12 - Chapter 3 PDF

Chapter - III:
Life Insurance Corporation of India:
Structure, Role & Performance

Chapter - III: Life Insurance Corporation of India:
The aim of the discussion in the last chapter was to have an overview of
insurance sector in India with specific emphasis on the life insurance
sector. Hence, to start with the discussion was focused on the socio
economic importance of the insurance sector. But later on the issues like
evolution and development of the insurance sector, the reforms in the
insurance sector and the structure of Indian insurance industry in the
post liberalization period were discussed. Since the present work directly
relates to Life Insurance Corporation (LIC) of India, it is essential to have
a concrete picture of LIC. Hence, the current chapter aims at looking into
the issues of structure, role and performance of LIC over the years. With
this aim this chapter is divided into five broad sections excluding
introduction.
The first section deals with the genesis of LIC. While the second section
deals with the objecives of LIC. The third section discusses the
stuructural aspects of LIC. In this section, the issues like organisational
and operational aspects are delt with. The fourth section pertains to the
role of LIC in nation building. In this section aprt from the role in capital
formation the social role of LIC over the years, are also discussed. The
fifth and final section of the present chapter discusses the issues of
performances of LIC. The discussion on performance in general has been
restricted to 90s, the decade of liberalisation and the post libealisaiton
period of the insuracne sector in particular. Lastly, the chapter is
summarised with the findings from each section.
Life Insurance Corporation of India (LIC) over the years has made the
Indian insurance sector vibrant. In particular, the life insurance
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business in India has grown leaps and bounds due to the dominant role
played by LIC. Today, India has the highest number of life insurance
policies in force. The total investible funds with the Life Insurance
Corporation of India (LIC) are almost 8 per cent of GDP. The LIC employs
more than one lakh employees who in turn supervise through 2,048
branch offices more than five lakh agents, servicing around 18 crores
policies and a corpus of over rupees 3,40,000 crores. It started its
business with 300 offices, 5.6 million policies and a corpus of rupees
45.9 crores. LIC is almost half a century old. With more than 90,000
crore of investible funds, it is a big part of the nation’s financial life.
There has been a major social thrust to the activities of LIC, both at
covering the poorer and vulnerable sections of Indian society through
group schemes, and at investing. the income in infrastructural and
socially beneficent projects.
Till the liberalisation of Indian insurance sector, Life Insurance
Corporation of India, commanded a monopoly of soliciting and selling life
insurance in India. With the change in the India’s economic philosophy
from the early 1990s, and removal of state control from a number of
sectors of economy, the monopolistic position of the Life Insurance
Corporation of India appeared to be threatened. Ultimately, with the
opening-up of the insurance sector its monopoly position stands diluted
and currently, it has to compete with a number of other corporate
entities, Indians as well as transnational Life Insurance brands.
Nevertheless, it has a long history of performing the life insuracne
business in india.
63
I. The Genesis of LIC:

After independence, the business of Indian insurance grew, at a faster
pace as competition amongst the Indian companies intensified and as
the non-Indian insurers were dislodged by Indian life companies. Despite
the strides by the Indian companies, insurance business remained an
urban phenomenon. There was an immense scope for further spread of
life insurance in the country. Moreover, this limited development was
marked by many malpractices involving misuse of insurance funds,
excessive costs, deficiencies and frequent liquidation of insurance
companies. This shook public confidence and also deprived policy
holders of their savings and security1. LIC came into being in a scenario
of insurance marred by insolvencies, increasing public distrust and
insurance being confined to urban areas mainly. The first and foremost
emphasis was on trusteeship. This emphasis on trusteeship was relevant
then, in light of major insolvencies and fraudulent practices of some
private insurance companies prior to 1956. The genesis to the legal
enactment to nationalize the life insurance business in India lies in the
above background. Also the sovereign aspirations of the Republic of
India to put into motion a framework of state control was one of the
reason for the nationalisation of LIC. The framework of state control was
envisaged in the Industrial Policy Resolution of 1956, a political
resolution, which had created a policy framework for extending state
control over at least seventeen sectors of the economy, including the life
insurance. Another justification for nationalisation was to raise the much
needed funds for rapid industrialisation and self-reliance, especially
1 Bhave, S R (1970),
64
since the country had chosen the path of state planning for development.
Insurance provided the means to mobilise household savings on a large
scale. LIC thus came into being with a stated mission of mobilising
savings for the development of the country and also conducting the
business in the spirit of trusteeship and providing protection to the
people in every parts of the country.

The Life Insurance Corporation of India (LIC) was formed in 1956, when
the government of India brought together over 200 odd private life
insurers and provident societies, under one nationalised monopoly
corporation. Nationalization was accomplished in two stages: initially the
management of the companies was taken over by means of an ordinance,
and later, the ownership too by means of a comprehensive bill. The
Parliament of India passed the Life Insurance Corporation Act on the
19th of June 1956, and the Life Insurance Corporation of India was
created on 1st September, 1956, with capital contribution from the
Government of India and with the aim 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. The then Finance Minister, Shri C.D.
Deshmukh, while piloting the bill, espousing the above aims, outlined
the role to be performed by LIC; to conduct the business with the utmost
economy, in a spirit of trusteeship; to charge premium no higher than
warranted by strict actuarial considerations; to invest the funds for
obtaining maximum yield for the policy holders consistent with safety of
the capital; to render prompt and efficient service to policy holders,
thereby making insurance widely popular.
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Thus, after independence, it was felt that there exit a high degree of
insolvencies, fraud and malpractices and hence a great deal of public
distrust in the insurance sector in general and in the life insurance
sector in particular. It was also felt that the concept of insurance has
confined only to urban areas. The spread of insurance and the increase
in saving habits of the general public were considered as highly
important because after independence India had aimed at rapid
industrialization and self reliance. These realizations resulted in the
nationalization of life insurance sector and establishment of Life
Insurance Corporation of India by the act of the parliament in June
1956.
II. Objectives of LIC:
The broad objectives of LIC have been spelt out in its citizen’s charter.
The citizen charter gives the broad contours of the objecives uder two
important heads one is mission and the other is the vision of LIC2.
Mission; "Explore and enhance the quality of life of people through
financial security by providing products and services of aspired
attributes with competitive returns, and by rendering resources for
economic development.” Vision; "A trans-nationally competitive financial
conglomerate of significance to societies and Pride of India."
The above mentioned broad majors have been deciphered into several
specific objectives. However, some the important objectives could be the
followings.
• Spread Life Insurance widely and in particular to the rural areas
and to the socially and economically backward classes with a view
2 www.Iicindia.com
66
to reaching all insurable persons in the countiy and providing

them adequate financial cover against death at a reasonable cost.
• Maximize mobilization of people's savings by making insurance-
linked savings adequately attractive.
• Bear in mind, in the investment of funds, the primary obligation to
its policyholders, whose money it holds in trust, without losing
sight of the interest of the community as a whole; the funds to be
deployed to the best advantage of the investors as well as the
community as a whole, keeping in view national priorities and
obligations of attractive return.
• Conduct business with utmost economy and with the full
realization that the money belongs to the policyholders.
• Act as trustees of the insured public in their individual and
collective capacities.
• Meet the various life insurance needs of the community that would
arise in the changing social and economic environment.
• Involve all people working in the Corporation to the best of their
capability in furthering the interests of the insured public by
providing efficient service with courtesy.
• Promote amongst all agents and employees of the Corporation a
sense of participation, pride and job satisfaction through discharge
of their duties with dedication towards achievement of Corporate
Objective.
Thus the major objectives of LIC have been to spread the life insurance
by providing coverage against death at a reasonable cost to the poor and
67
Structure, Role 85 Performance
vulnerable section of the society in the rural areas and thereby to
maximize saving of the people.

No doubt, the realization of the above objectives depends to a large extent
on the structure of LIC. Hence, in the following section efforts have been
made to have an overview of the structural aspects of LIC.
III. Sturacture of LIC:
The basic aspects of any organisation is its structure. It’s a dynamic
concept since it is not a time constant. Rather it changes with time. Over
the years there has been several innovations to the structure of LIC. The
present structure of LIC is the result of developments over half a century
with regard to two of its important pillers one is organsational framwork
and another is operations of LIC. A flow chart of the organisational
framework has been presented in the annexure.
Operations of HO. 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, the 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 crores of New Business
in 1957 the corporation crossed 1000 crores only in the year 1969-70,
and it took another 10 years for LIC to cross 2000 crore mark of new
business. But with re-organisation happening in the early eighties, by
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1985-86 LIC had already crossed 7000 crore Sum Assured on new
policies.
Today, LIC functions with 2048 fully computerized branch offices, 100
divisional offices, 7 zonal offices and the corporate office. The Life
Insurance Corporation of India also transacts business abroad and has
offices in Fiji, Mauritius and United Kingdom. Besides the branch
operations, the Corporation has established overseas subsidiaries jointly
with reputed local partners in Bahrain; Nepal and Sri Lanka. The
following map gives a picture of domestic operation of LIC.
Domestic Operation Of LIC3:
3 adapted from www.licindia.com
69
LIC’s wide area network covers 100 divisional offices and connects all the
branches through a metro area network. LIC has tied up with some
banks and service providers to offer on-line premium collection facility in
selected cities. LIC’s ECS and ATM premium payment facility is an
addition to customer convenience. Apart from on-line Kiosks and IVRS,
Info Centres have been commissioned at Mumbai, Ahmedabad,
Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
other cities. With a vision of providing easy access to its policyholders,
LIC has launched its SATELLITE SAMPARK offices. The satellite offices
are smaller, leaner and closer to the customer. The digitalized records of
the satellite offices will facilitate anywhere servicing and many other
conveniences in the future.
Thus, through various operational, changes particularly, reorganization
the functions of LIC have significantly expanded. Moreover, LIC has also
expanded its overseas operation by opening offices in Fiji, Mauritius and
United Kingdom and by establishing overseas subsidiaries in Bahrain;
Nepal and Sri Lanka. In order to strengthen it operation LIC has
introduced several customer friendly advanced technologies. However,
the half a century of operation of LIC has played a great role in the
nation building.
IV. The Role of LIC in Nation Building:
LIC since the last half a century has been actively involed in the task of
nation building. Over the years, it has not only developed the Indian
insurance sector but also it has played a key role in the economic
development of the country. Being a public monopoly, owned, wholy by
the government of india, the domestic economy has immensely benefited
70
Structure, Role 8s Performance
from it. Certainly, it does not imply that all of its surpluses are accrued
to the government of india. Rather, as specified in the charter, only 5 per
cent of its annual valuation surplus goes to the government (the owner)
and the rest 95 per cent is returned to policy-holders in the form of
bonuses and profits.7 It is thus run almost like a mutual fund of the
policy-holders. Thus, LIC acts as a link between the savers and the
investors. On the one hand, it encourages savings habits of the general
public and on the other hand it makes the fund available to the potential
investors so that the funds are deployed profitably. In both the cases the
ultimate result is the enhancement of the productive capacity of the
domestic economy. In case of the former, the productive activity is
enhanced indirectly because a person when saves through insurance
covers he enjoys peace of mind since he has got protection against risk
associated with his activities. On the contrary, in case of later the
productive activity is enhanced directly because each dose of investment
results in an addition to the stock of productive assets i.e. the stock of
capital in the domestic economy, which in other words is known as
capital formation for the economy. In this context it is certainly
worthwhile to analyze the nature and extent of contribution made by LIC
in enhancing the rate of capital formation in the domestic economy.
Capital Formation: Over the years LIC has contributed significantly to
the domestic capital formations in the country. The funds of the LIC have
been invested in various sectors of the economy. The investment of the
Corporation funds is governed by section 27A of the Insurance Act, 1938,
and subsequent guidelines/instructions issued there under by the
Government of India from time to time. These investments are regulated
71
by the Government to benefit the people at large. However, as maintained

earlier, the total investible funds with the Life Insurance Corporation of
India (LIC) is almost 8 per cent of GDP.
The contribution of LIC to gross domestic capital formation was not very
significant during the first two decades of post independence era. It
however, picked up during the 80’s and of course in the post
liberalization era. The following table 3.1, gives a picture of the
contribution of LIC to domestic investment during the above mentioned
period.
Table 3.1: Investments by LIC (19!B0-2004):
Year Year
(As at As at
Year (As at Investments the Investments the Investments
the end of (Rupees end of (Rupees end of (Rupees
March) crore) March). crore) March) crore)
1980 5287.7 1990 . 20503.7 2000 139032.2
1981 6020.5 1991 24899.7 2001 167003.8
1982 6894.4 1992 30402.4 2002 207203.3
1983 7835.0 1993 36322.1 2003 251770.3
1984 8857.6 1994 44161.6 2004 P 326741.2
1985 9954.2 1995 53479.5
1986 11289.9 1996 65056.9
1987 12812.9 1997 77938.0
1988 14712.2 1998 93600.3
1989 17342.7 1999 114102.7
P: Provisional Figure
Source: Data Base on Indian Economy, RBI4.
As shown in the above table 3.1, the investment by LIC has increased
continuously since 1980. In the year 1980, it was nearly Rs. 5288 crore,
from that it has increased to Rs. 326741 crore by the year 2004 as per
the provisional estimates. That is nearly 62 times increase during these
two decades and a half. Of course, since the figures are not in constant
4 www.rbi.org.
72
prices, the effects of rising prices are incorporated within it. This
certainly implies that, the phenomenon of increase investments is
exaggerated because of the rise in domestic prices over the years.
However, it can not be denied the fact that there has been an increasing
trend of investments made by LIC over the years. The above phenomenon
has also been depicted in the following figure.
Figure: 3.1: Investments by LIC
Investments by LIC
350000 T
The above figure clearly shows a rising pattern of investment made by

LIC over the years in the domestic economy. Of course, the absolute
figures do not give a clear picture of the growth of investments over the
years. The growth rates may give a better picture of the increase in the
investments made by LIC. An attempt has been made to look at the
investments made by LIC over the years from the prospective of growth.
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The following table 3.2 gives a picture of growth of LIC investments over
the years.
Table 3.2: Growth in Investments by LIC:
Compound Annual Average
Annual Growth Growth Rates
Periods Rates (CAGR) (AAGR)
Period I (1980 - 89) 13.7 14.12
Period II (1990 - 99) 20.9 20.74
Period III (2000 - 04) 23.6 23.46
Entire Liberalization
Period (1991-2004) 21.43 21.89
Whole Period (1980 -
2004) 18.8 18.8
Source: same as table 3.1
The compound annual growth rates (CAGR) of the time series data has
been calculated by taking the coefficients of exponential equation where
as the Annual average growth rates.are nothing but the average of simple
annual growth rates over various years. Taking the various aspects such
as the decadal aspect, liberalization in the economy and the insurance
sector liberalization etc. into account, a period wise analysis of the
growth of investments over the years has been made.
As shown in the above table 3.2, both the compound annual growth
rates and annual average growth rates are showing the similar pattern.
However, through whichever prism one looks at it is clear that
performance of LIC with respect to the growth of investment has been
better in the years of liberalization of the domestic economy in
comparison to that of pre liberalization period. In fact the growth rates
have been the highest during the period III (2000-04). This has been the
period of insurance sector liberalization. This certainly indicates that in
the aftermath of liberalization of Indian economy in general and the
74
insurance sector in particular, LIC has focused on profitable deployment
of its funds.
Thus, it can be said that LIC over the years has contributed significantly
to the domestic investment. The contribution to domestic investment is
more prominent in the liberalization period. However, apart from
enhancing domestic investment it has played a major social role in the
economy.
Social Role of HO. One of the objectives of nationalization of life
insurance operations was to conduct the business with social objective in
mind. Accordingly, there has been a major social thrust to the activities
of LIC, both at covering the poorer and vulnerable sections of Indian
society through group schemes, and at investing the income in
infrastructure and socially oriented projects. LIC’s charter (the LIC Act of
1956) requires it to invest at least 75 per cent of its funds into socially
oriented projects.
LIC has been assisting development of road transport by providing
financial assistance to State Road Transport Corporations for
augmenting their fleet of buses. LIC also has been providing financial
assistance to state Electricity Boards/Power Corporations for power
generation projects by way of loans/subscriptions to their bonds. As on
March 1997, LIC invested Rs 61,074 crore in central, state and other
government guaranteed marketable securities, and loans to various
socially oriented schemes5. These funds are used to provide for and
improve basic amenities such as potable water, drainage, housing,
electrification and transport. In 1997 the scope of socially oriented
s Ranade. A & Ahuja R.(1999)
75
investment was widened to include infrastructure projects such as ports,

roads, including highways, and railways.
Housing Finance also occupies a prime place in LIC’s socio-purposive
investments. The Corporation provides finance for housing to individuals,
Co-operative Housing Societies and private undertakings under its
various mortgage housing schemes. The LIC has also emerged as an
important contributor to the housing finance. The contributions by LIC
comprising of direct lending, bulk loans and assistance to State
Government apex bodies and loans to its own housing finance subsidiary
totaled around Rs. 1570 crores during the Seventh Plan. The
contribution was as high as Rs. 825 crores during 1990-91. The
following table 3.3 gives a picture of the LIC’s social sector investments.
Table 3.3: Investments of LIC in Social Sector:
Investments as a perc entage of
Total Investments oy LIC
Sectors 1986-87 1996-97 1998-99
State Govt. Securities 13 11 11
Electricity 20 11 9
Housing 15 14 12
Water Supply 8c Sewage 6 3 2
State Road Transport 1 1 1
Source: www.bimaonline.com
The above table 3.3, depicts that the share of various social sectors in
the total investments of LIC. As shown in the above table 3.3, earlier
electricity had larger share in investments made by LIC but in recent
year it is the housing sector which has a larger share in the total
investments made by LIC. On the contrary the share of state road
transport is the least. In fact it has remained constant at only 1 per cent.
This might be due to the fact during the last couple of decades there has
been unprecedented boom in the housing sector. And owing to
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speculation the sector has been giving a phenomenal degree of return.

But in case of state road transport sector, the rate of return is very less
due to the absence of users charge. However, keeping aside the sector
specific aspects of the investments made by LIC, the overall picture
which emerges is quite interesting. The overall picture is that the
investments made by LIC in all these social sectors have either been
declining or have remained constant. This might be due to the concerns
and consolidation of LIC owing to liberalization of Indian economy in
general and financial sector in particular. This has also been depicted in
the following figure.
Figure: 3.2: Social Sector Investment by LIC:
Social Sector Investments by LIC
State Govt. Securities Electricity Housing Water Supply & Sewage State Road Transport
Important Social Sectors
Apart from providing finances for the exclusive sectors, LIC also has been
helping those sectors which are inclusive in the broader sense of the
concept of social sector. Particularly, it has been helping the small scale
8s medium scale industries by granting loans for setting up Co-operative
Industrial Estates & Industrial Development Corporations etc. The
p77~
Structure, Role 8m Performance
Corporation’s assistance to State Level Finance Corporations 8s All India

Finance Corporations like IDBI, IFCI, ICICI etc. by way of subscription to
bonds or debentures issued by such institutions, also indirectly helps
the development of small 8s medium scale industries. Hence, it may be
said that over the years LIC has been making a distinct contribution
towards growth in industrialization 8s generation of skilled 8s unskilled
employment opportunities in the country.
LIC’s other social role is seen in its subsidising specific kinds of policies.
For example, for the unorganised and rural sectors, group life insurance
has an important role to play in supplementing other state level efforts,
like providing old age pensions, employment generation scheme,
preventive health and medical care. LIC’s social security group insurance
scheme that is applicable to 23 approved occupations including beedi
rollers, rickshaw pullers, construction workers, self-employed women,
covers around 50 lakh lives. Around six lakh lives are covered under
rural group life insurance schemes (RGLIS) started from August 1995. At
the time of nationalisation, insurance was largely an urban phenomenon
but currently LIC underwrites 50 per cent of its new business from rural
areas. The following table 3.4, gives a picture of the rural thrust of LIC
over the years.
Table 3.4: Rural Thrust of LIC:
No of policies (lakhs) Sum Assured in Rs crore)
Year Total Rural %share Total Rural %share
1961 15 5 37 599 183 31
1970 14 5 33 1026 252 25
1980 21 6 28 2733 604 22
1990 74 31 41 23220 8086 35
1998 133 68 51 63618 27551 43
Source: same as table 3.3.
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As shown in the above 3.4, table the share of rural area in total number
of policies as well as the sum assured were as high as 37 and 31 per cent
respectively. This clearly reveals the fact that after the nationalization of
LIC, during the initial decades, there was a great deal of emphasis on the
rural expansion of LIC because as said earlier at the time of
nationalization there were urban biases in life insurance business.
However, such euphoria was short lived. The rural share fell both in 70’s
and 80’s. The increase in urban bias was in spite of nationalization and
pro active policy framework of the state. Hence, this could be either
because of the fact that the growth of the economy was urban biased or
the state apparatus was not effective enough to correct such anomalies
or both. However, the situation got reversed during 1980s and 1990s
both due to the active role of the. state and the rural orientation of
economic growth process owing to green revolution. By 2000, in spite of
the threats of liberalization rural penetration by LIC was almost 50 per
Cent. This indeed a commendable job performed by LIC in recent
decades. This has also been reflected in the following graph.
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Figure: 3.3: Rural Thrust of LIC:
Rural Thrust of LIC
-No of policies
-Sum Assured
Percentage of UC Total
1961 1970 1980 1990 19®

Year
Other Related Activities: In the 1970s LIC branched out into mass
insurance through group insurance, later, extending to social security. It
further entered the pension field in mid-1980s. During 1989-90, the
corporation branched out into other related spheres of activity with the
creation of three subsidiaries, viz, LIC Mutual Fund, LIC International,
and LIC Housing Finance. Even though LIC has some limited foreign
insurance business, and does re-insure with foreign organisations, its
foreign activities have negligible foreign exchange implications. LIC’s
initiative to provide related financial services through its extensive
network of branches has come none too soon.
Thus, LIC has been mainly operating as a link between the savers and
investors. In order to strengthen such link it has made its inroads to
various other related activities viz, mutual fund, housing finance and
overseas activities etc. Through its operation it has not only been
80
enhancing the saving habits of the people but also the level of investment
in the economy. Interestingly, the contribution to domestic investment is
more prominent in the liberalization period. LIC has also been enhancing
the economic activity by helping the small & medium scale industries
through the provision of funds for their infrastructural development.
Apart from enhancing economic activities LIC has been fulfilling its social
responsibility by subsidizing specific kinds of policies, like unorganized
and rural sectors and supplementing state level efforts, like providing old
age pensions, employment generation scheme, preventive health and
medical care, etc. As a part of the social responsibility LIC also finances
the social sector investments. But unfortunately, in the recent decades
the investments made by LIC in some of the important social sectors
have either been declining or have.remained constant. However, one of
the major objectives of the establishment of LIC as a state monopoly was
to remove the urban bias in the business of life insurance. In this respect
the finding suggest that initially it succeeded in this objective but latter
on during 70’s and 80’s the rural share of LIC business fell sharply.
However, the situation got reversed during 1980s and 1990s both due to
the active role of the state and the rural orientation of economic growth
process owing to green revolution. By 2000, in spite of the threats of
liberalization rural penetration by LIC was almost 50 per cent. Thus,
apart from other things LIC over the years has also been full filling its
social responsibility of helping the poor and needy even in remote
corners of the country.
Thus, it can be said that over the years LIC has been contributing
tremendously to nation building. Apart from its contribution to the
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Structure, Role 8b Performance
domestic economy it is also essential to know that does LIC make good
business as a business entity. The issue is more important in the context
of increased competition in the insurance sector owing to liberalization.
An analysis of its performance in the last decade or some may give some
picture of the same.

V. Performances of LIC:
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 year6.
From its nationalization to now, LIC has crossed many milestones and
has set unprecedented performance records in various aspects of life
insurance business. The state of the economy has a permanent bearing
on the growth and performance of LIC. Since 1991, the state of the
Indian economy has changed significantly. Form a closed door, state
controlled economy it has changed to an open door, market controlled
economy. Though insurance sector liberalization took place almost a
decade after the initiation of liberalization of Indian economy, the
changed environment has been exhorting a great deal of impact on the
growth and performance of LIC. Those impacts may be considered as the
indirect and the liberalization of insurance sector may be considered as
the direct. The insurance sector liberalization took place in December
1999. Hence, it may be said that the performance of LIC in the 1990,s
6 Ranade A and Ahuja R (1999),
IT
was subject to only indirect impact of liberalization whereas, since 2000

it has been subjected to both direct and indirect impact of liberalization.
Keeping this view in mind the present section has been divided into two
subsections. The first subsections deals with the performance of LIC in
the 1990s and the next subsection deals with the performance of LIC in
the post liberalization period.

Performance of LIC in the 1990s: The performance of LIC over 1990-
91 to 1997-98 is given in Table 3.5.
Table 3.5: Growth of Business in Force:
Number Simple Simple Total Simple

of Annual Annual Annual Sum Annual
As on 31st
Policies Growth Premium Growth Assured Growth
of March
(in Rates (in (Rs. Cr.) Rates (in in (Rs. Rates (in
Lakhs) %) %) in Cr.) %)
1991 455.1 4777 118651
1992 508.6 11.76 . .5946 24.47 145929 22.99
1993 566.1 11.31 7146 20.18 177268 21.48
1994 608 7.4 8758 22.56 207601 17.11
1995 645.5 6.17 10385 18.58 253333 22.03
1996 708.7 9.79 12094 16.46 294336 16.19
1997 776.6 9.58 14500 19.89 343018 16.54
Source: Computed from Annual Reports of LIC, Various Issues
As shown in the above table 3.5, the business of life insurance by LIC
grew steadily in the 1990s. The total numbers of policies sold by LIC,
Annual Premium income and total sum assured by LIC have shown
positive growth during the period under consideration. However, if we
look at the annual growth pattern as depicted in the above table one
striking feature has been that the growth rate more or less declined or
slowed down during the second half of the period under consideration
than that of the first half.
83
The question however remains intact, i.e. why during the initial years of
liberalization LIC has done better in comparison to that of later years. Is
the new business undertaken by LIC in the aftermath of liberalization
some way responsible for the same?
Premium on new business individual insurance that comprised a third of
the total premium income (new as well as renewal premium) declined to
less than a quarter between 1990-91 and 1996-97. The growth rate of
number of new policies, nearly half of which are written in rural areas,
does not show any clear trend during the same period. Yet, total
premium income from individual plans continued to grow at a reasonable
rate. This is to a large extent due to greater preference for policies of
higher sum assured. Share of policies with sum assured of Rs 50,000
and over , increased from around 8 per cent in 1990-91 to 19 per cent in
1996-97. This share being picked up wholly at the expense of policies
with sum assured of Rs 10,000 or less.
In the 1990s LIC introduced number of new products a few of them have
been quite popular. This is reflected in the fact that the share of two
most popular policies, namely, Endowment policy and Money Back
policy, which constituted about 75 per cent of the business in 1991-92,
has gone down to almost 56 per cent in 1996-97. Asha Deep, Bima
Kiran, Jeevan Surabhi, introduced in the 1990s, did well in the market.
The following table 3.6, gives a picture of the growth of new business
which LIC has undertaken in the aftermath of liberalization in the Indian
economy.
84
Table3.6: Growth of New Business in India - Individual Insurance

(Excluding Annuities):
Simple
Number of Simple Annual Annual Annual
Policies (in Growth Rates Premium Growth
YEAR Lakhs) (in %) (Rs. in Cr.) Rates (in %)
1990-91 86.5 NA 1527 NA
1991-92 92.4 6.82 1790 17.22
1992-93 99.6 7.79 2038 13.85
1993-94 107.3 7.73 2508 23.06
1994-95 108.8 1.4 2534 1.04
1995-96 110.21 1.3 2814 11.05
1996-97 122.68 11.31 3345 18.87
1997-98 133.11 8.5 3859 15.37
Source: Same as table 3.5
As shown in the above table 3.6, the number of individual insurance
policies sold by LIC during the period 1990-91 to 1997-98 has increased
continuously. The annual growth rate of the policies sold was the highest
in the year 1996-97. On the contrary, it was the lowest in the two
previous years. The low growth of policies sold during those previous two
years slightly exaggerates the achievements of LIC in selling of insurance
products. However, it is true that the activities of LIC have been
successful in during 90’s in general and in the first half in particular. If
we look at the premium income of the LIC during the period under
consideration it also reveals a similar trend to that of policies sold. The
premium income also has increased continuously during the period
under consideration. But if we look at the annul growth pattern of the
premium income it does not reveal smooth pattern altogether. Rather, it
has been subjected to slight hiccups during the period under
consideration. During the period 1990-91 to 1997-98, initially, the
annual growth of premium income increased continuously. It reached
85
the maximum in the year 1993-94. It was to the extent of 23 per cent. In
the very next year it declined to just 1 per cent. But in the years it again
increased. Only in the last year during the period 1990-91 to 1997-98
i.e. 1997-98 it has declined marginally. In fact it can be said that in spite
of the hiccups in its growth, the premium income grew on an average
better in the first half of 90’s than that of the second half. Thus it may be
safely maintained that both the growth of policies sold and premium
income accrued to LIC have increased steadily throughout the period in
general and during the first half of the period under consideration in
particular. This might be due to the fact that though insurance sector
had not been liberalized till 1997-98, but by the end of the first half of
90s it was almost certain that it is going to be liberalized sooner or later.
As a result LIC made various in house efforts to consolidate its position
in the insurance sector during the second half. This was necessarily at
the cost of some growth and performance. The above phenomenon has
also been depicted in the following graph..
Certainly, the debate on reforms in insurance sector has put some
pressure on LIC to improve its performance.
Expenses of LIC: Overall expense as a percentage of premium income
maintained a declining trend over the same period, though renewal
expense as a percentage of premium income showed a steady increase
from 3.52 to 7.1 during 1990-91 and 1996-97. Operating expenses, that
include commissions as well as management expenses, as a percentage
of total income (premium income as well as income from other sources)
showed a steady decline over the period under consideration. In 1996-97,
86
Structure, Role 8b Performance
its share in total income was 14 per cent. Salaries account for much of
the management expenses.
Regional Spread of LIC: Regional analysis of insurance, across seven
zones in which LIC divides the country, suggests that insurance
penetration (total premium income as percentage is of zonal domestic
product (ZDP) is the maximum in southern zone. This is followed by
western and then south central zone while it is lowest is in central
(Madhya Pradesh), and only a little better in north central (Uttar
Pradesh) zone. There exists a strong correlation between per capita
premium income and per capita zonal domestic product suggesting an
increase in per capita income to be the surest way to increasing
insurance penetration. Region wise insurance density follows broadly
similar pattern. However, number of policies as a percentage of
population shows a strong correlation with social indicators such as
region wise literacy level. For example, top two regions (southern and
western zones) according to literacy rate are also the regions having the
highest number of policies as a percentage of its population. Similarly,
the lowest two regions (north-central and central) in terms of literacy rate
are also rank lowest in terms of number of policies as a percentage of its
population.
The Contribution of LIC to Govt. Revenue: As already mentioned,
there is a significant impact of tax-incentives in the purchase of
insurance. Now certainly the time has come to have a look at the tax
treatment of the insurance company. Taxation of Insurance companies is
governed by Income Tax Act 1961. Under this act, profits and gains of life
insurance business is taken to be the surplus arrived at by way of
87
actuarial valuation made as per Insurance Act, 1938. An assessee has to

pay income tax at the rate of 12.5 per cent on his income from life
insurance business. Further, Income Tax Act provides that any income of
a fund set up by the LIC on or after August 1, 1996 under a pension
scheme is exempt from income tax7. The amount that LIC paid to the
government both on valuation surplus and the tax is shown in the
following table 3.7.
Table 3.7: Amount Paid by LIC to the Govt.
5 Per (
Cent
Surplus Taxes Total
(Rs. in (Rs. in (Rs. in
Year Cr.) Cr.) Cr.)
1990-
91 90 254.9 344.9
1991-
92 105.41 326.6 432.01
1992-
93 118.42 407.15 525.57
1993-
94 140.15 431.92 572.07
1994-
95 160.94 508.98 669.92
1995-
96 171.69 582.28 753.97
1996-
97 198.35 585.06 783.41
Source: same as table 3.5.
As shown in the above table 3.7, the contribution of LIC to the Central
Government in the form of surplus has increased in the 1990s. From a
meager 90 corers in the year 1990-91, it has increased to nearly 200
crorers in the year 1996 - 97. Similarly, the tax receipt for the central
government has increased from 250 crores to nearly 600 crores during
7 Soman. S. S. (1997)
88
the aforesaid period. Interestingly, the increase in tax receipts by the

govt, form LIC activities, has been in the face of decline in the tax rate.
This certainly indicates the buoyancy in the tax rationalization. The
ascertainment of such fact is definitely beyond the scope of the present
study. However, because of the both the increase in surpluses of LIC and
the tax realization from LIC activities the total revenue accruable to
government has increased substantially. As shown in the above table it
has increased from Rs. 344.9 Crore in the year 1991 to nearly 800 crores
in the year 1996 -97. This certainly, highlights the performance of LIC
as a public sector monopoly in India. This has also been depicted in the
following graph.
Figure 3.4: Contribution of LIC to Govt. Revenue:
Performance of LIC in the Post liberalization Period:

Liberalization of Indian economy started long back, since 1991. Within a
short span of time the liberalization process touched almost all the
important sectors of the economy, from finance to external trade. But for
a long time the insurance sector remained untouched. There was a great
deal of debate over the opening of insurance sector. Finally, after almost
a decade of cross fire discussion, the insurance sector was opened up
with the passing up of the insurance development and regulatory bill in
December 1999. The tide of liberalization in the sea of insurance sector
gave a thrashing to the rock solid stance of the state behemoth the LIC.
The insurance sector liberalization apart from destroying the monopoly of
LIC has challenged its dominant leadership position in the life insurance
market in India. With the opening of the insurance sector several foreign
companies in collaboration with domestic companies have started
operating in India. They have changed the face of life insurance business
in India with the introduction of new product and by improving the
customer relationship management. They took a very little time to get
control over a significant size of the insurance market. The nature and
extent of their penetration in the life insurance market in India has been
discussed at length and breadth in the last chapter. In this section an
attempt is made to assess the performances of LIC since the
liberalization of insurance sector.
New business of LIC constitutes a significant portion of the total
business of LIC. Hence, the present performance analysis of LIC is
focused on the new business of LIC. The following table 3.8 gives a
picture of new business of LIC in the post liberalization period.
90
Table 3.8: Premium from New Business of LIC: 2001-05

(Rs. in 000' Crores) _______________ ___________ ______
Simple Simple Share of
Annual Annual LIC in
Growth Growth Industry
Rates Industry Rates (in Total (in
Year LIC (in %) Total %) %)
2000-01 7 - 7 100
2001-02 10 51 11 53 98
2002-03 11 8 12 16 92
2003-04 16 43 19 51 87
2004-05 20 23 27 42 75
2005-06 26 28 36 35 71
Compound Average
Growth Rate (CAGR)
(in %) 29 38
Annual Average
Growth Rate (AAGR)
________ (in%)________ 31 40
Source: Computed from IRDA journal, Various Issues.
The above table 3.8 reveals the fact that the premium collection by LIC
has been increasing continuously during the period under consideration.
It has increased from Rupees 7000 crores during 2000-01, when LIC was
the only player in the life insurance market in India, to Rupees 26000
crores in 2005-06, when LIC is one of the 13 players in the market. Over
the half a decade of liberalization LIC has achieved nearly 30 per cent
growth either going by the parameters of compound average growth or by
annual average growth. Thus, it appears even after the liberalization of
*
the insurance sector, LIC has maintained its growth momentum. This is
precisely due to the fact that the industry has also been growing at a
phenomenal rate after its liberalization. LIC however, has not been free
from wounds caused by insurance sector liberalization. The wreck to LIC,
caused by insurance sector liberalization is evident from the fact that the
industry growth, nearly 40 per cent, which all by counts is distinctly
91
higher than that of the LIC. Earlier, during hey days of LIC’s monopoly,
the insurance sector growth was synonymous with the growth of LIC.
This is quite evident from the facts of initial years of liberalization. As
shown in the above table 3.8, during the first two years of liberalization
viz. 2000-01 85 2001-02, the premium collection as well as its growth
rates are almost the same for LIC and the life insurance industry as a
whole. But slowly, with the arrivals of the new players in the market due
to the liberalization of insurance sector, LIC has lost its monopoly
position. The increase in competition and the growing erosion of
monopoly position is again evident from the fact that the gap between the
growth of the industry and that of the LIC has been expanding
continuously. However, in the latest financial year i.e. 2005-06, LIC has
made some grounds. The dent to LIC due to increased competition is also
evident from the decline in its market share. As shown in the above table
3.8, as far as the collection of premium from new business are
concerned, the markets share of LIC has declined from cent per cent in
the year 2000-01 to 71 per cent in the year 2005-06. Certainly, the
erosion has been close to one third. Thus, it appears that the insurance
sector liberalization has affected the performance of the LIC. However,
this may not be true. If the performance of LIC can be estimated in all
these years assuming the absence of liberalization and if they happens to
be less than the growth rates mentioned in the above table 3.8 than it
may be held that LIC has benefited rather than lost from liberalization.
Insurance sector Liberalization might have led to a greater market
expansion and LIC in fact might have benefited from it. Thus, whether
92
LIC has benefited or lost from liberalization is really difficult to comment

upon.
Figure 3.5: Premium from New Business: Market Share of LIC:
Premium from New Business:

Market Share of LIC
OO
Market share ( in %}
03
^O O
0)
O
OM
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Year
The three important component of new business in the life insurance

industry are premium collection and no of policies sold and no of lives
covered. Of course, out of these three, collection of premium is the most
important one. After discussing the performance of LIC in the post
liberalization period with regard to premium collection, it is essential to
at least highlight its various major constituents such as, number of
policies sold and no. of lives covered. The latest completed financial year
2005-06, has been considered for the above purpose.
93
The following table 3.9 gives a picture of the first two while the
information about no. of lives covered has been incorporated in the
analysis.
Table 3.9: Constituents of New Businesses of Lit3 (2005-C m Shar
Premium Collection No. of
e' of
Policies
Indust LIC
Share of / Indust in
iy Schem
LIC Total LIC in ry Indus
es
(Rs.in (Rs in Industry Total try
(000’
000' 000' Total (in (000’ Total
Nos)
Constituents Cr.) Cr.) %) Nos) (in %)
1. Individual Single
Premium 9 11 80 2274 2697 84
2.Individual Non-
Single Premium 13 20 65 29298 32744 89
3.Total individual
Business (1+2) 22 31 71 31572 35440 89
4.Group Single
Premium 4 . 4 90 18 18 100
5.Group Non-
Single Premium 0 1 0 0 3 0
6.Total of Group
Business (4+5) 4 5 80 18 21 86
Total (3+6) 26 36 71 31590 35462 89
Source: Same as table 3.8
As shown in the above table 3.9, as far as the constituents of premium
collection are concerned, total group business of LIC has a larger share
in the industry total. However, much of the premium collected by LIC
comes from total individual business. As far as the total individual
business is concerned the share of LIC happens to be 71 per cent which
is exactly equal to the share of LIC in total premium collection. This
certainly implies that much of the premium collection of LIC comes from
total individual business. In the total individual business, LIC has the
highest share in the industry. This in fact is true for one of its
94
constituents i.e. individual single premium. The share of individual

single premium of LIC in the industry happens to be as 80 per cent. This
certainly implies that LIC has a strong hold in the individual premium
business even after liberalization of the insurance sector. This has
happened because of the historical lineage of LIC to the business of
individual single premium. If we look at the number of policies sold, the
story is not different either. LIC dominates the industry in the group
single premium business. Its market share happens to be cent percent.
Hence, it may be said that LIC is the only life insurance company in
India which sells group single premium policies. The picture with regard
to the number of policies sold is quite similar to that of the premium
collection. However a slight difference appears. The slight difference is
mainly with regard to individual non single premium, whose share in the
market is higher than that of the individual single premium, whereas, in
case of premium collection it is the opposite.
Moreover, as far as number of lives covered is concerned which has not
been presented in the above table, the share of LIC in the market
happens to be nearly 76 per cent.
Thus, it may concluded that if we look at the micro constituents of new
business of LIC, in the life insurance industry the effect of insurance
sector liberalization has been similar to that of its premium collection.
The discussion however, remains incomplete without a brief look at the
share of micro constituents in the total of LIC’s new business. The
following table 3.10 gives a picture of the same.
95
Table 3.10: Relative Share of Constituents: 2005-06

Premium No. of
(Rs. in Policies /
Constituents 000 Cr.) Schemes
1. Individual Single
Premium 9 2274
2.Individual Non-
Single Premium 13 29298
3.Total individual
Business (1+2) 22 31572
Share of 1 in 3 (in %) 41 7
Share of 2 in 3 (in %) 59 93
4.Group Single
Premium 4 18
5.Group Non-Single
Premium 0 0
6.Total of Group
Business (4+5) 4 18
Share of 4 in 6 (in %) 100 100
Share of 5 in 6 (in %) 0 0
7.Total Busines of LIC
(3+6) 26 . 31590
Share of 3 in 7 (in %) 85 99.95
Share of 6 in 7 (in %) 15 0.05
Source: Source: Same as table 3.8
As shown in the above table 3.10, as far as the premium collection of LIC
in the year 2005-06 is concerned its main source has been individual
business. Its contribution of is nearly 85 per cent of the total business of
the LIC whereas, the contribution of group business is meager 15 per
cent. And in the group business is solely contributed by the group single
premium business. On the contrary, in case of individual business of
LIC, the positions of the constituents are almost evenly poised. The share
of individual single premium business and the share of individual non
single premium business in total individual business of LIC are 41 per
cent and 59 per cent respectively. On the contrary, if we look at the
96
number of policies sold by LIC in the year 2005-06 the picture is almost
similar to that of discussed earlier. Here also the main source has been
individual business. In fact it is almost cent percent. But there is exists
slight difference as far as the contribution of the constituents of the
individual business of LIC is concerned. As shown in the above table
3.10, unlike premium collection, the major contributor for number of
policies in the individual has been individual non single premium.
Thus, the conclusion emerges from the above is that LIC mainly depends
on its individual business rather than group business. And in the
individual business for premium collection, the major strong hold of LIC
has been individual single premium business whereas for the selling of
number of policies or scheme the major strong hold of LIC has been
individual non single premium. The main cause of this may be attributed
to the fact that LIC has remained a public monopoly for half a century or
so. Undoubtedly, the strongholds of LIC are reflected in its industry
performances.
Thus it may be safely maintained that both the growth of policies sold
and premium income accrued to LIC have increased steadily throughout
the period in general and during the first half of the period under
consideration in particular. This might be due to the business
consolidation efforts of LIC during the second half of 90s in order to face
up coming competition in the aftermath of insurance sector
liberalization.
As far as the performances of LIC with regard to its expenses are
concerned both its overall expense as well as salaries account, operating
and management expenses maintained a decline during 90s.
On the contrary as far as the regional spread of LIC is concerned the

analysis suggests that insurance penetration is the maximum in the
southern zone. This is followed by western and then south central zone
while it is lowest is in central (Madhya Pradesh), and only a little better
in north central (Uttar Pradesh) zone. There exists a strong correlation
between per capita income insurance penetrations. The analysis of
performance with regard to tax efforts of LIC to Govt, reveals that there
has been a significant increase. This certainly indicates the buoyancy in
the tax revenue since it has been in spite of the decline in the tax rate.
The performance analysis of LIC on growth front after the liberalization of
the insurance sector, reveals that LIC has maintained its growth
momentum which it experienced in the first half of 90’s, since the
industry has also been growing, at a phenomenal rate after its
liberalization. But at the same time it is also true that with the arrivals of
the new players in the market due to the liberalization of insurance
sector, LIC has lost its monopoly position. The increase in competition
and the growing erosion of monopoly position appears from the decline in
LIC’s shafe in the industry.
Summary:
Thus, it may be summaries that after independence in order to remove
the anomalies in the life insurance sector such as a high degree of
insolvencies, frauds etc and in order spread insurance and increase the
saving habits of the general public, the nationalization of life insurance
sector was done with the establishment of Life Insurance Corporation of
India by the act of the parliament in June 1956. The major objectives of
LIC was to spread the life insurance by providing coverage against death
98
at a reasonable cost to the poor and vulnerable section of the society in

the rural areas and thereby to maximize saving of the people. Over the
years, through various operational changes such as reorganization and
adoption several customer friendly advanced technologies, LIC has
significantly expanded. Moreover, LIC has also expanded its overseas
operations.
As far as its role and contribution to national economy are concerned,
LIC in order to strengthen its link between the savers and investors has
made its inroads to various other related activities viz, mutual fund,
housing finance and overseas activities etc. over the years it has not only
been enhancing the saving habits of the people but also the level of
investment in the economy. Interestingly, the contribution to domestic
investment is more prominent in the liberalization period. LIC has also
been enhancing the economic activity by helping the small & medium
scale industries through the provision of funds for their infrastructural
development. Apart from enhancing economic activities LIC has been
fulfilling its social responsibility by subsidizing specific kinds of policies,
like unorganized and rural sectors and supplementing state level efforts,
like providing old age pensions, employment generation scheme,
preventive health and medical care, etc. As a part of the social
responsibility LIC also finances the social sector investments. But
unfortunately, in the recent decades the investments made by LIC in
some of the important social sectors have either been declining or have
remained constant. However, one of the major objectives of the
establishment of LIC as a state monopoly was to remove the urban bias
in the business of life insurance. In this respect the finding suggest that
99
initially it succeeded in this objective but latter on during 70’s and 80’s
the rural share of LIC business fell sharply. However, the situation got
reversed during 1980s and 1990s both due to the active role of the state
and the rural orientation of economic growth process owing to green
revolution. By 2000, in spite of the threats of liberalization rural
penetration by LIC was almost 50 per cent. Thus, apart from other things
LIC over the years has also been full filling its social responsibility of
helping the poor and needy even in remote comers of the country. Hence,
it may be said that over the years LIC has been contributing
tremendously to nation building.
Lastly, as far as the performance of LIC with regards to its growth is
concerned it may be maintained that both the growth of policies sold and
premium income accrued to LIC have increased steadily throughout the
period in general and during the first half of the period under
consideration in particular. On the contrary as far as the regional spread
of LIC is the analysis suggests that insurance penetration is the
maximum in the southern zone. This is followed by western and then
south central zone while it is lowest is in central (Madhya Pradesh), and
only'a little better in north central (Uttar Pradesh) zone. There exists a
strong correlation between per capita income insurance penetrations.
The analysis of performance with regard to tax efforts of LIC to Govt,
reveals that there has been a significant increase, which indicates the
buoyancy in the tax revenue since it has happened in spite of the decline
in the tax rate.
The performance analysis of LIC on growth front after the liberalization of
the insurance sector, reveals that LIC has maintained its growth
100
momentum which it experienced in the first half of 90’s, since the

industry has also been growing at a phenomenal rate after its
liberalization. But at the same time it is also true that with the arrivals of
the new players in the market due to the liberalization of insurance
sector, LIC has lost its monopoly position. The increase in competition
and the growing erosion of monopoly position appears from the decline in
LIC’s share in the industry.
Certainly, the important issue at the present juncture is that how LIC
can slow down the erosion on its market share or industry position? It
can only slow down the erosion on its market share or industry position
if and only if it addresses the customer woes on which the new arrivals in
the life insurance industry are focusing on. This can happen if it pays
attention to the issues relating to its customer satisfaction. In the next
chapter an attempt has been made to highlight the theoretical
underpinnings of customer’s satisfaction, which is otherwise known as
the customers delight management.
101

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Chapter - III:

Life Insurance Corporation of India:

Structure, Role & Performance

I. The Genesis of LIC:

people in every parts of the country.

to reaching all insurable persons in the countiy and providing

vulnerable section of the society in the rural areas and thereby to

maximize saving of the people.

3 adapted from www.licindia.com

by the Government to benefit the people at large. However, as maintained

The above figure clearly shows a rising pattern of investment made by

insurance sector in particular, LIC has focused on profitable deployment

s Ranade. A & Ahuja R.(1999)

investment was widened to include infrastructure projects such as ports,

speculation the sector has been giving a phenomenal degree of return.

Social Sector Investments by LIC

Corporation’s assistance to State Level Finance Corporations 8s All India

Figure: 3.3: Rural Thrust of LIC:

Rural Thrust of LIC

1961 1970 1980 1990 19®

picture of the same.

6 Ranade A and Ahuja R (1999),

was subject to only indirect impact of liberalization whereas, since 2000

the post liberalization period.

Number Simple Simple Total Simple

Table3.6: Growth of New Business in India - Individual Insurance

actuarial valuation made as per Insurance Act, 1938. An assessee has to

the aforesaid period. Interestingly, the increase in tax receipts by the

Performance of LIC in the Post liberalization Period:

Table 3.8: Premium from New Business of LIC: 2001-05

LIC has benefited or lost from liberalization is really difficult to comment

Premium from New Business:

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

The three important component of new business in the life insurance

constituents i.e. individual single premium. The share of individual

Table 3.10: Relative Share of Constituents: 2005-06

On the contrary as far as the regional spread of LIC is concerned the

at a reasonable cost to the poor and vulnerable section of the society in

momentum which it experienced in the first half of 90’s, since the

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