1

1. INTRODUCTION
In 2003, the Indian insurance market ranked 19th globally and
was the fifth largest in Asia. Although it accounts for only 2.5%
of premiums in Asia, it has the potential to become one of the biggest
insurance markets in the region. A combination of factors underpins
further strong growth in the market, including sound economic
fundamentals, rising household wealth and a further improvement in the
regulatory framework.The insurance industry in India has come a long
way since the time when businesses were tightly regulated and
concentrated in the hands of a few public sector insurers. Following the
passage of the Insurance Regulatory and Development Authority Act in
1999, India abandoned public sector exclusivity in the insurance industry
in favor of market-driven competition. This shift has brought about
major changes to the industry. The inauguration of a new era of insurance
development has seen the entry of international insurers, the
proliferation of innovative products and distribution channels, and the
raising of supervisory standards.By mid-2004, the number of insurers in
India had been augmented by the entry of new private sector players to a
total of 28, up from five before liberalization. A range of new products
had been launched to cater to different segments of the market, while
traditional agents were supplemented by other channels including the
Internet and bank branches. These developments were instrumental in
propelling business growth, in real terms, of 19% in life premiums and
11.1% in non-life premiums between 1999 and 2003. There are good
2

reasons to expect that the growth momentum can be
sustained. In particular, there is huge untapped potential in various
segments of the market. While the nation is heavily exposed to
natural catastrophes, insurance to mitigate the negative financial
consequences of these adverse events is underdeveloped. The same
is true for both pension and health insurance, where insurers can play
a critical role in bridging demand and supply gaps. Major changes in
both national economic policies and insurance regulations will
highlight the prospects of these segments going forward. Insurance or
assurance, device for indemnifying or guaranteeing an
individual against loss. Reimbursement is made from a fund to which
many individuals exposed to the same risk have contributed certain
specified amounts, called premiums. Payment for an individual loss,
divided among many, does not fall heavily upon the actual loser. The
essence of the contract of insurance, called a policy, is mutuality. The
major operations of an insurance company are underwriting, the
determination of which risks the insurer can take on; and rate making,
the decisions regarding necessary prices for such risks. The
underwriter is responsible for guarding against adverse selection,
wherein there is excessive coverage of high risk candidates in
proportion to the coverage of low risk candidates. In preventing adverse
selection, the underwriter must consider physical, psychological, and
moral hazards in relation to applicants. Physical hazards include those
dangers which surround the individual or property, jeopardizing the well-
being of the insured. The amount of the premium is determined by the
operation of the law of averages as calculated by actuaries. By investing
3

premium payments in a wide range of revenue-producing projects,
insurance companies have become major suppliers of capital, and they
rank among the nation's largest institutional investors.
GENERAL DEFINITION:
The general definitions are given by the social scientists &
they consider insurance as a device to protection against risks, or a
provision against inevitable contingencies or a co-operative device of
spreading risks. Some of such definitions are given below:
which large number of people associate themselves & transfer to the
shoulder of all, risks that attach to individuals."
In the words of Sir William, "The collective bearing
of risks is insurance."
In the words of Boone & Kurtz, "Insurance is a
substitution for a small known loss (the insurance
premium) for a large unknown loss, which may or may not
occur."
In the words of Ghosh & Agarwal, "Insurance is a co-
operative form of distributing a certain risk over a
group of persons who are exposed to it."


4

2. HISTORY OF INSURANCE IN INDIA
In India, insurance has a deep-rooted history. It finds mention in
the writings of Manu (Manusmrithi), Yagnavalkya(Dharmasastra) and
Kautilya (Arthasastra). The writings talk in terms of pooling of
resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern
day insurance. Ancient Indian history has preserved the earliest traces
of insurance in the form of marine trade loans and carriers contracts.
Insurance in India has evolved over time heavily drawing from other
countries, England in particular.
1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta. This
Company however failed in 1834. In 1829, the Madras Equitable had
begun transacting life insurance business in the Madras
Presidency. 1870 saw the enactment of the British Insurance Act and in
the last three decades of the nineteenth century, the Bombay Mutual
(1871), Oriental (1874) and Empire of India (1897) were started in the
Bombay Residency. This era, however, was dominated by foreign
insurance offices which did good business in India, namely Albert Life
Assurance, Royal Insurance, Liverpool and London Globe Insurance and
the Indian offices were up for hard competition from the foreign
companies.
In 1914, the Government of India started publishing returns of
Insurance Companies in India. The Indian Life Assurance Companies Act,
5

1912 was the first statutory measure to regulate life business. In
1928, the Indian Insurance Companies Act was enacted to enable the
Government to collect statistical information about both life and non-
life business transacted in India by Indian and foreign insurers
including provident insurance societies. In 1938, with a view to
protecting the interest of the Insurance public, the earlier legislation was
consolidated and amended by the Insurance Act, 1938 with
comprehensive provisions for effective control over the activities of
insurers.
The Insurance Amendment Act of 1950 abolished
Principal Agencies. However, there were a large number of
insurance companies and the level of competition was high. There were
also allegations of unfair trade practices. The Government of India,
therefore, decided to nationalize insurance business. An Ordinance was
issued on 19
th
January, 1956 nationalising the
Life Insurance sector and Life Insurance Corporation came into
existence in the same year. The LIC absorbed 154 Indian,16 non-Indian
insurers as also 75 provident societies245 Indian and foreign
insurers in all. The LIC had monopoly till the late 90s when the
Insurance sector was reopened to the private sector.
The history of general insurance dates back to the Industrial
Revolution in the west and the consequent growth of sea-faring trade and
commerce in the 17
th
century. It came to India as a legacy of British
occupation. General Insurance in India has its roots in the
establishment of Triton Insurance Company Ltd., in the year 1850 in
6

Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was
set up. This was the first company to transact all classes of general
insurance business. 1957 saw the formation of the General Insurance
Council, a wing of the Insurance Association of India. The General
Insurance Council framed a code of conduct for ensuring fair
conduct and sound business practices. In 1968, the Insurance Act was
amended to regulate investments and set minimum solvency margins.
The Tariff Advisory Committee was also set up then. In 1972 with
the passing of the General Insurance Business
(Nationalization) Act, general insurance business was nationalized with
effect from 1
st
January, 1973. 107 insurers were amalgamated and
grouped into four companies, namely National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd and the United India Insurance Company Ltd.
The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.
This millennium has seen insurance come a full circle in a
journey extending to nearly 200 years. The process of re-opening of
the sector had begun in the early 1990s and the last decade and more
has seen it been opened up substantially. In 1993, the Government set up
a committee under the chairmanship of RN Malhotra, former Governor
of RBI, to propose recommendations for reforms in the
insurance sector. The objective was to complement the reforms
initiated in the financial sector. The committee submitted its report in
1994 wherein, among other things, it recommended that the private sector
7

be permitted to enter the insurance industry. They stated that foreign
companies are allowed to enter by floating Indian companies,
preferably a joint venture with Indian partners.
Following the recommendations of the Malhotra Committee report,
in 1999, the Insurance Regulatory and Development Authority (IRDA) was
constituted as an autonomous body to regulate and develop the insurance
industry. The IRDA was incorporated as a statutory body in April, 2000.
The key objectives of the IRDA include promotion of competition so
as to enhance customer satisfaction through increased consumer
choice and lower premiums, while ensuring the financial security of the
insurance market. The IRDA opened up the market in August 2000 with
the invitation for application for registrations. Foreign companies were
allowed ownership of up to 26%. The Authority has the power to
frame
regulations under Section 114A of the Insurance Act, 1938 and has from
2000 onwards framed various regulations ranging from
registration of companies for carrying on insurance business to
protection of policyholders interests. In December, 2000, the subsidiaries
of the General Insurance Corporation of India were restructured as
independent companies and at the same time GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four
subsidiaries from GIC in July, 2002.
Today there are 24 general insurance companies including the
ECGC and Agriculture Insurance Corporation of India and 23 life
insurance companies operating in the country. The insurance sector is a
8

colossal one and is growing at a speedy rate of 15-20%. Together with
banking services, insurance services add about 7% to the countrys GDP.
A well-developed and evolved insurance sector is a boon for economic
development as it provides long- term funds for infrastructure
development at the same time strengthening the risk taking ability of the
country.


















9


3. CHARACTERISTICS OF INSURANCE:
Sharing of Risks
Insurance is a co-operative device to share the burden of risk,
which may fall on happening of some unforeseen events, such
as the death of head of the family, or on happening of
marine perils or loss of by fire.
Co-operative Device
Insurance is a co-operative form of distributing a certain
risk over a group of persons who are exposed to it (Ghosh &
Agarwal). A large number of persons share the losses arising
from a particular risk.
Evaluation of Risk
For the purpose of ascertaining the insurance premium, the
volume of risk is evaluated, which forms the basis of insurance
contract.

Payment of happening of specified event
On happening of specified event, the insurance company is
bound to make payment to the insured. Happening of the
specified event is certain in life insurance, but in the case of
10

fire, marine or accidental insurance, it is not necessary. In
such cases, the insurer is not liable for payment of indemnity.

Amount of payment
The amount of payment in indemnity insurance depends
on the nature of losses occurred, subject to a maximum of the
sum insured. In life insurance, however, a fixed amount is paid
on the happening of some uncertain event or on the maturity of
the policy.

Large number of insured persons
The success of insurance business depends on the large
number of persons insured against similar risk. This will
enable the insurer to spread the losses of risk among
large number of persons, thus keeping the premium rate at
the minimum.

Insurance is not a gambling
Insurance is not a gambling. Gambling is illegal, which
gives gain to one party & loss to the other. Insurance is
a valid contract to indemnity against losses. Moreover,
insurable interest is present in insurance contracts & it has the
element of investment also.

Insurance is not charity
11

Charity pays without consideration but in the case of
insurance, premium is paid by the insured to the insurer in
consideration of future payment.

Protection against risks
Insurance provides protection against risks involved in life,
materials & property. It is a device to avoid or reduce risks.

Spreading of risk
Insurance is a plan, which spread the risks & losses of few
people among a large number of people. John Magee writes,
Insurance is a plan by which large number of people
associates themselves & transfer to the shoulders of all, risks
attached to individuals.

Transfer of risk
Insurance is a plan in which the insured transfers his risk
on the insurer. This may be the reason that Mayerson
observes, that insurance is a device to transfer some
economic losses to the insurer, and otherwise such losses
would have been borne by the insured themselves.

Ascertaining of losses
By taking a life insurance policy, one can ascertain his
future losses in terms of money. This is done by the insurer
12

to determining the rate of premium, which is calculated on the
basis of maximum risk


A contract
Insurance is a legal contract between the insurer & insured
under which the insurer promises to compensate the
insured financially within the scope of insurance policy, &
the insured promises to pay a fixed rate of premium to the
insurer.

Based upon certain principle
Insurance is a contract based upon certain fundamental
principles of insurance, which includes utmost good
faith, insurable interest, contribution, indemnity, cause
proximal, subrogation, etc., which are the basis for successful
operation of insurance plan.

Utmost Good Faith
Insurance is a contract based on good faith between the
parties. Therefore, both the parties are bound to disclose the
important facts affecting to the contract before each other.
Utmost good faith is one of the important principles of
insurance.
To conclude, insurance is a device for the transfer of
13

risks from the insured to the insurers, who agree to it for a
consideration (known as premium), & promises that the
specified extent of loss suffered by the
insured shall be compensated. It is a legal contract of a
technical nature.
14

4. INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee- headed by former Finance
Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the
Indian insurance industry and recommend its future direction. The
Malhotra committee was set up with the objective of complementing
the reforms initiated in the financial sector. The reforms were aimed at
creating a more efficient and competitive financial system suitable for the
requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an
important part of the overall financial system where it was necessary to
address the need for similar reforms. In 1994, the committee
submitted the report and some of the key recommendations included:
i) Structure Government stake in the insurance Companies to be
brought down to 50%. Government should take over the holdings of GIC
and its subsidiaries so that these subsidiaries can act as independent
corporations. All the insurance companies should be given greater
freedom to operate.
ii) Competition Private Companies with a minimum paid up capital
of Rs.1bn should be allowed to enter the sector. No Company should deal
in both Life and General Insurance through a single entity. Foreign
companies may be allowed to enter the industry in
collaboration with the domestic companies. Postal Life Insurance
should be allowed to operate in the rural market. Only one State Level Life
Insurance Company should be allowed to operate in each state.
15

iii) Regulatory Body The Insurance Act should be
changed. An Insurance Regulatory body should be set up. Controller of
Insurance-a part of the Finance Ministry- should be made independent
iv) Investments Mandatory Investments of LIC Life Fund in
government securities to be reduced from 75% to 50%. GIC and its
subsidiaries are not to hold more than 5% in any company (there
current holdings to be brought down to this level over a period of
time)
v) Customer Service LIC should pay interest on delays
inpayments beyond 30 days. Insurance companies must
beencouraged to set up unit linked pension plans. Computerization of
operations and updating of technology to be carried out in the
insurance industry. The committee emphasized that in order to improve
the customer services and increase the coverage of insurance policies,
industry should be opened up to competition. But at the same time,
the committee felt the need to exercise caution as any failure on the part
of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by
enable them to act as independent companies with economic
motives. For this purpose, it had proposed setting up an independent
regulatory body- The Insurance Regulatory and Development
Authority. Reforms in the Insurance sector were initiated with the
passage of the IRDA Bill in Parliament in December 1999. The IRDA
since its incorporation as a statutory body in April 2000 has fastidiously
stuck to its schedule of framing regulations and registering the
16

private sector insurance companies. Since being set up as an independent
statutory body the IRDA has put in a framework of globally
compatible regulations. The other decision taken simultaneously to
provide the supporting systems to the insurance sector and in
particular the life insurance companies was the launch of the IRDA
online service for issue and renewal of licenses to agents. The
approval of institutions for imparting training to agents has also
ensured that the insurance companies would have a trained
workforce of insurance agents in place to sell their products.























17

MALHOTRA COMMITTEE
In 1993, the first step towards insurance sector reforms was
initiated with the formation of Malhotra Committee, headed by former
Finance Secretary and RBI Governor R.N. Malhotra. The committee
was formed to evaluate the Indian insurance industry and recommend its
future direction with the objective of complementing the reforms
initiated in the financial sector.
Key Recommendations of Malhotra Committee: Structure
Government stake in the insurance Companies to be brought down
to 50%.
Government should take over the holdings of GIC and
its subsidiaries so that these subsidiaries can act as independent
corporations.
All the insurance companies should be given greater freedom to
operate.
Competition
Private Companies with a minimum paid up capital of
Rs.1billion should be allowed to enter the industry.
No Company should deal in both Life and General
Insurance through a single Entity.
18

Foreign companies may be allowed to enter the industry
in collaboration with the domestic companies.
Postal Life Insurance should be allowed to operate in the
rural market.
Only one State Level Life Insurance Company should be allowed
to operate in each state.
Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance should be made independent.
Investments
Mandatory Investments of LIC Life Fund in government securities
to be reduced from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in
any company.
Customer Service
LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked
pension plans.
19

Computerisation of operations and updating of technology to
be carried out in the insurance industry.
Malhotra Committee also proposed setting up an independent
regulatory body - The Insurance Regulatory and Development
Authority (IRDA) to provide greater autonomy to insurance
companies in order to improve their performance and enable them to act as
independent companies with economic motives.

















20

5. TYPES OF INSURANCE


1. Life Insurance
Life insurance is a contract between an insured (insurance policy
holder) and an insurer, where the insurer promises to pay a
designated beneficiary a sum of money (the "benefits") upon the death of the
insured person. Depending on the contract, other events such as terminal
illness or critical illness may also trigger payment. The policy holder
typically pays a premium, either regularly or as a lump sum. Other expenses
(such as funeral expenses) are also sometimes included in the benefits.
The advantage for the policy owner is "peace of mind", in knowing that the
death of the insured person will not result in financial hardship for loved
ones and lenders.
TYPES OF
iNSURANCE
LIFE
INSURANCE
GENERAL
INSURANCE
AUTOMOBILE
INSURANCE
FIRE
INSURANCE
MARINE
INSURANCE
HEALTH
INSURANCE
21


2. General Insurance
General Insurance is further classified as follows :-
Automobile Insurance
Automobile insurance (also known as auto
insurance, GAP insurance, car insurance, or motor
insurance) is insurance purchased
for cars, trucks, motorcycles, and other road vehicles. Its
primary use is to provide financial protection against
physical damage and/or bodily injury resulting from traffic
collisions and against liability that could also arise
therefrom. The specific terms of vehicle insurance vary with
legal regulations in each region. To a lesser degree vehicle
insurance may additionally offer financial protection against
theft of the vehicle and possibly damage to the vehicle,
sustained from things other than traffic collisions.


Fire Insurance
A fire insurance is a contract under which the insurer
in return for a consideration (premium) agrees to indemnify
the insured for the financial loss which the latter may suffer
due to destruction of or damage to property or goods, caused
by fire, during a specified period. The contract specifies the
maximum amount , agreed to by the parties at the time of the
22

contract, which the insured can claim in case of loss. This
amount is not , however , the measure of the loss. The loss
can be ascertained only after the fire has occurred. The
insurer is liable to make good the actual amount of loss not
exceeding the maximum amount fixed under the policy.


Marine Insurance
A contract of marine insurance is an agreement
whereby the insurer undertakes to indemnify the assured, in
the manner and to the extent agreed, against losses
incidental to marine adventure. There is a marine adventure
when any insurable property is exposed to maritime perils
i.e. perils consequent to navigation of the sea. The term
'perils of the sea' refers only to accidents or causalities of the
sea, and does not include the ordinary action of the winds
and waves. Besides, maritime perils include, fire, war perils,
pirates, seizures and jettison, etc.

Health Insurance
Health insurance is insurance against the risk of
incurring medical expenses among individuals. By
estimating the overall risk of health care and system
expenses among a targeted group, an insurer can develop a
routine finance structure, such as a monthly premium or
23

payroll tax, to ensure that money is available to pay for the
health care benefits specified in the insurance agreement.
The benefit is administered by a central organization such as
a government agency, private business, or not-for-profit
entity.

Apart from the above mentioned types of insurances
there are many other types of insurance as well.


















24


6. TOP 5 INSURANCE COMPANIES IN INDIA

a) LIFE INSURANCE CORPORATION OF INDIA:
On January 19, 1956 the President of the Indian Union issued an
ordinance, providing for the taking over, in public interest, of the
management of life insurance pending nationalization of such
business, & the then Finance Minister explained the objectives of
nationalization of life insurance business.
In June 1956, the parliament passed a bill for nationalization of life
insurance business in India and for setting up a corporation as the sole
agency for carrying on this business in India. The corporation, set up under
this Act, is known as Life Insurance Corporation of India, which started
functioning on September 1, 1956.
For the purpose of servicing of policies issued before September 1,
1956, some integrated head offices & integrated branch office units were
created. These offices have nothing to do with the policies issued by the
corporation. Corporation also took over foreign life business of the Indian
insurers.

b) HDFC STANDARD LIFE INSURANCE COMPANY:
HDFC Standard Life Insurance Co. Ltd. is a joint venture between
HDFC, Indias largest housing finance institution and Standard Life
Assurance Company, Europes largest mutual life company. HDFC
25

manages Rs. 21,450 Crores in assets and Standard Life manages over US
$100 billion in assets. Both the promoters are well known for their ethical
dealings, their financial strength and their commitment to be a long-term
player in the life insurance industry.

c) MAX NEW YORK LIFE INSURANCE COMPANY:
Max New York Life Insurance Company is a joint venture between
New York Life International Inc. and Max India Limited. New York
Life, a Fortune 100 Company, is one of the worlds experts in life
insurance with over 156 years of experience in the business and over
US$ 165 billion (Rs. 775,000 Crores) in assets under management.
Max India Limited is a multi-business corporate, focused on the
knowledge, people, and service-oriented business of life
insurance, healthcare and information technology.

d) BIRLA SUN LIFE INSURANCE COMPANY
It is a joint venture of Aditya Birla Group and Sun Life
Financial Services with the objective that Insurance is not
about something going wrong. It's often about things going
right. One of the wonders of human nature is that we never
believe anything can actually go wrong. Surely, life has its
share of ifs. At Birla Sun Life however, we believe it has its
equally pleasant share of buts as well. We at Birla Sun Life
26

stand committed to helping you realize those happy
moments, which make a life. Be it living the same lifestyle
in your post retirement days or providing a secure future for
your loved ones, in case something happens to you.

e) TATA AIG LIFE INSURANCE COMPANY
Tata AIG is a joint venture that is backed by the Tata Group-
Indias most respected industrial conglomerate, with revenues
of more than US $ 8.4 billion, and American International
Group, Inc. (AIG) - the leading US -based international
insurance and financial services organization,
with a presence in over 130 countries and jurisdictions
throughout the world. Tata AIG offers a gamut of innovative
products in the Life Insurance sector.




The main focus of this project is LIFE INSURANCE
CORPORATION OF INDIA (LIC of INDIA).




27



7. LIFE INSURANCE CORPORATION OF INDIA (LIC of
INDIA).
LIC in INDIA


On January 19, 1956 the President of the Indian Union issued an
ordinance, providing for the taking over, in public interest, of the
management of life insurance pending nationalization of such
business, & the then Finance Minister explained the objectives of
nationalization of life insurance business.
In June 1956, the parliament passed a bill for nationalization of life
insurance business in India and for setting up a corporation as the sole
agency for carrying on this business in India. The corporation, set up under
this Act, is known as Life Insurance Corporation of India, which started
functioning on September 1, 1956.
For the purpose of servicing of policies issued before September 1,
1956, some integrated head offices & integrated branch office units were
created. These offices have nothing to do with the policies issued by the
corporation. Corporation also took over foreign life business of the Indian
insurers.
The story of insurance is probably as old as the story of mankind. The same
instinct that prompts modern businessmen today to secure themselves
against loss and disaster existed in primitive men also. They too sought to
28

avert the evil consequences of fire and flood and loss of life and were
willing to make some sort of sacrifice in order to achieve security. Though
the concept of insurance is largely a development of the recent past,
particularly after the industrial era past few centuries yet its beginnings
date back almost 6000 years.
Life Insurance in its modern form came to India from England in the year
1818. Oriental Life Insurance Company started by Europeans in Calcutta
was the first life insurance company on Indian Soil. All the insurance
companies established during that period were brought up with the purpose
of looking after the needs of European community and Indian natives were
not being insured by these companies. However, later with the efforts of
eminent people like Babu Muttylal Seal, the foreign life insurance
companies started insuring Indian lives. But Indian lives were being treated
as sub-standard lives and heavy extra premiums were being charged on
them. Bombay Mutual Life Assurance Society heralded the birth of first
Indian life insurance company in the year 1870, and covered Indian lives at
normal rates. Starting as Indian enterprise with highly patriotic motives,
insurance companies came into existence to carry the message of insurance
and social security through insurance to various sectors of society. Bharat
Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more
insurance companies. The United India in Madras, National Indian and
National Insurance in Calcutta and the Co-operative Assurance at Lahore
were established in 1906. In 1907, Hindustan Co-operative Insurance
Company took its birth in one of the rooms of the Jorasanko, house of the
29

great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General
Assurance and Swadeshi Life (later Bombay Life) were some of the
companies established during the same period. Prior to 1912 India had no
legislation to regulate insurance business. 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 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. During the mushrooming of insurance companies many financially
unsound concerns were also floated which failed miserably. 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. The
demand for nationalization of life insurance industry was made repeatedly in
the past but it gathered momentum in 1944 when a bill to amend the Life
Insurance Act 1938 was introduced in the Legislative Assembly. 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
30

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 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. Since life insurance contracts are
long term contracts and during the currency of the policy it requires a variety
of services need was felt in the later years to expand the operations and place
a branch office at each district headquarter. Re-organization of LIC took
place and large numbers of new branch offices were opened. As a result of
re-organisation 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-organisation 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, 109
divisional offices, 8 zonal offices, 992 satallite offices and the Corporate
office. LICs Wide Area Network covers 109 divisional offices and connects
all the branches through a Metro Area Network. LIC has tied up with some
31

Banks and Service providers to offer on-line premium collection facility in
selected cities. LICs 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 continues to be the dominant life insurer even in the liberalized scenario
of Indian insurance and is moving fast on a new growth trajectory surpassing
its own past records. 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, 2005, posting a healthy growth rate of 16.67% over the
corresponding period of the previous year.
From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life insurance
business. The same motives which inspired our forefathers to bring
insurance into existence in this country inspire us at LIC to take this message
of protection to light the lamps of security in as many homes as possible and
to help the people in providing security to their families.


32

Objectives of LIC

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

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."

33

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





















34


Board of Directors

Members On The Board Of The Corporation
Shri. T.S. Vijayan (Chairman)

Shri. D.K. Mehrotra (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. R. Gopalan (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)

Dr. Sooranad Rajashekhran

Shri. Monis R. Kidwai

Lt. General Arvind Mahajan ( Retd.)

Shri Anup Prakash Garg






35


PRESENT LIC STATUS
Customer base of 25 Crore
Largest Investor to the Country
Funds 24.6% of Govt. expenses
Assets estimated of 8trillion rupees

Insurance Industry India
$47.89 billion Industry
The 5
th
largest Life Insurance Market
Growing at the rate of 32-34% annually
Contributes upto 7% to the GDp
The life Insurance Premium is about to achieve 1,230,000 crore by
2010-2011
Subsidiaries of LIC
LIC of INDIA International
LIC Nepal
LIC Lanka
LIC Housing Finance



36


LIC OWNS THE FOLLOWINGSUBSIDIARIES

1. 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$
denominated policies to cater to the insurance needs of NRIs and providing
insurance services to holders of LIC policies currently residing in the Gulf.

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

3. LIC Housing Finance
Incorporated in 19June 1989, its main objective is to providelong term
finance for construction or purchase of houses or apartments. It hasa Dubai
office.

4. LIC Lanka
A joint venture company formed in 2003 with the Bartleet Group
of Companies, Sri Lanka.
37



5. LIC Housing Finance
A wholly owned subsidiary of LIC Housing Finance, itbuilds and
operates "Assisted Community Living Centres" for senior citizens.


PROGRESS OF 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 in2006.
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 .1,12,184
h). In the financial year 2006-07 Life Insurance Corporation of India's
number of policy holders aresaid 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.
38

8. INFORMATION TECHNOLOGY & LIC
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.

1964 saw the introduction of computers in LIC. Unit Record Machines
introduced in late 1950s were phased out in 1980s and replaced by
Microprocessors based computers in Branch and Divisional Offices for Back
Office Computerization. Standardization of Hardware and Software
commenced in 1990s. Standard Computer Packages were developed and
implemented for Ordinary and Salary Savings Scheme (SSS) Policies.

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. Thus all
our 100 divisional offices have achieved the distinction of 100% branch
computerisation. New payment related Modules pertaining to both ordinary
39

& SSS policies have been added to the Front End Package catering to Loan,
Claims and Development Officers Appraisal. All these modules help to
reduce time-lag and ensure accuracy.

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
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
40

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
LICs 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 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
LIC has 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.
41

These KIOSKS are enable to provide policy details and accept premium
payments.

INFO CENTRES
LIC has also set up 8 call centres, manned by skilled employees to
provide you with information about our Products, Policy Services, Branch
addresses and other organizational information.












42

TYPES OF INSURANCE PLANS OFFERED BY LIC
Pension Plans
Pension Plans are Individual Plans that gaze into your future and
foresee financial stability during your old age. These policies are most suited
for senior citizens and those planning a secure future, so that you never give
up on the best things in life.

Life Insurance Plans
As individuals it is inherent to differ. Each individual's insurance
needs and requirements are different from that of the others. LIC's Insurance
Plans are policies that talk to you individually and give you the most suitable
options that can fit your requirement.

Unit Policies
. Unit plans are investment plans for those who realise the worth of
hard-earned money. These plans help you see your savings yield rich
benefits and help you save tax even if you don't have consistent income.



43

Group Scheme
Group Insurance Scheme is life insurance protection to groups of
people. This scheme is ideal for employers, associations, societies etc. and
allows you to enjoy group benefits at really low costs.

The LIC also offers other plans such as Health Plans, Special Plans,
Withdrawal Plans India is among the most promising emerging
insurance markets in the world. Its current premium volume of USD 18
billion has the potential to increase to USD 90 billion within the next
decade. In particular, life insurance, which currently makes up 80%
of premiums, is widely tipped to lead the growth. The major drivers
include sound economic fundamentals, a rising middle-income class,
an improving regulatory framework and rising risk awareness.








44

9. CONCLUSION
The groundwork for realizing potential was arguably laid in 2000
when India undertook to open the domestic insurance market to private-
sector and foreign companies. Since then, 13 private life Insurers and
eight general insurers have joined the Indian market. Significantly,
foreign players participated in most of these new companies - despite
the restriction of 26% on foreign ownership. Incumbent state-owned
insurance companies have so far managed to hold their own and retain
dominant market positions. Yet, their market share is likely to decline
in the near to medium term. Important steps have thus been already
taken, but there are still major hurdles to overcome if the market is to
realize its full potential. To begin with, India needs to further liberalize
investment regulations on insurers to strike a proper balance between
insurance solvency and investment flexibility. Furthermore, both the life
and non-life insurance sectors would benefit from less invasive
regulations. In addition, price structures need to reflect product risk.
Obsolete regulations on insurance prices will have to be replaced by
risk-differentiated pricing structures.
In the end I would like to conclude by saying that in todays world of
uncertainty it is needful and very important to get oneself insured. Getting
insured is not only important for oneself but also important for the security
and safety of ones family. LIC provides insurance to the masses at lowest
and reasonable prices. LIC is not just a corporation but it also fulfills its
social responsibilities. Every year LIC contributes 4-5% of its total profit
towards NATION BUILDING FUND.
45

ANNEXURE
1. Do you have a Life Insurance Policy?
Yes No


2. Which Companys Insurance Policies do you have?
LIC SBI Life Insurance
HFC Standard Life New York MaxLife
Birla Sunlife Others

3. What is amount of insurance premium you pay
annually?


4. What priorities would you consider most important,
while purchasing
a policy? (Please Rank Your Choice)
Death Benefit Childrens Education
Retirements Benefit Tax Planning
Financial Planning

5 you have any knowledge of the stock market?
Yes No

6. If Yes do you have any knowledge about unit
linked insurance
plans?
Yes No
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7. If given a choice, where would you like to invest
your money?
Mutual Funds Post Office Schemes
Insurance Policies Debentures
Gold Banks (FDs etc.)
Equities If other
(specify)___________



8. According to you what are the factors that would
affect you decision while purchasing an insurance
policy?
Premium Return
Safety Liquidity
Market Condition


9. Are you or any of your family members are
planning to buy an insurance policy in near future?
Yes No



10. Are your needs satisfied with your current
investment in insurance?
Yes No





47




BIBLOGRAPHY
A. WEBLIOGRAPHY
1. http://www.irda.gov.in
2. http://en.wikipedia.org
3. http://business.gov.in

B. BOOKS
1. Insurance Industry vol.3- edited by U. JAWAHARLAL
2. Principles & Practices of Banking & Insurance 2nd Sem Banking &
Insurance Vipul Prakashan.