CHAPTER 1

INTRODUCTION
1. CONCEPT OF INSURANCE
Life has always been an uncertain thing. To be secure against unpleasant possibilities,
always requires the utmost resourcefulness and foresight on the part of man. To pray
or to pay for protection is the spirit of the humanity. Man has been accustomed to
pray God for protection and security from time immemorial. In modern days
Insurance Companies want him to pay for protection and security. The insurance man
says "God helps those who help themselves"; probably he is correct.
Too many people in this country are not in employment; and work for too many no
longer guarantees income security. Several millions are part-time, self employed and
low-earning workers living under pitiable circumstances where there is no security
cover against risk. Further the inherent changing employment risks, the prospect of
continual change in the work place with its attendant threats of unemployment and
low pay especially after the adoption of New Economic Policy and the imminent life
cycle risks - a new source of insecurity which includes the changing demands of
family life, separation, divorce and elderly dependents are tormenting the society.
Risk has become central to one's life. It is within this background life insurance policy
has been introduced by the insurance companies covering risks at various levels. Life
insurance coverage is against disablement or in the event of death of the insured,
economic support for the dependents. It is a measure of social security to livelihood
for the insured or dependents. This is to make the right to life meaningful, worth
living and right to livelihood a means for sustenance. Therefore, it goes without
saying that an appropriate life insurance policy within the paying capacity and means
of the insured to pay premium is one of the social security measures envisaged under
the Indian Constitution. Hence, right to social security, protection of the family,
economic empowerment to the poor and disadvantaged are integral part of the right to
life and dignity of the person guaranteed in the constitution.
Man finds his security in income (money) which enables him to buy food, clothing,
shelter and other necessities of life. A person has to earn income not only for himself
but also for his dependents, viz., wife and children. He has to provide legally for his
1

family needs, and so he has to keep aside something regularly for a rainy day and for
his old age. This fundamental need for security for self and dependents proved to be
the mother of invention of the institution of life insurance.
What is Insurance :
The business of insurance is related to the protection of the economic values of assets. Every
asset has a value. The asset would have been created through the efforts of the owner. The
asset is valuable to the owner, because he expects to get some benefit from it. The benefit
may be an income or some thing else. It is a benefit because it meets some of his needs. In the
case of a factory or a cow, the product generated by is sold and income generated. In the case
of a motor car, it provides comfort and convenience in transportation. There is no direct
income.
Every asset is expected to last for a certain period of time during which it will perform. After
that, the benefit may not be available. There is a life-time for a machine in a factory or a cow
or a motor car. None of them will last for ever. The owner is aware of this and he can so
manage his affairs that by the end of that period or life-time, a substitute is made available.
Thus, he makes sure that the value or income is not lost. However, the asset may get lost
earlier. An accident or some other unfortunate event may destroy it or make it non-functional.
In that case, the owner and those deriving benefits from there, would be deprived of the
benefit and the planned substitute would not have been ready. There is an adverse or
unpleasant situation. Insurance is a mechanism that helps to reduce the effect of such adverse
situations.
Insurance, in law and economics, is a form of risk management primarily used to hedge
against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk
of a potential loss, from one entity to another, in exchange for a premium. Insurer, in
economics, is the company that sells the insurance. Insurance rate is a factor used to
determine the amount, called the premium, to be charged for a certain amount of insurance
coverage. Risk management, the practice of appraising and controlling risk, has evolved as a
discrete field of study and practice.

PROGRESS IN INSURANCE BUSINESS

The growth of Life Insurance in concrete terms could be said to being during the first two
decades of twentieth century when most of the major companies were founded. They grew in
terms of rise in the number of companies, in terms of number of policies and sum assured as
well as total life fund. Indian Insurance Year Book, published for the first time in 1914, gives
the figure of the total business-in -force as 22.44 crore which grew to Rs. 298 crore in 1938.
In 1914, there were only 44companies transacting insurance business in India, and during the
next 25 years their number rose to 176. The total progress on all the primary heads, viz. life
fund (Rs. 50.50 crore), premium income (Rs. 10.50 crore) and new business (Rs. 43.30 crore)
indicate that Indian Insurance Business had been making a definite headway during this
years. The inter-war -years thus saw rapid growth life insurance in India.
The promotion of new life insurance companies continued to be almost a craze and insurance
companies mushroomed. In this period, 176 insurance companies were formed and many of
them failed. Thus unhealthy growth was harmful to the interest of the policy holders and
insurance business in India. Feeling concerned about it, the All India Life Assurance Offices'
Association urged upon the Government in 1932 to undertake the insurance legislation to
(a) Compulsorily register all Life Insurance companies.
(b) Secure a deposit of Rs.2 lakh from all Life Insurance companies.
(c) Compel foreign companies doing business in India to keep sufficient funds in
India securities to meet their liabilities under all policies issued in India

GROWTH OF LIFE BUSINESS IN INDIA: 1914-1948

Sr
1914 1930
1940
1945
no
1

No of insurers

44

68

(a) Indian

44

68

(b) Non-Indian
Total No. of
2
policies In force

1948

195
179
(91.79)

215
200
(93.02)

209
189
(90.43)

16

15

20

748997

1628381 2714000 3016000

(a) Indian

513925
(68.61)

1371963 2376000 2791000

(84.25) (87.55) (90.15)

(b) Non-Indian
Indian outside
(c) India

220703

181247 261000

234000

14369

75171

202000

77000

Total business in
force

22.44

258.42

304.03

573.07

712.76

(a) Indian (Rs. Crore) 22.44

84.89
(32.85)

225.51
(74.17)

459.43
(80.17)

566.38
(79.46)

69.76
3.77

60.12
18.4

91.85
21.79

101.08
45.3

6.36

20.53

62.41

107.4

150.39

(b) Non-Indian
(c) Indian outside
India
Total life funds
4
(Rs. Crore)

Note: Figures in brackets show percentage of the total.

ENTRY OF PRIVATE COMPANIES

Under the IRDA Act, private companies can now operate in India's insurance
industry. However, they must obtain a license from the IRDA before being
permitted to write business.
To have its license application considered, a domestic private company must be
registered in accordance with the Companies Act of 1956 and have approximately
US$ 20 million of investment capital. The specific licensing requirements that
Private Indian Companies must fulfill are set forth in the Registration on Indian
Insurance Companies Regulations, published by the IRDA 2000.
OVERVIEW OF THE CURRENT INSURANCE MARKET
In the years since the IRDA Act initiated market reforms, the insurance sector has
experienced some remarkable changes.
The entry of a large number of Indian and Foreign private companies in life
insurance business has to lead greater choice in terms of products and services.
Increased consumer awareness of the benefits and importance of insurance and
reinsurance has generated many more buyers; and new distribution channels_
among them brokers, bank assurance, the Internet, and corporate agents_ have
provided additional ways of getting products and services to customers.
Private insurance companies have to date written a small percentage of business in
this sector during the last three years, but they have ushered in a competitive
environment that has accelerated market growth.
State owned insurers still write the bulk of insurance business, and they have the
net worth required to underwrite large corporate risks without depending almost
4

entirely on reinsurance support. However, their focus on restructuring is beginning

to put them at a disadvantage against private competitors.
Over the next few years, the share of the market held by the public insurers is
expected to drop substantially, with private companies assuming a growing
percentage of the business written.
At present there are 15 private insurers with two standalone private players and
remaining private-foreign joint venture.

Purpose and Need of Insurance :

Assets are insured, because they are likely to be destroyed through accidental occurrences.
Such possible occurrences are called perils. Fire, floods, breakdowns, lightening,
earthquakes, etc, are perils. If such perils can cause damage to the asset, we say that the asset
is exposed to that risk. Perils are the events. Risks are the consequential losses or damages.
The risk to a owner of a building, because of the peril of an earthquake, may be a few lakhs
or a few crores of rupees, depending on the cost of the building and the contents in it.
The risk only means that there is a possibility of loss or damage. The damage may or may not
happen. Insurance is done against the contingency that it may happen. There has to be an
uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is no
uncertainty about the occurrence of an event, it cannot be insured against. In the case of
human being, death is certain, but the time of death is uncertain. In the case of person who is
terminally ill, the time of death is not uncertain, though not exactly known. He cannot be
insured.
Insured does not protect the asset. It does not prevent its loss due to peril. The peril cannot be
avoided through insurance. The peril can sometimes be avoided through better safety and
damage control management. Insurance only tries to reduce the impact of the risk on the
owner of the asset and those who depend on that asset. It only compensates the losses and
that too, not fully.
Only economic consequences can be insured. If the loss is not financial, insurance may not be
possible. Example of non-economic losses are love and affection of parents, leadership of
managers, sentimental attachments to family heirlooms, innovative and creative abilities, etc.

How Insurance Works?

The mechanism of insurance is very simple. People who are exposed to the same risks come
together and agree that, if any one of them suffers a loss, the others will share the loss and
make good to the person who lost. All people who send goods by ship are exposed to the
same risks, which are related to water damage, ship sinking, piracy, etc. Those owning
factories are not exposed to these risks, but they are exposed to different kinds of risks like,
fire, hailstorms, earthquake, lightning, burglary, etc. Like this, different kinds of risks can be
identified and separate groups made, including those exposed to such risks. By this method,
the heavy loss that any one of them may suffer (all of them may not suffer such losses at the
same time) is divided into bearable small losses by all. In other words, the risk is spread
among the community and the likely big impact on one is reduced to smaller manageable
impacts on all.
If a Jumbo Jet with more than 350 passengers crashes, the loss would run into several crores
of rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jets
will crash at same time. If 100 airline companies flying Jumbo Jets, come together into an
insurance pool, whenever one of the Jumbo Jets in the pool crashes, the loss to be borne by
each airline would come down to a few lakhs of rupees. Thus, insurance is a business of
sharing.
There are certain principles, which make it possible for insurance to remain a fair
arrangement. The first is that it is difficult for any one individual to bear the consequences of
the risks that he is exposed to. It will become bearable when the community shares the
burden. The second is that the perils should occur in an accidental manner. Nobody should be
in a position to make the risk happen. In other words, none in the group should set fire to his
assets and ask others to share the costs of damage. This would be taking unfair advantage of
an arrangement put into place to protect people from risks they are exposed to. The
occurrence has to be random, accidental, and not the deliberate creation of the insured person.
The manner in which the loss is to be shared can be determined before-hand. It may be
proportional to the risk that each person is exposed to. This would be indicative of the benefit
he would receive if the peril befell him. The share could be collected from the members after
the loss has occurred or the likely shares may be collected in advance, at the time of
admission to the group. Insurance companies collect in advance and create a fund from which
the losses are paid.
The collection to be made from each person in advance is determined on assumptions. While
it may not be possible to tell beforehand, which person will suffer, it may be possible to tell,
6

on the basis of past experiences, how many persons, on an average, may suffer losses. The
following two examples explain the above concept of insurance:
Insurance of Human Asset
A human being is an income generating asset. Ones manual labour, professional skills and
business acumen are the assets. This asset also can be lost through unexpectedly early death
or through sickness and disabilities caused by accidents. Accidents may or may not happen.
Death will happen, but the timing is uncertain. If it happens around the time of ones
retirement, when it could be expected that the income will normally cease, the person
concerned could have made some other arrangements to meet the continuing needs. But if it
happens much earlier when the alternate arrangements are not in place, there can be losses to
the person and dependents. Insurance is necessary to help those dependent on the income.
A person, who may have made arrangements for his needs after his retirement, also would
need insurance. This is because the arrangements would have been made on the basis of some
expectations like, likely to live for another 15 years, or that children will look after him. If
any of these expectations do not become true, the original arrangement would become
inadequate and there could be difficulties. Living too long can be as much a problem as dying
too young. Both are risks, which need to be safeguarded against. Insurance takes care.
Insurance of Intangibles :
The concept of insurance has been extended beyond the coverage of tangible assets.
Exporters run risk of losses if the importers in the other country default in payments or in
collecting the goods. They will also suffer heavily due to sudden changes in currency
exchange rates, economic policies or political disturbances in the other country. These risks
are insured. Doctors run the risk of being charged with negligence and subsequent liability
for damages. The amounts in question can be fairly large, beyond the capacity of individuals
to bear. These are insured. Thus, insurance is extended to intangibles. In some countries, the
voice of a singer or the legs of a dancer may be insured.
Advantages of Life Insurance :
Life insurance has no competition from any other business. Many people think that life
insurance is an investment or a means of saving. This is not a correct view. When a person
saves, the amount of funds available at any time is equal to the amount of money set aside in
the past, plus interest. This is so in a fixed deposit in the bank, in national savings certificates,
7

in mutual funds and all other savings instruments. If the money is invested in buying shares
and stocks, there is the risk of the money being lost in the fluctuations of the stock market.
Even if there is no loss, the available money at any time is the amount invested plus
appreciation. In life insurance, however, the fund available is not the total of the savings
already made (premiums paid), but the amount one wished to have at the end of the savings
period (which is the next 20 or 30 years). The final fund is secured from the very beginning.
One is paying for it later, out of the savings. One has to pay for it only as long as one lives or
for a lesser period if so chosen. There is no other scheme which provides this kind of benefit.
Therefore life insurance has no substitute.
The Business of Insurance :
Insurance companies are called insurers. The business of insurance is to (a) bring together
persons with common insurance interests (sharing the same risks), (b) collect the share or
contribution (called premium) from all of them, and (c) pay out compensation (called claims)
to those who suffer. The premium is determined on the same lines as indicated in the
examples above, but with some further refinements.
In India, insurance business is classified primarily as life and non-life or general. Life
insurance includes all risks related to the lives of human beings and General insurance covers
the rest. General insurance has three classifications viz., Fire (dealing with all fire related
risks), Marine (dealing with all transport related risks and ships) and Miscellaneous (dealing
with all others like liability, fidelity, motor crop, personal accident, etc.). Personal accident
and sickness insurance, which are related to human beings, is classified as non-life in India,
but is classified as life, in many other countries.
Criticism of Insurance Companies :
Some people believe that modern insurance companies are money-making businesses which
have little interest in insurance. They argue that the purpose of insurance is to spread risk so
the reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject
to flooding, or young drivers) runs counter to the principle of insurance.
Other criticisms include:

Insurance policies contain too many exclusion clauses. For example, some house
insurance

policies do not cover damage to garden walls.

Most insurance companies now use call centre and staff attempt to answer questions
by

reading from a script. It is difficult to speak to anybody with expert knowledge.

2. GLOBAL INSURANCE INDUSTRY :

The global insurance industry is one of the largest sectors of finance. It ranges from
consumer to corporate and industrial insurance, and even reinsurance, or insurance of
insurance.
The major insurance markets of the world are obviously the US, Europe, Japan, and South
Korea. Emerging markets are found throughout Asia, specifically in India and China, and are
also in Latin America.
With the internet and other forms of high-speed communication, companies and individuals
are now able to purchase insurance and related financial products from almost anywhere in
the world. Increasing affluence, especially in developing countries, and a rising
understanding of the need to protect wealth and human capital has led to significant growth in
the insurance industry.
Given the evolving and growing socio-economic conditions worldwide, insurance companies
are increasingly reaching out across borders and are offering more competitive and
customized products than ever before.
Over the past ten years, global insurance premiums have risen by more than 50%, with
annual growth rates ranging between 2 and 10%.In 2004, global insurance premiums
amounted to $3.3 trillion.
The majority of insurance comes from developed nations such as most of Europe, the US,
and Japan. In 2004, premiums in North American amounted to $1,217 billion, while the
European Union generated $1,198 billion, and Japan produced $492 billion. The UK
amounted to $295 billion.
The four biggest generators of insurance premiums comprised almost two-thirds of premiums
for 2004, the US and Japan amount to half, while they only make up 7% of the worlds
population.
In contrast, the emerging markets that make up 85% of the worlds population produced only
10% of the premiums.
9

The leading global insurance companies are:

Zurich Financial Services,

AXA
Berkshire Hathaway/ Berkshire Hathaway Re
Allianz
Aviva
ING Group
Munich RE Group
American International Group (AIG)
Nippon Life Insurance
Assicurazioni Generali

10

GLOBAL LIFE INSURANCE DENSITY :

Continent/Co
untry
North
America

2001**

2002**

2003**

2004**

2005**

1508.6

1563.8

1565.7

1617.2

1686.3

United States

1602

1662.6

1657.5

1692.5

1753.2

Canada
Latin
America
Brazil
Mexico
Uruguay
Argentina
Panama
Chile
Colombia

675.9

657.3

722.9

926.1

1071.9

26.3
10.8
53.2
21.5
68.8
39.3
122.1
11.5

29.1
27.2
59.2
17.8
19.7
44.6
103.5
12.5

30
35.8
41.3
15.4
24.2
42.4
138.3
12.4

37.2
45.9
50.2
N/A
34.5
50.6
164.5
14.3

42.0
56.8
49.9
15.5
35.4
47.2
174.9
16.8

Europe
United
kingdom

573.2

620.4

726.9

848.1

911.8

2567.9

2679.4

2617.1

3190.4

3287.1

Switzerland

2715.7

3099.7

3431.8

3275.1

3078.1

Netherlands

1345

1296.1

1561.7

1936.5

1954.2

France

1268.2

1349.5

1767.9

2150.2

2474.6

Belgium

1155

1323.6

2004.8

2291.2

2988.7

Sweden

1356

1232.2

1602.3

1764.3

2105.2

Denmark

1364.4

1574.9

2037.5

2310.5

2489.9

Germany

674.3

736.7

930.4

1021.3

1042.1

Italy

720.8

904.9

1238.3

1417.2

1449.8

Austria

632

648.7

955.3

1095.1

Portugal

302.9

418.6

611.4

768.1

1113.7

Spain

491

588

488.6

571.9

615.8

Poland

48.7

50.7

59.9

73.3

101.9

Russia
Croatia

33.2
25.3

23.1
33.2

33.9
46.3

24.8
58.7

6.3
70.9

Hungary

59.3

76.7

99.1

117.3

148.2

Greece
Bulgaria

108.9
5

116
9.9

152.1
5.5

177.9
8.2

213.1
11.1

Ukraine
Turkey

0.1
5.5

0.1
6.5

0.3
8.4

0.6
12

1.3
12.7

Asia

125

128.1

140.1

147.2

149.6

South Korea

763.4

821.9

873.6

1006.8

1210.6

Japan

2806.4

2783.9

3002.9

3044

2956.3

Tiwan

760.9

925.1

1050.1

1494.6

1699.1

Hongkong

1249.7

1237.9

1483.9

1884.3

2213.2

Israel

525.2

459.3

460.8

467.4

510.2

Malaysia

129.5

118.7

139.8

167.3

188

Singapore

713.2

730.1

1300.2

1483.9

1591.4

811

11

2006
**
17 .
31 8
1789.
5
12 .
04 1
51.
3
72.5
62.9
16.6
43.8
51.2
176
20.5
1119
.6
5139.
6
31 .
11 8
20 .
71 6
29 .
22 5
24 .
27 7
22 .
14 6
2840.
8
11 .
36 1
14 .
92 8
110
4.6
11 .
31 5
651.
0
150.
5
4.
0
81.8
192.
3
256.
7
13.2
1.
9
13.1
154
.6
14 .
80 0
2829.
3
1800.
0
245
6
532.
6
189.
2
1616.
5

*
*

Thailand

34.1

42.1

52

50.8

54.6

Kenya

2.9

3.4

3.7

4.5

Nigeria

0.5

0.5

0.6

0.7

0.5

Egypt

2.7

2.4

2.7

3.1

Algeria

0.4

0.5

0.5

0.8

0.9

Oceania

697.5

668.7

750.7

851

885

Australia
New Zealand

1040.3
198.4

1010.4
211.1

1129.3
272

1285.1
318

1366.7
219.7

60
33.
2
34.1
13.1
89.8
8.
5
12.5
14.3
6.
1
2.
6
40.9
2.
3
0.
8
38.
3
695.
6
N/
A
N/
A
14.7
5.
3
0.
8
4.
7
1.
2
896
.3
138
9
215

India
China
Phillipines
UAE

9.1
12.2
6.6
56.3

11.7
19.5
8.7
74

12.9
25.1
8.6
72.5

15.7
27.3
9.4
59.7

18.3
30.5
10.6
74.7

Srilanka
Indonesia
Oman

4.3
3.6
13.6

4.5
5.2
14.8

5.3
6.4
13.8

6.2
7.5
14.2

6.9
10.5
17.3

Vietnam

2.1

3.8

4.1

7.3

6.1

Iran
Kuwait

1.1
30.3

1.5
36.8

1.7
36.9

2.3
39.1

2.2
35.7

Pakistan

1.2

1.1

1.5

1.9

Saudia Arabia

0.6

1.7

1.7

2.1

0.7

Africa

22.4

21.5

26.1

30.3

30.7

South Africa

377.2

476.5

545.5

558.3

119.1

133.1

136.1

21.4
12

N/A
10.6

N/A
11.7

World

235

247.3

267.1

291.5

299.5

330
.6

Mauritius

95.3

360.5
103.
7

Zimbabwe
Morocco

12.4
9.4

7.8
12.2

Source: Swiss Re, Sigma volumes

Insurance density is measured as ratio of premium to total population
Data relates to calender
years Figure in US$
www.indiainsuranceresearc

12

CHAPTER 2
RESEARCH METHODOLOGY
RESEARCH OBJECTIVES:
1. To compare the performance of LIC and private insurance companies in India.
2. To find out the performances of LIC and private insurance companies in each
category (size. growth, productivity and efficiency)
3. To compare grievance management of LIC and private insurance companies.
RESEARCH DESIGN :
a. Type of research design : Analytical Research
b. Data collection : Secondary Sources
c. Statistical Tools : Ratio Analysis
RESEARCH PROCESS
In this research my research objective was to compare the performance of LIC and Private
insurance companies. For this purpose I decided the four broad categories under which I have
compared the LIC and Private insurance companies. These are:
1. Size
2. Growth
3. Productivity
4. Grievance Handling
Under these Broad Categories I have analyzed 13 factors which are:
1. Size

Total Premium
Total Income
Size of Balance Sheet
Total number of Policies
Total number of Branches

2. Growth

Growth in Premium
Growth in Income
Growth in number of Policies
Growth in Market share
13

3. Productivity

Business per Branch

Income per Branch
New Premium per Branch

4. Grievance Handling
I have used the Secondary data of last five financial years. I have collected data from the
various balance sheet of LIC and other private insurance companies, web sites and in some
cases I personally met some employees of some insurance companies. I tried to find out most
of the information required to compare the LIC and private insurance companies.
In Analysis I have found all the required data and on the basis of performance gave the rank
to LIC and Private Insurance Companies on each factor and then points. Now these Points
have been multiplied with the weightage of that factor. And then after the analysis of each
factor a consolidated point table has been prepared to know that which sector is performing
better than other. The Weightage for different categories are:
Factors

Weightage
25%
5%
5%
5%
5%
5%

Size
A. Total Premium
B. Total Income
C. Balance Sheet Size
D. Total No. of Policies
E. Total No. of Branches
Growth
A. First Premium
B. Growth in Income
C. Increase in No. of Policies

40%
10%
10%
10%

D. Growth in Market Share

Productivity
A. Business per Branch
B. Income Per Branch

10%
15%
5%
5%

C. First Premium per Branch

Grievance Handling

5%
20%

LIMITATIONS:
1. Could reach to a limited number of documents of different insurance companies in
regard to the management and other policies and resultant figures so as to identify
14

the exact cause of their lag in performance.

2 . Due to the limited time could not study all the insurance companies original
documents individually.
3. Non-Proficiency in technical aspects of insurance companies might have hindered the
best analysis of the findings.
SIGNIFICANCE OF THE STUDY:
The Detailed Study has been done with the purpose of finding out the relative share of LIC
and Private Insurance in India. It is useful for the people associated with the Insurance
Industry and the research associates related to the Insurance Sector in India. This study will
acquaint them with the data of all the banks complied at one place along with the findings,
conclusion and recommendations.

15

CHAPTER 3

ANALYSIS AND
INTERPRETATION

16

1. SIZE :
(A)

TOTAL PREMIUM :

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

(Rs. In crores)
FY 06-07 FY 07-08

63533

75127

90792

127822

149789

3120

7727

15083

28253

51561

66653

82854

105875

156075

201350

16000
0
14000
0
12000
0
10000
0

PREMIUM OF LIC

80000
60000
40000
20000
0

63533

149789
12782
2

90792
75127

FY 03-04FY 04-05FY 05-06FY 06-07FY 07-08

PREMIUM OF PVT INSURERS

6000
0
5000
0
4000
0
3000
0
2000
0
1000
0

51561

28253
15083
7727
3120

0
FY 03-04

FY 04-05

FY 05-06

17

FY 06-07

FY 07-08

Avg. Premium
( In Crores)

LIC
Private Insurance
Co.

points after
multiplying
by
weightage
(7.5%)

Rank points

101412.20
21148.80

0.5

Average premium of LIC is much more than that of all

insurance companies altogether. LIC s average premium of the
last five years is nearly five times the average premium of the
all other private insurance companies.

It can be said that up to that time their were less number of

private players in the field of insurance but then also
undoubtedly LIC is the king.

(B) TOTAL INCOME :

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

(Rs. In crores)
FY 06-07 FY 07-08

93089

112393

132147

174425

206363

4323

9049

18863

24242

52648

97412

121442

151010

198667

259011

25000
0

INCOME OF
LIC
206363

20000
0
15000
0

174425
132147

18

7.5
3.75

10000
0

93089

112393

50000
0
FY 03-04

FY 04-05FY 05-06FY 06-07FY 07-08

19

INCOME OF PVT INSURERS

60000

51561

50000
40000
30000

18863

20000
10000

24242

9049
4323

0
FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

Avg. Income
( In Crores)

LIC
Private Insurance
Co.

Rank points

points after
multiplying
by
weightage
(7.5%)

143683.40
21825.00

1
0.5

All over income of LIC is much more than than of private players. It is
due to the fact that LIC being a government agency is being trusted by
lot of companies and has large number of shares in big corporates.

7.5
3.75

(C) SIZE OF BALANCE SHEET :

(Rs. In crores)
FY 03-04 FY 04-05

LIC
Private
Insurers
TOTAL

FY 05-06

FY 06-07

FY 07-08

346022

416910

531390

625956

776904

6585

13653

28910

53048

100774

352607

430563

560300

679004

877678

1000000

BALANCE SHEET SIZE OF LIC

776904

800000

625956

60000
0
400000
200000

531390

346022

416910

0
FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

BALANCE SHEET SIZE OF PVT

INSURERS
12000
0
10000
0

100774

80000
53048

60000
40000
20000
0

28910
6585

13653

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

Avg. Balance
Sheet
Size
( In Crores)

LIC
Private Insurance
co.

points after
multiplying by
weightage
(7.5%)

Rank points

539436.40
40594.00

1
0.5

Total average size of balance sheet of LIC in the last five years is certainly
higher than that of private insurance companies. There is a huge gap in this
value. It is obvious that LIC has bigger balance sheet as being working in the
insurance field for quite large time. As compared to average balance sheet size
of 40,594 crores of private insurance companies, LIC s average balance sheet
size goes to much high as that of 5,39,436.4 crores.

(D) TOTAL NUMBER OF POLICIES :

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

26968069

23978123

31590515

38229292

37612599

1658847

2233075

3871410

7922294

13261558

46151586

50874157

28626916 26211198 35462117

7.5
3.75

TOTAL NUMBER OF POLICIES

6000000
0
50874157
5000000
0

46151586

4000000
0
3000000
0

3546211
7
28626916 2621119
8

LIC
PVT.INSURE
RS

2000000
0

INDUSTRY

10000000

0
FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

Avg. number
of
policies

LIC
Private Insurance
Co.

points after
multiplying by
weightage
Rank points (7.5%)

31675670

7.5

5789437

0.5

3.75

LIC is an undoubted leader in the field of average number of policies

per year in the last five years. It is seen that private insurance companies are
gaining momentum and are trying to defeat LIC in case of new insurances. Main
reason behind LIC having such a large number of policies is the trust of a
common man. LIC being a government agency has got a faith of indian mass.
People are not yet prepared to give their savings in the hands of private players.

(E) NUMBER OF BRANCHES :

FY 03-04

LIC
Private
Insurers
TOTAL

FY 04-05 FY 05-06

FY 06-07

FY 07-08

2196

2197

2220

2301

2522

416

804

1645

3072

6391

2612

3001

3865

5373

8913

10000

8913

9000
8000
7000

6391
537
3

6000

LIC
PVT INSURERS

5000
3865

4000
3000

2612 219
7
2196

3001
2220
1645

2000
1000
0

2522

INDUSTRY

2301

804

416
FY 0304

3072

FY 04-05

FY 0506

FY 0607

%growth in
number
of
branche
s

LIC
Private Insurance
Co.

14.8
143
6

FY 07-08

points after
multiplying
by

Rank points
0.
2
5
1

weightage
(7.5%
)

When the matter of total number of branches comes its very much
obvious that LIC, being the oldest existing insurance company in India, has the
large number of offices in the countryby any single insurance company. Since
the number of private insurance companies is increasing, with continuous
expansion in their business, now the number of branches of all private players
has crossed the number of branches of LIC.

3.75
7.5

2. GROWTH :
(A) FIRST PREMIUM :

FY 03-04 FY 04-05

LIC
Private
Insurers
TOTAL

(Rs. In crores)

FY 05-06

FY 06-07

FY 07-08

17347

20653

28515

55934

59996

2440

5564

10270

19425

33715

19787

26217

38785

75359

93711

FIRST PREMIUM OF
LIC
7000
0

59996

6000
0
5000
0
4000
0
3000
0
20000

55934

28515
20653

17347

10000
0
FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08

FIRST PREMIUM OF PVT

INSURERS
4000
0
3500
0
3000
0
2500
0
2000
0
1500

33715

19425
10270

0
1000
0
5000
0

2440
FY 03-04

5564

FY 04-05

FY 05-06

FY 06-07

FY 07-08

Growth in
First
Growth in
First
Premium

Premium
(in Absoute

(in
Percentage

by
weightag
e

Terms) (in

Terms)

LIC
Private Insurance
Co.

points
after
multiplyin
g

crores)

245.85
1281.76

Rank

4264
9
3127
5

point
s (10%)

0.5

Though LIC has attained more growth in absolute terms i.e. Rs.42649
crores but private players being so less in number five years back has achieved a
dream come true growth of 1281.76 % which is certainly a matter of pride for
them.
(B) GROWTH IN INCOME :
(Rs. In crores)

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

12101

19303

19754

42277

31988

2692

4725

9814

5379

28406

14793

24028

29568

47656

60394

% GROWTH IN INCOME :

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

14.9

20.7

17.5

32

18.3

165

109.3

108.4

28.5

117

17.8

24.6

24.3

31.5

30.3

10

180

165

160
140

117

120

109.3

108.4

100

LIC
PVT
INSURERS

80
60
40
20

INDUSTRY
32 31.5
28.5

14.9 17.8 20.7 24.6 17.5 24.3

0
FY 03-04 FY 04-05 FY 05-06

FY 0607

30.3
18.3

FY 07-08

points
after
multiplyin
g
by
weightag
e

Growth in
Growth in
Income

Income
(in Absoute

(in
Percentage

Terms) (in

Terms)

LIC
Private Insurance
Co.

crores)

164.34
955.20

Rank

1988
7
2571
4

point
s (10%)

0.5
1

Here LIC has neither attained more growth in absolute terms i.e.
Rs.19887 crores as compared to 25714 crores of private players nor has got
more growth in terms of percentage.this shows that private players are doing
great job in enhancing their business.

(C) INCREASE IN NUMBER OF POLICIES :

LIC
Private

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

1475992

-2989946

7632584

6638585

-616693

804696

574228

1638335

4050884

5339264

10

Insurers
TOTAL

2280688 9270919
2415718

10689469 4722571

% INCREASE IN NUMBER OF POLICIES :

LIC
Private
Insurers
TOTAL

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

5.79

-11.09

31.75

21.01

-1.6

94.21

34.62

73.37

104.64

67.4

8.6

-8.4

35.3

30.1

10.2

% GROWTH IN NO. OF
POLICIES
120
104.64
100

94.21

80

73.37

67.4

60

LIC
PVT
INSURERS
34.62

40

31.75

35.3

20

30.1
21.01

INDUSTRY
10.2

5.79 8.6
0
FY 03-04
-20

FY 04-05 FY 05-06
-11.09

-8.4

-1.6

FY 07-08

Growth in

Growth in

number of
policies

number of
policies

(in
Percentage
Terms)

LIC
Private Insurance
Co.

FY 06-07

39.47
699.44

points
after
multiplyin
g
by
weightag
e

(in Absoute
Terms)

106445
30
116027
11

Rank

2
1

point
s (10%)

0.5
1

10

Private players are doing extremely well as they are increasing their
customer base rapidly.

(D) MARKET SHARE :

26.1

FY 07-08

73.9

25.8

FY 06-07

74.
2
PVT.
INSURERS

26.5
FY 05-06

73.5

21.2

FY 04-05

FY 03-04

LIC

78.8

12.3
87.7

20

40

60

80

100

LIC is still the market leader in insurance industry with 73.9 % share. But we
cannot forget that in last five years market share of LIC has decreased. It was
87.7 % in year 2003-04 which came down to 73.9 % in 2007-08.

(A)

LIC
Private
Insurers

BUSINESS PER BRANCH :

FY 03-04

FY 04-05

FY 05-06

(Rs. In crores)
FY 06-07 FY 07-08

28.93

34.20

40.9

55.55

59.20

7.5

9.61

9.17

9.2

8.07

BUSINESS PER
BRANCH
70
60

59.2

55.55

50

30

40.9

34.
2

40

LIC

28.93

PVT
INSURERS

20
10

7.5

9.61

0
FY 03-04FY 04-05

9.17

8.07

FY 07FY 05-06 FY 06-07 08

Avg.
Business
Per Branch
(In
crores)

LIC
Private
Insurance
Co.

9.2

points after
multiplying
by
Ran
k

point
s

weightage
(5%)

43.756
8.71

1
2

1
0.5

5
2.5

Avg business per branch of LIC is much higher than that of whole private
insurance companies.

(B) INCOME PER BRANCH :

(Rs. In crores)

LIC
Private
Insurers

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

42.39

51.16

59.52

75.80

81.80

10.41

11.25

11.47

7.89

8.23

INCOME PER
BRANCH
90

81.8

80

75.8

70
59.52

60
50

51.16
42.39

LIC

40

PVT INSURERS

30
20

10.41

11.25

11.47

10
0

FY 0304

FY 0405

7.8
9

FY 05-06FY 06-07

8.23

FY 07-08

Avg. Income
Per
Branch (In
crores)

LIC
Private Insurance
Co.

point
s

Rank

points after
multiplying
by
weightage
(5%)

62.134
9.864

0.5

Average income per branch of LIC is much more than that of private
insurance companies. Its almost six times the total value of all the private
companies.

2.5

(C) NEW PREMIUM PER BRANCH :

LIC
Private
Insurers

FY 03-04

FY 04-05

FY 05-06

(Rs.in crores)
FY 06-07
FY 07-08

7.90

9.40

12.84

24.30

23.78

5.86

6.92

6.24

6.32

5.28

NEW PREMIUM PER BRANCH

30
24.3

25

23.78

20

15
10

12.84
7.9

LIC
PVT INSURERS

9.4
6.92

5.86

6.2
4

6.32

5.28

FY 0506

FY 06-07

FY 07-08

5
0
FY 03-04FY 04-05

Avg.
New
Premium Per
Branch (In
crores)

LIC
Private Insurance
Co.

Rank

point
s

points after
multiplying
by
weightage
(5%)

15.64
4
6.124

1
2

1
0.5

5
2.5

This value tells us about increase in the business of an insurance company

in a period. Here we see that LIC is ahead of private insurance companies

in case of increasing their business.

4. GRIEVANCE HANDLING :
TOTAL NUMBER OF GRIEVANCES :

LIC
Private
Insurers

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

474

704

851

354

651

45

195

540

507

1406

NUMBER OF GRIEVANCES RESOLVED :

LIC
Private
Insurers

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

39

123

215

313

80

26

83

216

450

1103

% OF GRIEVANCES RESOLVED :

LIC
Private
Insurers

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

8.2

17.5

25.3

88.4

12.2

57.7

42.6

40.0

88.7

78.4

GRIEVANCES IN LIC
800
700
600
500
400
300
200
100
0

704

651
540

474

507
450
TOTAL
RESOLV
ED

216
123

80

39

FY 03-04 FY 04-05 FY
05-06 FY 06-07 FY 07-08

GRIEVANCES IN PVT.
COMPANIES
1600

1406

1400
1200

1103

1000
800

540

600

TOTAL

507

RESOLV
ED

450

400
200 45 26
0
FY 0304

195
83

216

FY 04- FY 05- FY 0605

06
07 FY 07-08

% OF GRIEVANCES
RESOLVED
100

88.884.7

90

78.4

80
70
60

57.7

50
40

42.6

30
20
10

17.5
8.2

LIC

40

PVT
INSURERS

25.3
12.2

FY 03-04 FY 04-05 FY 05-06 FY 06-07

FY 07-08

% Grievances
resolve
d

LIC
Private Insurance
Co.

25.3
7
69.7
0

points after
multiplying
by
weightage
Rank points (7.5%)

0.5

3.75

Grievance Handling is one of the major issues in any organization. It plays an

important role in Insurance sector. People do attract towards companies who
handles their grievances.
Here we see that private players are much ahead of LIC when the matter comes
to grievance management. In the last five years LIC has resolved only 25.37 %
of cases brought in front of them while the percentage of cases resolved in case
of private players is 69.7 %.
This shows that private players are very serious about their image and are
working hard to provide the solution of the problems of the people as early as
possible.

7.5

TOTAL POINTS TABLE:

Factors

Private
Insurance
Companies

LIC

Size
A. Total Premium
B. Total Income
C. Balance Sheet Size
D. Total No. of Policies
E. Total No. of Branches

7.5

3.75

7.5

3.75

7.5

3.75

7.5

3.75

3.75

7.5

10

10

10

10

2.5

2.5

2.5

3.75

7.5

77.75

72.75

Growth
A. First Premium
B. Growth in Income
C. Increase in No. of Policies
D. Market Share
Productivity
A. Business per Branch
B. Income Per Branch
C. First Premium per Branch
Grievance Handling

Total Score

CHAPTER 4
FINDINGS & CONCLUSIONS

LIC is the giant of the insurance sector. The overall size of LIC is much more than

that of all private insurance companies. Private insurers are in expansion mode and
are increasing their size but are still much behind LIC. Total premium deposits in
LIC is much higher than the private insurance companies. Total premium of LIC in
FY 07-08 was 149789 crores which three times more than that of private insurance
companies.

Income of LIC is much greater than private insurance companies. Last year total

income from investments of LIC was 48244.14 crores which was nearly equal to the
total income of the all private insurance companies. By this we can imagine how big
the LIC is.

Size of balance sheet of private insurance companies are lagging much behind LIC.

Balance sheet of LIC is seven times bigger than that of private insurance companies.
If we see the total number of policies issued by LIC and private insurance companies,
we find that there is a huge gap between them. No doubt that LIC is a well established
player in the field of insurance and many private companies have just started their
business. Hence it is obvious that LIC is having large number of policyholders.

Number of branches of private insurance companies is increasing as the new players

are entering in this market. Also the established players are in expansion phase and
hence are expanding there business. There are many private insurance companies and
hence there total number of branches has gone past LIC in the last financial year. But
offices of private insurance companies are mostly in urban areas and still it is LIC
which covers most of the area.
Hence we see that LIC is leading when it comes to size. It is giant in insurance
sector having huge network and customer base.

We see that due to excellent service quality and attractive offers private insurance

companies have started getting a number of customers. They are growing rapidly.
Though LIC is also increasing its customer base but private insurance companies are
moving at a fast pace.

Though the income of private insurance companies is negligible when compared with

LIC but then also the pace with which they are increasing their income is tremendous.
Private insurance companies are expanding their business and will certainly going to
give a tough competition to LIC in the coming days.

LIC is certainly having a large customer base. Private insurance companies are not

having that much number of customer base but they are increasing it rapidly. They
have registered a decent growth of 104.64 % in number of new policies in the year
2006-07. Last year also their growth rate was 67.4 %.
64

LIC, being the oldest player in the existing insurance market, has the biggest market

share of 73.9 % which was 87.3% five years earlier. We see that private insurance
companies are penetrating in the customer base of LIC.
Overall we can see that private insurance companies are giving a tough
competition to the LIC and will certainly create a good business for themselves
in the coming days.

There are many new entrants in this sector. There are many private insurance

companies who have reported loss in this and previous years. This is the main reason
why private insurance companies lag behind LIC in case of business per branch.
There is a big difference between them.

Same is the case when it comes to income per branch. LIC is much ahead of private

insurance companies in this field. They are undoubted champions in insurance when it
comes to profit earning.

New business is increasingly going towards private insurance companies but still the

customer base of LIC is very strong. In issuing new policies per branch also, they are
ahead of private insurance companies though not by very large margin.
Customer base of LIC is very strong and still business per branch, profit per
branch or premium per branch, they are leading much ahead of private

insurance companies.

LIC has not shown their good concern when the matter of grievance handling comes.

Private insurance companies are far ahead in this matter. LIC has just resolved 25%
cases in the last five years while private insurance companies have resolved nearly
70% cases. This is a matter from where customer shift starts. We have seen the rapid
increase in customer base of private insurance companies which can be very much
affected by this factor.
Overall we have seen that still LIC is very famous but private insurance companies are
growing at exceptionally fast pace. Private companies show due concern in grievance
management and brings innovative schemes to attract the customers. Right now they
are giving good competition to LIC and very soon they will give very tough competition
to Life Corporation of India.