the industry has been constantly increased from Rs. 50094.46 crores in 2001-2002 to Rs. 55747.55 crores in 2002-03, and again increased to Rs. 66653.75 crores in 2003-04 and to Rs. 66653.75 crores in 2004-05. It further increased to Rs. 82854.80 crores and Rs. 105875.76 crores respectively in the year 2004-05 and 2005-06. In the year 2006-07, the premium income of industry increased to Rs. 156065.32 crores and further mounted to Rs. 201351.41 crores in 2007-08 and reached to Rs. 265450.37 crores in the year 200910. The premium income of the industry was maximum in the year 2006-07. Thus it can be depicted that an overall positive growth has been noticed in total premium income of life insurance business in a period of ten years from 2001 to 2010. Table No. 2 : Growth over Previous Year in Total Premium Income 20012002200320042005FY 02 03 04 05 06 42.79 9.65 16.30 18.25 20.85 LIC PRIVATE 412.41 310.59 178.83 147.65 95.19 INSURERS INDUSTRY 43.54 11.28 19.56 24.31 27.78 Growth In Total Premium Income
2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 0 100 LIC 200 300 Private Insurers 400 INDUSTRY (TOTAL) 500 600

200607 40.79 87.24 47.38

200708 17.19 82.57 29.01

(In %) 2008200909 10 5.01 18.30 25.09 10.15 23.06 19.69

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Interpretation: The above table no.2 and graph no. 1, presents the growth in total premium income over the previous years. In the case of LIC, the premium growth was 42.79 % in 2001-02 and it come down to 9.65% in the year 2002-03 and again increased to 16.30% in 2003-04.there has been a continuous growth in the amount of premium income from 2004-05 (18.25%) onwards to up to 2006-07 (40.79%). In 2007-08, the growth was 17.19% and it decreased to 5.01% in 2008-09 and again increased to 18.30% in 2009-10. Likewise, private insurers have recorded a growth of 412.41% in the initial year of entry in life insurance industry. From 2002-03 onwards, the growth in premium income has been decreased in every successive years as against the previous year. Private insurers has shown maximum decline in the year 2008-09 that is 25.09% as against the previous year of 82.57%. The maximum premium growth of the industry has seen in the year 2001-2002 (43.54 %) and 2006-07 (47.38%) as against the previous year. Premium income of the industry has been increased every year, except a downfall in the growth in 2002-03 and 2008-09. Number of Policies: New Business It is another important indicator of growth and performance of the insurance companies. It is a pointer towards the spread of message of insurance among those people who have never availed of the benefits of life insurance as well as the existing policyholders. The table no. 3 presents the complete picture of the performance of new business in terms of number of policies of both LIC and private life insurers in a period of ten years from 2001 to 2010. Table No. 3: Total Number of Policies (In Lakhs) FY 2001-02 2002-03 2003-04 2004-05
LIC PRIVATE INDUSTRY
232.75476 232.75476 245.29946 836.621 108.19204 269.68069 165.8846 286.26916 240.27393 223.3075 262.11198

2005-06
315.90515 387.1410 354.62117

2006-07
382.29292 792.2294 461.51586

2007-08
376.12599 132.61558 508.74157

2008-09
359.12667 150.10710 509.23377

2009-10
388.6378 143.62 532.25

Interpretation: It has been revealed out from the table no.3, that the performance of LIC in terms of new policies business has deteriorated and those of private players have been improved tremendously. In 2001-02, the number of policies of LIC was only 232.75476 lakhs which increased to 269.68069 lakhs in 2003-04. But in 2004-05, instead of increase, there is fall in the no. pf policies to 240.27393 lakhs. Further, the no. of policies increased to 388.637 lakhs in the year 2009-10. Whereas in the case of private players, in the year 2002-03 the no. Of policies was only 836.621 lakhs and it further dropped down to 165.884 and 223.307 crores in the year 2003-04 and 2004-05 respectively. Further, the no. of policies has increased to 792.229 lakhs in the year 200607 against 387.141 crores of the previous years 2003-04. .with every successive year, private players are gaining the trust of the pubLIC and have quite successful in snatching the business from LIC. The number of policies of industry has increased in all years except 2004-05, where a decrease of 262.11198 is recorded from 286.26916 of the previous year. The increase in number of policies was maximum in the year 2005-06 and 2006-07. Hence it can be inferred that, there is considerable growth in the number of new policies business in a period of post liberalization. Table No. 4: Growth Over Previous Year in Number of Policies (In %) FY 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 5.39 9.93 -11.09 31.75 21.01 -1.61 -4.52 8.21 LIC PRIVATE -80.17 34.62 73.37 104.6 67.40 13.19 -4.32 INSURERS 8.9 8.6 -8.4 35.3 30.1 10.2 0.10 4.52 INDUSTRY Graph No.2: Growth In Number Of Policies: New Business
200 150 100 50 0 2002-03 -50 -100 FY 2001-02 LIC Private INDUSTRY 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation: It is revealed from the table no.4 and graph no.2, that new business of LIC in terms of number of policies has increased in all years, except the year 2004-05, 2007-08 and 2008-09 with a negative growth rate ISSN: 2277-6168 April|2012 www.ijsst.com Page | 6

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of -11.09%, -1.61% and -4.52 % respectively. Likewise private players have also been shown positive growth against the previous year, except the year 2003-04 and 2009-10 with a negative growth of -80.17% and -4.32% respectively. The growth of industry was 8.9% in 2002-03 and decreased to 8.6% in 2003-04, a negative growth of -8.4%has seen in the year 2004-05. In the year 2005-06, the growth in number of policies was remarkably high (35.3%) as against the negative growth of the previous year. There was many up and downs seen in the policy growth of industry. The growth was registered maximum in the year 2005-06 and lowest in 2008-09 due to the global slowdown of the economy. Total Income Total income is the overall revenue of the life insurers. The total income is the sum of Premium Income, FPI, Renewal Premium and it has been increased significantly in every year. The below table no. 5, presents total income of LIC and private insurers from the study period 2001 to 2010. Table No. 5 Total Income of Life Insurance Industry FY 2001-02 2002-03 2003-04 2004-05 53968 80982 93089 112393 LIC PRIVATE 2617 4323 9049 INSURERS 83599 97412 121442 INDUSTRY 53968

2005-06 132147 18863 151010

2006-07 174425 24242 198667

2007-08 206363 52648 259011

2008-09 217274 77970 295244

2009-10 261773 125826 387599

Interpretation: It has been elucidate from the table no. 4, that the total income of both pubLIC and private life insurer players has been significantly increased over a period of ten year from 2001 to 2010. The total income of LIC was Rs. 53968 in 2001-2002 and it has increased to Rs. 132147 in 2005-06 and further it rose to Rs. 261773 in the year 2009-2010. The total income of all private insurers was only Rs. 2617 crores in 2002-03 and it has increased to Rs. 9049 crores in 2004-05 an almost more than thrice of the initial year. Further, in the year 200506 the total income increased to Rs. 18863 crores which an almost double of the previous year 2004-05. The income is consistently rising and achieved the target of Rs.125826 crores in the year 2009-10. The total income of industry has increased from Rs. 53968 crores in 2001-02 to Rs. 97412 crores in 2003-04. It further, rose to Rs. 151010 crores in 2005-06 from Rs. 121442 crores of the previous year 2004-05. During the year 2007-08, total income of the industry has reached up to Rs. 259011 crores and then again mounted to Rs. 295244 crores and Rs. 387599 crores in the year 2008-09 and 2009-10 respectively. Thus it can be concluded that a life insurance industry has achieved a remarkable growth after privatization and the entry of large number of private players with new technology and innovative tailor-made product has improved the performance and growth of Indian life insurance business. Table No. 6 Growth Over Previous In Total Income (In %) FY 2001-02 2002-03 2003-04 2004-05 2005-06 50.05 14.9 20.7 17.5 LIC PRIVATE 65.18 165 109.3 108.4 INSURERS 54.91 17.8 24.6 24.3 INDUSTRY Graph No. 3 Growth in Total Income
250

2006-07 32 28.5 31.5

2007-08 18.3 117 30.3

2008-09 3.08 48.09 13.9

2009-10 20.4 61.3 31.28

200

Total Income (%)

150

100

50

0 FY 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation: It has been elucidate from the table no. 6 and graph no. 3 , that growth in the total income of LIC was 50.05% in 2002-03 and in 2003-04 it was fall down to 14.9% and again rose to 20.7% in 2004-05. During the year 2006-07, the growth in total income was 32% as against 17.5% in 2005-06. The growth in total ISSN: 2277-6168 April|2012 www.ijsst.com Page | 7

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income again declined to 18.3% in 2007-08. It further decreased to 3.05% in 2008-09 as against the previous year and 2009-10 it again increased to 20.4%. Likewise, private life insurers has also witnessed a significant growth of 65.18% in 2002-03 and it again rose to 165% in 2003-04, but in 2004-05, the growth in total income declined to 109.35% and 108.4% in 2005-06. The year 2006-07 was not good for private insurers, as the growth sharply declined to 25.7% and it again it increased to 117% in the year 2007-08. In 2008-09, it again declined to 48.09% and further mounted to 61.3% in 2009-10. The industry has witnessed 54.91% growth in total income in 2002-03 and declined to 17.8 % in 2002-03 and in 2003-04 it increased to 24.6% in the year 2004-05. The income growth was 31.5% in 2006-07 as against 24.3% in 2005-06. In the recession period of 2008-09, the income growth was suddenly dropped to 13. 9% as against 30.3% of the previous year 2006-07. In 2009-10, the growth again rose to 31.28%.

Market Share
Market share is also an important indicator of growth and performance of the insurance companies. Market share is the percentage of share captured by any company. A company with high market share reflects strong market position against the competitors and vice-versa. Table No. 7 presents the market share in terms of total premium of both LIC and private life insurers from the period 2001 to 2010. Table No. 7 Market Share in Terms of Total Premium (In %) FY LIC 2001-2002 99.46 2002-2003 97.19 2003-2004 95.29 2004-2005 90.67 2005-2006 85.75 2006-2007 81.90 2007-2008 74.39 2008-2009 70.92 2009-2010 70.10 Total 100 Graph No. 4 Market Share
Market Share in terms of total premium (2001-2010)
Market share of LIC & Private Insurer (In percentage)

PRIVATE INSURERS 0.56 2.01 4.71 9.33 14.25 18.10 25.61 29.08 29.90 100

(Source: Compiled From IrDA Annual Reports)

120 99.46 100 80 60 40 20 0.56 0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Years 2.01 4.71 9.33 14.25 18.1 29.08 29.9 97.19 95.29 90.67

85.75

81.9 74.39 70.92 70.1 LIC Private Insurers

25.61

Interpretation: It has been revealed out from the table no. 7 and graph no. 4, that the market share of all the private players has sharply risen from 0.56% in 2001-02 to 29.9% in 2009-10. Contrary to this, the market share of LIC has been decreasing year by year with the entry of private players in life insurance market. It has decreased from 99.46% in 2001-02 to 70.1% in 2009-10. Thus after the entry of private players in this sector, there has been constant fall in the market share of LIC in terms of total premium. This indicates that the private players are doing quite well and are improving year by year, thus affecting the performance of LIC.

5. Findings:
The total premium income of the industry has increased from Rs. 50094.46 crores in 2001-2002 to Rs. 265450.37 in 2009-2010. This shows that life insurance industry has achieved a remarkable growth in the premium income after the entry of private insurers. April|2012 www.ijsst.com Page | 8

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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 polices has subsequently increased year after year but the performance of LIC has deteriorated and those of private players have been improved tremendously. With every successive year, private players are gaining the trust of the pubLIC and have quite successful in snatching the business from LIC. 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. The total income of LIC was Rs. 53968 in 2001-2002 and it has increased to Rs. 132147 in 2005-06 and further it rose to Rs. 261773 in the year 2009-2010. The total income of all private insurers was only Rs. 2617 crores in 2002-03 and it has increased to Rs. 125826 crores in the year 2009-10. Thus it can be inferred that a life insurance industry has achieved a remarkable growth after privatization. LIC, being the oldest player in the existing insurance market, has the biggest market share of 64.39% which was 99% in the year 1999-2000. We see that private insurance companies are penetrating in the customer base of LIC. Private insurance companies are giving a tough competition to the LIC. LIC is today competing in the industry with 22 private sector insurers and from the table 5.7 it is revealed out, that the market share of LIC has declined to 70.10% in 2009-10 from 99.46% in 2001-02. The market share of private insurers has been increased noticeably in over of period of ten years of post liberalization. Based on the performance analysis of LIC and private insurers, it is found that premium income, number of policies, total income and market share of LIC is more than the private insurers. This shows that LIC is better than private insurers and people most trusted brand with leading market position even after privatization. Analysis of hypothesis: based on the secondary data analysis, it has been proved that liberalization has a significant impact on the growth of Indian life insurance business.

6. Suggestions
LIC was the only company in life insurance business prior to privatization and after privatization also LIC has a strong presence in life insurance market and to retain its market leader status the LIC needs to acquire more competitiveness in terms of product innovation, customer awareness, customer services and technology. The liberalization of the Indian insurance sector has both pros and cons. The ill-effects of liberalization on insurance industry can be lessen by promoting healthy competition among the life insurers and keeping the interest of common people above profit motive of the insurers. To achieve greater insurance penetration, the healthier competition has to be intensified by both the sectors and they should come up with new innovative products to offer greater variety or choice to the customers and also make improvement in the quality of services and sell products through appropriate distribution channel to win-win situation for both the parties. Life insurance is completely a customer oriented business and customer is the king in the market. Awareness of private insurance company is quite high but still many hesitate to invest. Therefore it is important to create trust and confidence among the investors that private insurance is a safer option for investing. To create trust among policy holders, insurance companies should train their sales force to be ethical, understand customer needs and sell appropriate products and provide complete information to the customers so that they can make informed choices. In present stiff market competition, a focus on niche segment can be an effective way of marketing for insurers to differentiate from the competitors. Focus on to design attractive product schemes with attractive premium structure to suit varied requirements of the investors by considering their financial position. Insurance schemes which are basically risk coverage instruments have been marketed as tax saving as well as wealth accumulation instruments. Keeping this in mind, insurance companies should devise policies which provide effective risk coverage rather than focusing on the tax benefits and also encourages them for long term investment in insurance.

7. Conclusion
India is among the important emerging insurance markets in the world. Life insurance will grow very rapidly over the next decades in India. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. Competition has brought more product innovation and better customer servicing and bring positive influence on the life insurance business. India insurance is a flourishing industry, with several national and international players competing and growing at rapid rates. The overall business of life insurance has been significantly increased after privatization but still a huge Indian population ISSN: 2277-6168 April|2012 www.ijsst.com Page | 9

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lives is being uninsured. Although LIC is a giant player in life insurance business but private insurance companies are moving at a fast pace. Though the income, size and penetration of private insurance companies is less when compared with LIC but then also the pace with which they are raising their market share is tremendous. Private insurance companies with its new innovative products and better customer services are expanding their business and will certainly going to give a tough competition to LIC in the coming days. The above mentioned figures and discussion supports that the liberalization has an overall positive impact on the growth and performance of life insurance industry in India.
Dr.Anshuja Tiwari is presently working as Assistant Professor in the Department of Commerce at Barkatullah University, BHOPAL (M.P.). She has earned a teaching experience of more than 16 (sixteen) years of Post Graduate and Graduate classes in commerce and management.. She has approximately 50 research papers to her credit published in reputed National & International journals. Babita Yadav (MBA, M.A in Economics & UGC-JRF) , Faculty of Managment, more than 6 years full time teaching experience in various reputated universities and management colleges plus have good no. Of paper publication in national and international journals/ conferences. Presently, a research scholar in R.D.V.V University, Jabalpur (PH.D in Commerece) near submission stage.

References:
C. Barathi, D. Balaji And Ch. Ibohal Meitei (2011), Innovative Strategies To Catalyse Growth Of Indian Life Insurance Sector-An Analytical Review, Indian Journal Of Commerce And Management Studies, Vol. Ii, Issue IV, May 2011. Chatterjee. P (2009) In Her Article Titled Private Insurers Command Majority Share Of Life Insurance Market. Krishnamurthy. S, Jhaveri. Nani, Bakshi. S (July-Sept 2005), Insurance Industry in India: Structure, Performance and Future Challenges, Vikalpa, Iima Volume 30, No. 3, Pg No. 93-95. Kundu. S (2003), Whats Next In Indias Insurance Market, Knowledge Digest Com., May 12. Murthy.T.N (2009), "Performance Evaluation of Lic", Icfai Journal of Risk & Insurance, Jan- April 2009, Vol. II. Rastogi. S and Sarkar.R (2006), Enhancing Competitiveness: The Case Of The Indian Life Insurance Industry, Conference On Global Competition & Competitiveness Of Indian Corporate, IIMK, September 2006. Sampada Kapse & D.G Kodwani (2003), Insurance As an Investment Option, the Insurance Time, May 2003, Pg No. 12. Sumninder Kaur Bawa (2007), Life Insurance Corporation of India: Impact of Privatization And Performance, Regal Publication, New Delhi. Tripathi.S (2009), A Comparative Analysis of Life Insurance Corporation and Private Insurance Company Dissertation Fms Banaras Hindu University, Page No. 53-58. IRDA Annual Report 2009-10. www.irda.org

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