EMERGENCE OF INSURANCE SECTOR WITH SPECIAL REFERANCE TO LIC FROM 1991 TO 2016
A
Summer project
submitted
in partial fulfillment
for the award of the Degree of
B.A.(H)economics
To
Amity School of Economics
Faculty Guide -Dr.Sanica Abbott Submitted by-Rishika Mittal
Designation-Professor enrolment no.-A6018216158
Department-Amity School of economics Programme-B.A.(H)economics
Amity School of Economics
Amity University, Uttar Pradesh
June 2017
Candidate’s Declaration
I hereby declare that the work, which is being presented in the Major Project/Seminar/Term Paper, entitled ‘Emergence of insurance sector with special reference to LIC from 1991 to 2016’in partial fulfillment for the award of Degree of ‘B.A.(H)economics’ submitted to the Amity School of Economics, Amity University, Uttar Pradesh is a record of my own investigations carried under the Guidance of Dr. Sanica Abbott, of Amity School of Economics.
I have not submitted the matter presented in this report anywhere for the award of any other Degree.
Name of Candidate-Rishika Mittal
Enrolment No.: A6018216158
Programme/Semester
Batch-B.A.(H) economics,3rd semester.
Counter Signed by
Name of Faculty Guide-Dr.Sanica Abbott
Designation-Professor
Organization-Amity school of economics
CERTIFICATE
This is to certify that Rishika Mittal of, B.A.(H) economics batch 2016 -19 of 3rd semester, has presented a summer project ’emergence of insurance sector with special reference to LIC from 1991 to 2016’in partial fulfillment for the award of the degree of B.A.(H)economics under Amity University, Uttar Pradesh.
Date: 30/6/2017
Faculty Guide-Dr. Sanica Abbott Prof.(Dr.) Shalini Singh Sharma
Designation-Professor Director Amity school of economics
ACKNOWLEDGEMENT
I owe my acknowledgement to the following person who helped me in my report: ‘Dr. Sanica Abbott’.
She is my mentor who guided me throughout my term paper, teaching me all I needed to gain from the various schemes and programmes introduced by LIC of India. She eliminated my discrepancies that I came up with. Sincere thanks to her. I thank her greatly to provide me an opportunity of working on this term paper and also motivating, encouraging and supporting me throughout the course of endeavor.
CONTENTS
1. Abstract
2. Introduction
3. Objectives
5. Literature review
6. LIC
7. Data analysis
8. Contribution in GDP
9. Government initiatives
10. Conclusion
11. Bibliography
Abstract
This paper shows that the insurance market has grown tremendously during the last decade. LIC still continues to dominate life insurance sector.LIC continues to be the market leader followed by SBI, ICICI and HDFC. The life insurance company is expected to grow 2-2.5 times by 2020 in spite of multiple challenges. The insurance industry of India consist of 53 insurance companies of which 24 are in life insurance business and 29 are non-life insurers. Among the life insurers LIC is the sole public sector company. India’s insurable population is anticipated to touch 750 million in 2020. Demographic factors such as growing middle class, young insurable population and growing awareness will support the growing insurance sector.
Introduction
The new monetary arrangement of 1991 has impacted numerous areas of India. One of the biggest part which got affected is the Insurance segment. With the authorization of Insurance Regulatory and Development Authority Act (1999), the Insurance division got opened up for private section. The Act was set up on April 19, 2000. In Insurance market, the arrangement of regarding client as a ruler is broadly taken after. Prior to the foundation of the Act, Life Insurance Corporation (LIC) held the syndication control yet with the approaches of liberalization, privatization and globalization, Insurance sector was opened up for private sector also. This led to intense competition. People started coming up with innovative schemes and policies to outrun the others. Because of the entry of private sector in the Insurance market the opposition has now turned out to be more exceptional. Organizations are thinking of new imaginative plans and items so as to pull in new clients. This research paper throws light on the emergence of insurance sector after it opened up for the private parts with special reference to LIC and how it performed subsequent to confronting rivalry from private sector. The monetary changes started in the mid 90s prepared for the development and opening up of the money related division, which led to financial development. The insurance business was opened up for private players in the competitive environment, and has seen overpowering development over the previous decade with the entry of worldwide insurance companies. India is developing as one of the world's most unique insurance markets with undiscovered potential. The insurance sector plays a critical role in a country’s social and economic development. The insurance sector acts as mobilize of savings, a financial intermediary, a promoter of investment activities, a stabilizer of financial markets and a risk manager. The insurance sector in India has progressed significantly over the last decade, which is reflected in the strong growth witnessed in the insurance premiums, strengthened outreach, and increased number of companies, innovative schemes, policies and its regulatory framework.
OBJECTIVES
‘ To study the growth of insurance sector in the recent years.
‘ To study the impact of LIC on the insurance market and the Indian economy.
‘ To study the impact of insurance sector on the GDP.
‘
Research methodology
A methodology is a system of methods used in a particular area of study or activity
In this paper the methodology is of descriptive nature taken with the help of secondary data. There is also the use of charts and graphs to study the data and for better understanding.
LITERATURE REVIEW
1. Dr M Subba Rao and R Srinivasulu(2013) in there report titled CONTRIBUTION OF INSURANCE SECTORTO THE GROWTH AND DEVELOPMENT OF INDIAN ECONOMY. Have shown that how the insurance sector has contributed in the growth of the country. They have taken different parameters like infrastructure, FDI, employment and shown how they grow when there is a strong insurance sector.The report concluded that the insurance sector is not very strong.
2. Bhagabat Barik and Rakesh Patra (june 2014) in there report titled EMERGING TRENDS IN INSURANCE ‘ A STUDY IN INDIAN LIFE INSURANCE SECTOR aims to To study the present life insurance scenario and their growth drivers in India and. To study the present trends in life insurance sector and suggests feasible measures for improvement in the sector. The data in this report is collected from primary means mainly and also some sites. The report concludes that the Indian insurance sector needs special attention and care this instry is going to face many challenges in the future.
3. Priti Jha and Bindu roy in there report titled ROLE OF LIC IN LIFE ISURANCE COMPANY, have studied the growth pattern and role of LIC in the Indian insurance sector. They found that there has been an increase in offices, no of insurers, increase in market share. And also the Steps that can be taken to strengthened the insurance sector.
4. In his studies MOHD ARIF (2015) his research paper titled Life Insurance Industries in India: Trends and patterns aims to understand the trends and patterns of the insurance sector in India. His study is based on secondary data. And covers the span of 10 years, from 2003-4 to 20012-13. The paper concludes that the insurance sector is the pillar of the economy and plays a very crucial role in the economy. The insurance sector has grown very much since it has opened up for the private sector, but when compared to the international market the insurance sector in India is still behind.
‘
LIFE INSURANCE CORPORATION
Nationalization of life insurance in India was done on nineteenth January 1956. Around 154 Indian insurance agencies, 16 non-Indian organizations and 75 provident were working in India at the time of nationalization. Nationalization was refined in two phases; at first the administration of the organizations was taken by means of an Ordinance, and later, the possession too by methods of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the nineteenth of June 1956, and the Life Insurance Corporation of India was made on first September 1956, with the target of spreading life insurance more widely and specifically to the rural regions with a view to contact every single insurable individual in the nation, giving them sufficient money at a reasonable cost.
MAIN COMPETITORS OF LIC
‘SBI Life Insurance Company
‘ICICI Prudential Life Insurance Company
‘Birla Sunlife Life Insurance Company
‘HDFC Standard Life Insurance Company
‘Reliance Life Insurance Company
The insurance business has developed by 83 per cent since the opening up of the division. Commenting on the execution of the protection business, C S Rao, director, Insurance Regulatory and Development Authority (Irda), said open division players have not endured with the opening up of the segment.
During April 2015 to march 2016 period ,the life insurance sector recorded a new premium income of Rs 1.38 trillion demonstrating a development of 22.5 per cent . The general insurance industry recorded a 12 per cent development in net direct premium guaranteed in april 2016 at Rs 105.25 billion.
"There has been no decrease in development rates as found on account of the Life Insurance Corporation of India (LIC). It can clutch its current offer as far as business development. Market share will undoubtedly stand decreased as some business goes to the private players," said Rao.
The well being and individual line segments are relied upon to see most extreme development amid the current money related year. The number of lives secured under medical coverage arrangements amid 2015-2016 was 36 crores which is around 30 per cent of India's aggregate populace. The number has seen an expansion each consequent year.
If the capital on foreign direct investment is increased to 49 per cent from the current 26 per cent, the industry can expect more noteworthy passage of players. Be that as it may, this, said Rao, ought not be viewed as a risk to open area players.
‘
Role of Insurance Regulatory and Development Authority in Indian Insurance Sector
The Insurance Regulatory and Development Authority Act of 1999 brought a few approach changes in the insurance segment of India. It prompted the arrangement of the Insurance Regulatory and Development Authority (IRDA) in 2000.
The objectives of the IRDA are to defend the interests of the insurance policy holders , and in addition to start diverse strategy measures to help manage development in the Indian protection part. The Authority has told 27 Regulations on many issues which incorporate Registration of Insurers, Regulation on insurance specialists, , Re-protection, Solvency Margin Obligation of Insurers to Rural and Social division, Investment and Accounting Procedure, Protection of strategy holders' advantage and so on. Applications were welcomed by the Authority with impact from fifteenth August, 2000 for issue of the Certificate of Registration to both life and non-life insurers . The IRDA has its Head Quarter at Hyderabad. Point by point data on IRDA is accessible at their site www.irdaindia.org
IRDA has the obligation of securing the enthusiasm of innsurance policyholders. Towards accomplishing this goal, the Authority has made the accompanying strides:
‘ IRDA has informed Protection of Policyholders Regulations 2001 to accommodate: arrangement proposition reports in effortlessly justifiable dialect;; setting up of grievance redressal hardware; claims strategy in both life and non-life coverage, quick settlement of cases; and policyholders' services.
‘ The insurers are required to maintain solvency margins so they are in a position to meet their commitments towards policyholders with respect to installment of cases.
‘ It is necessary with respect to the insurance agencies to make known plainly the advantages, terms and conditions under the arrangement. The notices issued by agencies should not mislead the customers.
‘ All insurers are required to set up legitimate grievance change hardware in their head office and at their different workplaces.
‘ The IRDA brings up with the back up plans any grievance got from the policyholders regarding administrations.’
SWOT ANALYSIS OF LIC
STRENGTHS
‘ Largest government owned enterprise.
‘ Has over 2000 branches.
‘ According to the brand trust report LIC is the 8th most trusted brand in India.
‘ It has many subsidiaries like LIC housing finance. LIC mutual funds.
WEAKNESSES
‘ It has an image of a government agency and lacks innovation.
‘ There are red tape and bureaucracy problems.
‘ Managing a huge workforce is difficult.
OPPOURTUNITIES
‘ Government schemes implementation.
‘ Use of technology to provide effective services to carter to urban population.
THREATS
‘ Economic crisis.
‘ Varying Govt policies.
‘ Entry of new non banking financial companies in the sector.
‘
DATA ANALYSIS
Office Expansion
Amid the most recent 10 years, LIC has expanded its workplaces by 1.16 times i.e. from 3030 workplaces in 2008-09 to 3526 workplaces in 2012-13. Then again the business has seen a fall in the quantity of workplaces by 0.87 times i.e. from 11815 workplaces in 2008-09 to 10285 out of 2012-13. Subsequently, the rate of LIC workplaces to add up to industry workplaces has expanded from 25.64 percent to 34.28 amid the comparing time frame. Table 1 demonstrates the graphical introduction of this data in which the development in the quantity of workplaces of private firms is likewise appeared with the workplaces of the LIC and the Industry all in all. The astounding development in the quantity of workplaces can be effortlessly observed amid 2009-10.
Table 1 Comparison of LIC offices with Total of industry offices.
(As on 31st March 2013)
YEAR OFFICES OF LIC TOTAL OFFICES OF THE INDUSTRY PERCENTAGE OF LIC OFFICES TO THE TOTAL OFFICES OF THE INDUSTRY
2008-09 3030 11815 26.64
2009-10 3250 12018 27.04
2010-11 3371 11546 29.19
2011-12 3455 11167 30.93
2012-13 3526 10285 34.28
Source ‘ IRDA Annual reports (Various Issues)
Growth in premiums
Amid the most recent five years LIC additionally enrolled development over the earlier year. In 2008-09 the premium was 157288.04 and in 2012-13 the figure ended up plainly 208803.58, in this way an expansion of 1.32 times. The superior sum discernibly expanded between 2008-09 and 2009-10. However the example of development over the earlier years as far as rate demonstrates a fluctuating nature.
Table 2 Total life insurance premium (in Crores)
YEAR TOTAL OF LIC PREMIMUMS GROWTH OVER PREVIOUS YEAR IN PERCENTAGE
2008-09 157288.04 5.01
2009-10 186077.31 18.30
2010-11 203473.40 9.35
2011-12 202889.28 -0.29
2012-13 208803.58 2.92
Source ‘ IRDAI Annual repots (Various Issues)
CONTRIBUTION IN GDP
YEAR VOLUME(IN BN) GDP VOLUME (IN BN)
2004 17.9 617.6
2005 22.3 721.6
2006 28.5 834.2
2007 40 949.1
2008 57 1238.7
2009 54.9 1224.1
2010 63.3 1365.4
2011 73.3 1710.9
2012 72 1872.9
The above analysis table shows that GDP is influenced by the entire insurance sector’s performance by 91 percent and it also reveals Insurance sector has a great impact on GDP of our country.
(IRDA annual report)
GOVERNMENT INITIATIVES
‘ The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) rules for insurance agencies in India, which are to hoping to divest equity through the IPO route.
‘ IRDAI has enabled back up plans to put up to 10 per cent (AT1) bonds, that are issued by banks to increase their level 1 capital, keeping in mind the end goal to extend the pool of qualified speculators for the banks.
‘ IRDAI has shaped two advisory groups to investigate and recommend approaches to advance web based business in the area with a specific end goal to build protection infiltration and bring money related incorporation.
‘ IRDAI has detailed a draft direction, IRDAI (Obligations of Insures to Rural and Social Sectors) Regulations, 2015, in compatibility of the alterations achieved under area 32 B of the Insurance Laws (Amendment) Act, 2015. These directions force commitments on insurers towards giving protection cover to the country and financially weaker areas of the population
Conclusion
Study reflects 91 percent variety in Indian economy GDP (in rs.) because of expanding Insurance Sector which is a significant part of Tertiary sector of the Economy while on other hand, the Total protection part's development is affected to 95 percent extent through private insurance division so we watch that the eventual fate of the Indian insurance segment looks positive.. The past record demonstrates an economy which has picked up in quality and auxiliary development in many measurements. It has absolutely risen up out of the example of ease back development up to the mid-seventies, to a greatly improved execution later particularly in the latest years. A development rate of 5 percent is currently unquestionably manageable and could even be bettered in future if the extensive unutilized investments from the past years is utilized. There is significant degree for receiving such rewards both in agriculture and in industry, with present levels of the rate. The mission of the protection division in India should be to expand the insurance scope over a bigger area of the masses and greater fragment of exercises. The three controlling standards of the business must be to charge premium no higher than what is justified by strict actuarial contemplations, to contribute the assets for getting high return for the arrangement holders reliable with the security of capital and to render effective and provoke administration to strategy holders. With inventive corporate arranging and a withstanding sense of duty regarding enhanced administration, the mission of augmenting the spread of insurance can be accomplished. With the privatization of the insurance division, the level of rivalry has expanded and therefore, the administration standard of insurance agencies has enhanced past creative energy and LIC has turned out to be more cognizant in regards to its items. The execution assessment demonstrates a steady increment in its business. It demonstrates that LIC has kept up the market estimation of their items. Consequently, LIC is making a decent showing with regards to, dealing with the items and activities related to advertising procedures adequately. LIC is a old trusted compaanyand it needs to dispatch new approach designs which can fulfill the requirements of people in general. In the meantime, LIC needs to prepare and build up its representatives so they can serve the client with full responsibility and devotion. In short privatization has positively influenced the LIC of India which came about into the advance in the general operations of LIC of India. LIC continues to rule the life insurance market.
Bibliography
1. Insurance Regulatory and Development Authority (IRDA)
2. Reserve Bank of India
3. Life Insurance Council
4. General Insurance Council
5. Centre for Monitoring Indian Economy
6. www.iosjournels.org
7. ‘World Insurance in 2009,’ Swiss Re
8. www.researchers world.com
9. www.licindia.com