2008

IRLM project

SSIM

A DETAILED PROJECT REPORT

ON LIFE INSURANCE
CORPORATION {LIC} OF INDIA



Submitted to:- Submitted by:

Mr. B.S Rao Arjun Roy {B2-08}

 
Table of Contents
Insurance-an Introduction ...................................................................................................... 3
The History of Insurance Worldwide .................................................................................... 4
Insurance Industry in India .................................................................................................... 5
Life Insurance at a glance ....................................................................................................... 7
Insurance Act 1938 ................................................................................................................... 8
Malhotra Committee ................................................................................................................. 9
Regulator of Insurance Industry in India-IRDA……………………………………………………....11

Structure of Insurance Industry…………………………………………………………………….…………..13

LIC-Introduction…………………………………………………………………………..…………………….……14

Channels of Distribution………………………………………………………………….………..…..……..….15

New Business brought in by all Channels of Distribution……………………….…..……………17

Span of Organization……………………………………………….………………………….……………………19

Investment in Government and Social Sector…………………………….…………………..…………20

Asset Under Management………………………..…………………………………………………….…………21

Products…………………………………………………………………………………………………………………..21

Impact of on Financial Crisis on LIC……………………….………………………………………….….22

Awards won by Lic……………………………………………………………………………………………..……23

Summary………………………………………………………………………………………………………………….23

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 Insurance – An Introduction :

Insurance is actually a contract between 2 parties whereby one party called insurer
undertakes in exchange for a fixed sum called premium to pay the other party happening
of a certain event.

Insurance described as a social device to reduce or eliminate risk of life and property.
Under the plan of insurance, a large number of people associate themselves by sharing
risk, attached to individual.

• Large number of people exposed to a similar risk , With the help of Insurance, makes
contributions to a common fund out of which the losses suffered by the unfortunate few,
due to accidental events, are made good.
• The risk, which can be insured against include fire, the peril of sea, death, incident, &
burglary. Any risk contingent upon these may be insured against at a premium
commensurate with the risk involved.
• Insurance is a contract whereby, in return for the payment of premium by the insured, the
insurers pay the financial losses suffered by the insured as a result of the occurrence of
unforeseen events.

In order for the concept of insurance to arise a pre-payment of some type is required. In
the case of typical, everybody general auto, health and life insurance for example the pre
payment is in the form of a premium. Prior to the eve to the year 2000 thousands of people
flocked to the stores stocking up on numerous supplies. The supplies they purchased would
act as a reimbursement in the case of loss.
Early insurance goes back to the Egyptians times. It was known that around 3000 BC,
Chinese merchants dispersed their shipments among several vessels to avoid the possibility
of damage or loss. There are some insurance companies around today in the united states
that provided insurance back in the mid 1700’s , as well as some that provided relief to
banks during the 1930’s and depression. Today, there is insurance for many aspects of

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daily living: business, auto, health, life, travel. Each of those categories includes sub
categories, branching of into numerous divisions.

The History of Insurance Worldwide :

The roots of insurance might be traced to Babylonia, where traders were encouraged to
assume the risks of the caravan trade through loans that were repaid (with interest) only
after the goods had arrived safely—a practice resembling bottomry and given legal force in
the Code of Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks applied a similar
system to their seaborne commerce. The Romans used burial clubs as a form of life
insurance, providing funeral expenses for members and later payments to the survivors.

With the growth of towns and trade in Europe, the medieval guilds undertook to protect
their members from loss by fire and shipwreck, to ransom them from captivity by pirates,
and to provide decent burial and support in sickness and poverty. By the middle of the 14th
cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine
insurance was practically universal among the maritime nations of Europe. In London,
Lloyd's Coffee House (1688) was a place where merchants, shipowners, and underwriters
met to transact business. By the end of the 18th cent. Lloyd's had progressed into one of the
first modern insurance companies. In 1693 the astronomer Edmond Halley constructed the
first mortality table, based on the statistical laws of mortality and compound interest. The
table, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate to age;
previously the rate had been the same for all ages.

Insurance developed rapidly with the growth of British commerce in the 17th and 18th cent.
Prior to the formation of corporations devoted solely to the business of writing insurance,
policies were signed by a number of individuals, each of whom wrote his name and the
amount of risk he was assuming underneath the insurance proposal, hence the term
underwriter. The first stock companies to engage in insurance were chartered in England in

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1720, and in 1735, the first insurance company in the American colonies was founded at
Charleston, S.C. Fire insurance corporations were formed in New York City (1787) and in
Philadelphia (1794). The Presbyterian Synod of Philadelphia sponsored (1759) the first life
insurance corporation in America, for the benefit of Presbyterian ministers and their
dependents. After 1840, with the decline of religious prejudice against the practice, life
insurance entered a boom period. In the 1830s the practice of classifying risks was begun.

The New York fire of 1835 called attention to the need for adequate reserves to meet
unexpectedly large losses; Massachusetts was the first state to require companies by law
(1837) to maintain such reserves. The great Chicago fire (1871) emphasized the costly
nature of fires in structurally dense modern cities. Reinsurance, whereby losses are
distributed among many companies, was devised to meet such situations and is now
common in other lines of insurance. The Workmen's Compensation Act of 1897 in Britain
required employers to insure their employees against industrial accidents. Public liability
insurance, fostered by legislation, made its appearance in the 1880s; it attained major
importance with the advent of the automobile.

Insurance Industry in India :

The origin of life insurance in India can be traced back to 1818 with the establishment of
the Oriental Life Insurance Company in Calcutta. It was conceived as a means to provide
for English Widows. In those days a higher premium was charged for Indian lives than the
non-Indian lives as Indian lives were considered riskier for coverage. The Bombay Mutual
Life Insurance Society that started its business in 1870 was the first company to charge
same premium for both Indian and non-Indian lives. In 1912, insurance regulation
formally began with the passing of Life Insurance Companies Act and the Provident Fund
Act.

By 1938, there were 176 insurance companies in India. But a number of frauds during

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1920s and 1930s tainted the image of insurance industry in India. In 1938, the first
comprehensive

legislation regarding insurance was introduced with the passing of Insurance Act of 1938
that provided strict State Control over insurance business.

Insurance sector in India grew at a faster pace after independence. In 1956, Government of
India brought together 245 Indian and foreign insurers and provident societies under one
nationalized monopoly corporation and formed Life Insurance Corporation (LIC) by an
Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore.

Before 1956, insurance was private with minimal government intervention. In 1956, life
insurance was nationalized and a monopoly was created. In 1972, general insurance was
nationalized as well. But, unlike life insurance, a different structure was created for the
industry. India had the nineteenth largest insurance market in the world in 2003. Strong
economic growth in the last decade combined with a population of over a billion makes it
one of the potentially largest markets in the future. Insurance in India has gone through
two radical transformations. One holding company was formed with four subsidiaries. As a
part of the general opening up of the economy after 1992, a Government appointed
committee recommended that private companies should be allowed to operate. It took six
years to implement the recommendation. Private sector was allowed into insurance business
in 2000. However, foreign ownership was restricted. No more than 26% of any company can
be foreign-owned.

A totally regulation free regime ended in 1912 with the introduction of regulation of life
insurance. A comprehensive regulatory scheme came into place in 1938. This was disabled
through nationalization in what follows, we examine the insurance industry in India
through different regulatory regimes. But, the Insurance Act of 1938 became relevant again
in 2000 with deregulation. With a strong hint of sustained growth of the economy in the
recent past, the Indian market is likely to grow substantially over the next few decades.

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The rest of the chapter is organized as follows. First, we study the evolution of insurance
business before nationalization. This is important because the denationalized structure
brought back to play important legal rules from 1938. Next we analyze the nationalized era
separately for life and property casualty business as they were not nationalized
simultaneously. Much of post-independence history of insurance in India was the history
of nationalized insurance. In the following section, we examine the new legal structure
introduced after the industry was denationalized in 2000. In the penultimate section, we
examine the current state of play and projected future of the industry.

Life Insurance : At a Glance

life insurance provides your family with a sum of money should something happen to you.
It thus permanently protects your family from financial crises.

Life insurance is a guarantee that your family will receive financial support, even in your
absence. Put simply, In addition to serving as a protective cover, life insurance acts as a
flexible money-saving scheme, which empowers you to accumulate wealth-to buy a new car,
get your children married and even retire comfortably.

Life insurance also triples up as an ideal tax-saving scheme. To know more, read the Key
Benefits of Life Insurance.

There are many options with coverage, depending on insured situation. And there are two
main categories of life insurance: term life, and whole life insurance.

Term life is the simplest and least expensive type of policy. It’s pure insurance with no cash
value account. A term life policy has only one function: to pay a specific lump sum to
whomever you have designated, upon a specific event of insured death.

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Whole life insurance provides permanent protection insured dependents while building a
cash value account. With this type of insurance, the insurance company manages the
policies various accounts.

In the first few years, when you’re young, its cost will be low, so the bulk of the money goes
to pay the agent and into an investment account. However, as you get older, the cost of
insuring you increases, so less of your premium goes into the investment account. The
money that goes into the account in the early years of your policy therefore grows. The cash
value of your whole life policy is the amount you’d get if you decide to surrender it.

Whole life insurance is so named because it’s designed to stay in force throughout your life.

Insurance Act, 1938

In 1938, with a view to protect the interest of insuring public, earlier legislation(1928) was
consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for
detailed and effective control over the activities of insurer. For the first time in the history
of insurance in India, the whole business was brought under a unified system of control
and its structure strengthened by statutory regulations. Weaker elements were weeded out;
indiscriminate promotion was checked and speculative insurance was eliminated. The best
proof the soundness of the law was the effective check on large scale liquidations which
had marred the name of insurance in the thirties. In due course, various amendments were
made in the Indian Insurance Act 1938 in subsequent years to improve the regulatory
mechanism. The Act of 1938, which in many respects codified and modernized the laws
relating to insurance in the country, suggest the same noteworthy changes in regulation
and organization of business. It was considerable step forward in the direction to envelop
all forms of insurance.

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 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.
• 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.

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• 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.
• 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.

Insurance sector in India was liberalized in March 2000 with the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for
private players and allowing foreign players to enter the market with some limits on direct
foreign ownership. There is a 26 percent equity cap for foreign partners in an insurance
company. There is a proposal to increase this limit to 49 percent. The opening up of the
insurance sector has led to rapid growth of the sector. Presently, there are 16 life insurance
companies and 15 non-life insurance companies in the market. The potential for growth of
insurance industry in India is immense as nearly 80 per cent of Indian population is
without life insurance cover while health insurance and non-life insurance continues to be
well below international standards.

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Regulator Of Insurance Industry In India : IRDA

The Insurance Regulatory and Development Act of 1999 were set out as follows. “To provide
for the establishment of an Authority to protect the interests of holders of insurance
policies, to regulate, promote and ensure orderly growth of the insurance industry and for
matters connected therewith or incidental thereto and further to amend the Insurance Act,
1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business
(Nationalization) Act, 1972.”

The Act effectively reinstituted the Insurance Act of 1938 with (marginal) modifications.
Whatever was not explicitly mentioned in the 1999 Act referred back to the 1938 Act?

(1) It specified the creation and functioning of an Insurance Advisory Committee that sets
out rules and regulation.

(2) It stipulates the role of the “Appointed Actuary”. He/she has to be a Fellow of the
Actuarial Society of India. For life insurers the Appointed Actuary has to be an internal
company employee, but he or she may be an external consultant if the company happens to
be a non-life insurance company. The Appointed Actuary would be responsible for
reporting to the Insurance Regulatory and Development Authority a detailed account of
the company.

(3) Under the “Actuarial Report and Abstract”, pricing of products have to be given in
detail. It also requires details of the basic assumptions for valuation. There are prescribed
forms that have to be filled out by the Appointed Actuary including specific formulas for
calculating solvency ratios.

(4) It stipulates the requirements for an agent. For example, insurance agents should have
at least a high school diploma along with training of 100 hours from a recognized
institution.

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(5) Under “Assets, Liabilities, and Solvency Margin of Insurers”, the Insurance Regulatory
and Development Authority has set up strict guidelines on asset and liability management
of the insurance companies along with solvency margin requirements. Initial margins are
set high (compared with developed countries). The margins vary with the lines of business.

Life insurers have to observe the solvency ratio, defined as the ratio of the amount of
available solvency margin to the amount of required solvency margin: (a) the required
solvency margin is based on mathematical reserves and sum at risk, and the assets of the
policyholders’ fund; (b) the available solvency margin is the excess of the value of assets
over the value of life insurance liabilities and other liabilities of policyholders’ and
shareholders’ funds.

(6) It sets the reinsurance requirement for (general) insurance business. For all general
insurance, a compulsory cession of 20% regardless of line of business to the General
Insurance Corporation, the designated national reinsurer was stipulated.

(7) Under the “Registration of Indian Insurance Companies”, it sets out details of
registration of an insurance company along with renewal requirements. For renewal, it
stipulates a fee of one-fifth of one percent of total gross premium written direct by an
insurer in India during the financial year preceding the year. It seeks to give detailed
background for each of the following key personnel: Chief Executive, Chief Marketing
Officer, Appointed Actuary, Chief Investment Officer, Chief of Internal Audit and Chief
Finance Officer. Details of sales force, activities in rural business and projected values of
each line of business are also required.

(8) Under “Insurance Advertisements and Disclosure”, details of insurance advertisement

in physical and electronic media has to be detailed with the Insurance Regulatory and
Development Authority. The advertisements have to comply with the regulation prescribed
in section 41 of the Insurance Act, 1938. The Act of 1938 says, “No person shall allow or
offer to allow, either directly or indirectly, as an inducement to any person to take out or
renew or continue an insurance in respect of any kind of risk relating to lives or property

12
in India, any rebate of the whole or part of the commission payable or any rebate of the
premium shown on the policy, nor shall any person taking out or renewing or continuing a
policy accept any rebate, except such rebate as may be allowed in accordance with the
published prospectus or tables of the insurer.”

(9) All insurers are required to provide some coverage for the rural sector. It is called the
“Obligations of Insurers to Rural Social Sectors”

Structure of Insurance Industry

Historical Perspective

(i) Prior to 1956 242 companies operating

(ii) 1956 - 2001 Nationalisation – LIC monopoly player – Government control

(iii) 2001 -- Opened up sector

Present Structure of Insurance Industry

(a) LIC – Fully owned by Government

(b) Postal Life Insurance

• (ii) Private players -

1. Bajaj Allianz Life Insurance Co. Ltd.
2. Birla Sun Life Insurance Co. Ltd. (BSLI)
3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)
4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)
5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA)

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6. Max New York Life Insurance Co. Ltd. (MNYL)
7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
9. SBI Life Insurance Co. Ltd. (SBI LIFE)
10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)
11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)
12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)
13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
14. Shriram Sunlam
• (iii) Other likely players – PNB Life Insurance, Reliance Life Insurance,

Life Insurance Corporation of India (LIC)

The Life Insurance Corporation of India has been a national-builder since its formation in
1956. The performance of LIC has been exemplary and has been growing from strength be
it customer base, agency network, branch office network, new business premium and the
like. It has played a significant role in spreading life insurance widely across the country.
True to objectives of nationalization, the LIC has invested the funds mobilized from policy
holders for the benefit of the community at large.

The other subsidiary companies under LIC are:

Life Insurance Corporation (LIC) of India International – A joint venture offshore

company promoted by LIC which commenced its operations in July, 1989 with the objective
of offering policies denominated in US $ to NRIs residing in the Gulf.
LIC Nepal – Formed in 2001 in joint venture with Vishal Group of Industries, Nepal.
LIC Lanka – Formed in 2003 in joint venture with Bartleet Group of Companies, Sri
Lanka

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 LIC Housing Finance – Established in 19th June, 1989 in Dubai with the objective of
providing long term finance for construction of houses or apartments.
LIC Housing Finance Limited Care Homes – A wholly owned subsidiary of LIC Housing
Finance which builds “Assisted Community Living Centers” for senior citizens.

Business performance in 2007-

2007-2008 {Rs. In Crores}

1. Total Income Rs 2,06,363

2. Total Premium Income Rs 1,49,706
3. Total Policy Payments Rs 57,623
4. Total Life Fund Rs 6’86’616
5. Total Assets Rs 8,03,820

The business performance for LIC in the last fiscal year (07-08) has been good compared

to the fiscal year (06-07). There has been a significant growth in total assets and total

income earned.

Channels of Distribution
Distribution

Individual Agent:
Agent The individual agent has been the bedrock and the lynchpin in the
marketing of insurance, especially life insurance. The professional agent has been the
strongest link between the life insurer and the customer. The professional agent
has the onerous role of explaining the concepts, terms and conditions, benefits and
privileges of the insurance contract. He has to analyze the financial requirements and
risks faced by the customers and market insurance plans suited to the needs and means of
the customers. All insurance companies, and life insurance companies in particular,
have recognized the paramount importance of this channel. The number of
agents has grown at a spectacular rate. The total number of agents on they roll is 11,03,047
as on 31.03.2007 as against 10,52,283 as on 31.03.2006.
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Corporate Agents:
Agents : The number of corporate agents has grown in recent years.
Corporate agent is a concept introduced with a view to taking advantage of the
presence of a large number of entities with a sizeable client base, contacts and
goodwill
already operating in the market. With multi locations and a network of people
assisting
them, these entities have a different structure and purpose. Hence their existing
network could be utilized to market insurance. The corporate agent could thus be
defined as a person - meaning a firm or company formed under the Companies Act,
1956 or a banking company or a Bank/RRB or a co-operative society registered under the
Co-operative societies Act, 1912 or a panchayat or a NGO/MFI covered under the Co-
op Societies Act or a NBFC registered with RBI or any other institution. They assist
greatly in the spread of insurance through the greater reach of the
institutions.

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

Bancassurance: Bancassurance is developing as an important channel in India. This is

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

Referrals:
Referrals: This is a new concept very similar to getting a prospecting list and leads to
effect sales with customers. It is evident that in addition to banks, there could be various
16
other entities which could act as a referral provider due to the large database of
members/clients, like credit cardholders association members, society members etc. In
short, such institutions could share or market their database to provide leads to the
intermediaries to sell insurance products. The referral provider is not a licensed
intermediary, but can be regulated by the insurance Regulator, through approval of
the terms of the agreement, between the insurer and the referral provider.

Direct Marketing:
Marketing : In the new technological environment, new
innovative marketing systems have evolved. The use of inter-net, web based sales, e- marketing,
telecalling, mobile SMS have made giant strides in reaching out to customers. This is
an emerging channel which in future may grow in size and proportion of sales. This
channel requires active regulation which should be on issues of transparency, disclosure,
privacy, contract, TRAI guidelines etc. It would be necessary to give full complete
information through soft copies of proposal forms, schedules, policies etc.

New Business Brought in by All Channels of Distribution :

(1/4/2oo7 to 31/3/2008)
(Individual Assurances)
Policies Sum Assured First Premium
( in lakh) ( in crore ) Income (in crore)
Composite
Composite 375.90 2, 75, 457.65 43,812.86
Growth Rate -1.62 % -9.12 % 10.80%

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Pension & Group Business & Social Security Schemes
Schemes

Achievement From 1.4.2007 to 31.03.2008

Pension & Growth Rate Social Security Growth

Group Schemes Schemes Rate
No. of New Lives 153.71 lac 83% 113.67 lac 98%
Premium Income 10356.94 -9% 192.56 91%
(Rs. In Crore )

Business In Force as on 31.3.2008

Policies (in crore ) Sum Assured

( Rs. In crore)
Individual Assurance 23.39 17, 28, 679
Group Insurance (lives) 5.10` 3, 06, 711

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Span of Organization

Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices,
7 zonal offices and the corporate office. LIC’s wide are 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,
Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other
cities. With a vision of providing easy access to its policy holders, LIC has launched
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.

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Investment In Govt. & Social Sector

As per the prescribed investment pattern approved by IRDA, the controlled funds are
invested as follows:-

Not less than 50% is invested in Govt. Securities or other approved Investments.

Not less than 15% is invested in infrastructural and social sector Investments.

Not exceeding 35% in others to be governed by prudent exposure norms.

Investment In Govt. & Social Sector (Rs. in Crores)

Type of investment As on
31.03.06 31.03.07 31.03.08
01. CENTRAL GOVT.SECURITIES 236959 272498 298157
02. STATE GOVT.& OTHER GOVT.. 58928 64285 89195
GUARANTEED MARKETABLE
SECURITIES
Sub-Total (A) 295887 336783 387352
03. INFRASTRUCTURE AND SOCIAL
SECTOR INVESTMENT
a) HOUSING 19807 22451 24325
b) POWER 29740 37881 41120
c) IRRIGATION / WATER SUPPLY & 8288 7500 6649
SEWARAGE
d) ROAD,RAILWAYS,PORT&BRIDGES 725 1516 1154
e) OTHERS 3954 4398 8774
Sub – Total (B) 62514 73746 82022
TOTAL 304002 358401 410529

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ASSET UNDER MANAGEMENT

Asset Under Management is the total value of assets that a mutual fund, a hedge
fund, or other portfolio manager manages and administers for itself and its
customers. The year 2006-07 was a good year for LICMF. There has been all round
improvement in the number of intermediaries , reach, number of collections and
amount of collections.

Total collections went up by 180% and number of redemptions were brought down
by 16%. The Assets Under Management(AUM) rose from Rs. 5228.89 crores as
31/03/2006 to Rs. 9642.80 crores as at 31/03/07 showing a growth rate of 84.41% as
against the industry growth of 40.83%.

Products:
Products:
They have in their basket more than 40 different plans catering to the differing needs
of different segments of the society,covering a age group of 0-80 year-,basic insurance
plans (whole life, endowment and money back), Term Assurance Plans, Pension Plans,
Capital Market linked Plans, Health Plan etc.

New products launched in 2007-08

1. Jeevan Bharti –I (Money Back Plan exclusively for Women)
2. Market Plus-I (Unit linked Pension Plan)
3. Money Plus-I (Unit linked Insurance plan)
4. Anmol Jeevan-I (Term Insurance Plan)
5. Child Career Plan & Child Future Plan (Children’s Plans)
6. Health Plus- (Unit Linked)

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Impact of the financial crisis
crisis on Life Insurance Corporation:
Even though the SENSEX Crashed from 21,207 on 08-01-2008 to 10,528 on 10-10-
2008……….the people who had invested in LIC’ s did not suffer much loss as compared
to other industries shares.

Script/ Funds Value of the Value of the % Change in the

Fund on Fund on 10.10.08 Value
08.01.08
SENSEX 21207 10528 -50.36
Jayaprakash Ass 100000 16483 -83.52
Reliance Infra 100000 20319 -79.68
DLF 100000 24479 -75.52
Sterile Inds 100000 26504 -73.5
ICICI Bank 100000 27304 -72.7
Reliance Comm 100000 29516 -70.48
Tata Steel 100000 32238 -67.76
Tata Motors 100000 38873 -61.13
L&T 100000 41044 -58.96
Hindalco 100000 42512 -57.57
Grasim Inds 100000 43431 -56.57
Reliance Inds 100000 50057 -49.94
Tata power 100000 49429 -50 .57
LIC 100000 89715 -10.28

A person who has invested Rs. 100000 in Jayaprakash Ass, the present value of that
investment is Rs. 16493, which implies a loss 83.52%, while a person who invested
Rs.100000 in LIC, today the value of fund is Rs. 89713 which shows a loss of 10.28%.
LIC is a public sector insurer and a domestic investor. As such, they are not directly
affected by the global financial crisis. However, the volatility in Indian financial
market due to the uncertainty in global markets has affected returns they gt on their
investments. But LIC has an indisputable record of prudently planning its investments
and getting the maximum returns on the policyholders’ money.

22
Awards Won
Won
Some of the recent awards received by LIC are
1. LIC has been ranked :” Number One Trusted Service Brand” in the Economic
Times Brand Equity Survey for the year 2008 for the 5th consecutive year, with
overall ranking across all categories going up from 27th to 12th.
2. Readers Digest “Trusted Brand”2008 in the platinum category.
3. SKOCH Challengers Award 2008 for our Micro Insurance Product Jeevan
Madhur.
4. Customer & Brand Loyalty Award 2008 in the Life Insurance category from
India times Mindscape.
5. Rated as the “Most Preferred Life Insurance Company of the year” at the CNBC
Awaaz Consumer Awards 2007 third time in a row.
6. “Conferred Peacock Award “ for Excellence in Corporate Governance
7. Conferred Outlook Money NDTV profit-“Best Life Insurer Award 2007”
8. “Web 18- Genius of the Web award -2007 “For the best website in Insurance
Category.
9. Adjusted the” Best Life Insurance Company of the year”- at the Second NDTV
Profit Business Leadership Awards-2007.

Summary

The Life Insurance Corporation of India has been a nation-builder since its formation
in 1956. The Corporation has deployed the funds to the best advantage of the
policyholders as the community as a whole. Year on year LIC’s productivity and
profitability provides shareholders with an improving dual return - as co-operative
shareholders through a wider range of services and products and as investors in the
business, with a useful return on capital and an increasing share price. The LIC
investment strategy is very clear. It is based on their investment policy, Irda
regulations, Insurance Act and the LIC Act. According to the guidelines, 50 per cent of
the total investible funds must be in government securities - 25 per cent should be in
central government securities, and up to 50 per cent in both state and central
government securities. The market has come down by about 50 per cent from its peak in
January, but the value of their investments have come down by only 15-20 per cent. For

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

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