Project Report ON A Study On Life Insurance Corporation of India (LIC)
Project Report ON A Study On Life Insurance Corporation of India (LIC)
ON
A STUDY ON LIFE INSURANCE CORPORATION OF INDIA
(LIC)
SUBMITTED BY:
DINESH SHOKEEN
SUPERVISED BY :
This is to certify that I have completed the Project titled A STUDY ON LIFE INSURANCE
CORPORATION OF INDIA (LIC) in Maharaja Surajmal Institute under the guidance of
Mrs. Seema Shokeen in partial fulfillment of the requirement for the award of degree of
Bachelor of Business Administration at Maharaja Surajmal Institute, Delhi. This is an
original piece of work & I have not submitted it earlier elsewhere.
DINESH SHOKEEN
(Name of the Student)
CERTIFICATE
This is to certify that the project titled A STUDY ON LIFE INSURANCE CORPORATION OF
INDIA (LIC) is an academic work done by DINESH SHOKEEN submitted in the partial
fulfillment of the requirement for the award of the degree of Bachelor of Business
Administration from Maharaja Surajmal Institute, Delhi, under my guidance & direction.
To the best of my knowledge and belief the data & information presented by him in the
project has not been submitted earlier.
.
ACKNOWLEDGEMENT
I hereby take the opportunity to express my profound sense of gratitude and reverence to
all those who have helped and encouraged me towards successful completion of the
Project Report. It has been a great experience working on ‘A STUDY ON LIFE INSURANCE
CORPORATION OF INDIA (LIC)’. It gives me complete insight of this concept of marketing
and its application.
I would like to thank my Project Guide Mrs. Seema Shokeen for her immense guidance,
valuable help and the opportunity provided to me to complete the project under her
guidance.
I would like to thank all faculty members of Maharaja Surajmal Institute for guiding and
supporting me in the completion of project from time to time.
Last but not the least, my gratitude to great almighty and my parents without whose
concerned and devoted support the project would not have been the way it is today.
.
TABLE OF CONTENTS
CHAPTER 1= INTRODUCTION
- INTRODUCTION
- OBJECTIVES OF THE STUDY
- RESEARCH METHODOLOGY
- LIMITATIONS OF THE STUDY
- SCOPE OF THE STUDY
BIBLIOGRAPHY
- WEBSITES
- BOOKS
- JOURNALS
.
CHAPTER-1
INTRODUCTION
.
WHAT AND WHY OF LIFE INSURANCE
Life insurance is a contract for payment of a sum of money to the person assured (or
failing him/her, to the person entitled to receive the same) on the happening of the event
insured against. Usually the contract provides for the payment of an amount on the date
of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs
earlier. Among other things, the contract also provides for the payment of premium
periodically to the corporation by the assured. Life insurance is universally acknowledged
to be an institution, which eliminates ‘RISK’, substituting certainty for uncertainty and
comes to the timely aid the family in the unfortunate event of death of the breadwinner.
By and large, life insurance is civilization’s partial solution to the problems caused by
death.
Life insurance is basically required to cover the two hazards that stand across the life path
of every person:
.
OBJECTIVES OF THE STUDY
.
SCOPE OF THE STUDY
Insurance is the most dynamic and growing sector in today’s business environment. A
big number of business houses of India have jumped into the business of insurance.
Life Insurance today plays a major role in one’s life at various stages because of the
various benefits it offers.
This report presents a brief background of how LIC came into existence and how it
became as one of the top insurance players of India.
The project deals with the market share of LIC and the current position of LIC with
the coming up of various other private insurance players.
.
RESEARCH METHODOLOGY
Data may be obtained either from the primary sources or from the secondary
sources. A primary source is a one that itself collect the data and a secondary
source is a one that makes use of available data which was collected by some
other agencies. Depending on the source, statistical data is classified under two
categories.
PRIMARY DATA
SECONDARY DATA
Primary is that which is collected for the first time and thus happens to be original
in character.
Secondary is that which is already being collected by someone else and which has
already passed through the statistical process.
.
LIMITATIONS OF THE STUDY
1. This project is entirely based upon secondary data so, it lacks the
personal touch.
2. Because of time constraint, I was not able to collect much of
information.
.
CHAPTER-2
COMPANY PROFILE
.
LIFE INSURANCE
CORPORATION OF INDIA
.
HISTORY OF LIFE INSURANCE
Life insurance first started in England in the 16th century. The first life that was
insured was of William Gibbons on June 18, 1653. The first registered office of
life was in England with the name ‘Hand-in-Hand Society’ in 1696. In USA, the
life insurance did not gain momentum till 18th century mainly because of
fluctuations in death rate. But after 1800 it gained momentum.
In India, some Europeans started the first life insurance company in Bengal
Presidency with the name ‘Orient Life Assurance Company’ in 1818. Then in
1871 ‘Bombay Mutual Life Assurance Society’ was established which was a
landmark in the Indian Insurance Industry. Before 1871 Indians were charged
about 15% more premiums as compared to Europeans. But Bombay Mutual Life
Assurance Society did not differentiate between Indians and Europeans in the
matter of fixation of premiums. Then in 1874 ‘Oriental Government Security Life
Assurance Company Ltd.’ was established. Since then, several offices developed
in India.
In India the private sector was prevalent in life insurance before 1956. Then it was
nationalized in 1956 and then again with coming up of IRDA Act, it has been
privatized in 2000. Thus, life insurance has completed a cycle in its evolution.
.
FORMATION OF LIC
First attempt to regulate insurance business was made through Indian Life
Insurance Companies Act in 1912. Then this was broad based and the insurance
act came into existence from the year 1928 onwards. This act was later reviewed
and a comprehensive legislation was enacted called the Insurance Act 1938. Then
nationalization of life insurance business took place in 1956, when 245 Indian and
foreign insurance and provident societies were first amalgamated and then
nationalized. Then the Life Insurance Corporation of India (LIC) came into
existence with its central office located at Mumbai.
Nationalization was done due to following reasons:
1. Because of the unhealthy practices by insurers, there were repeated
popular demands for nationalization in parliament.
2. There was a feeling that funds from insurance may be utilized for
country’s economic development.
3. The foreign exchange drain for import business would be stopped.
4. The monopolistic control of the business by a few industrialists insures
would end.
5. The living and working conditions of general insurance officers were
highly unsatisfactory.
6. There was high concentration of economic power in a few hands.
.
OBJECTIVES OF LIC
1. To spread life insurance much more widely and in particular to the rural
areas and to the socially and economically backward classes with the aim
of reaching all insurable positions in the country and to provide them with
adequate financial cover against death at a reasonable cost.
2. To maximize mobilization of people’s savings by making insurance-
linked savings adequately attractive.
3. To keep in mind, in the investment of funds, the primary obligations to its
policy holders, whose money it holds in trust, without losing sight of the
interests of the community as a whole, the funds to be deployed to best
advantage of the investors as well as the community as a whole keeping in
view national priorities and obligations of attractive return.
4. To spread life insurance much more widely and in particular to the rural
areas and to the socially and economically backward classes with the aim
of reaching all insurable positions in the country and to provide them with
adequate financial cover against death at a reasonable cost.
5. To maximize mobilization of people’s savings by making insurance-
linked savings adequately attractive.
6. To keep in mind, in the investment of funds, the primary obligations to its
policy holders, whose money it holds in trust, without losing sight of the
interests of the community as a whole, the funds to be deployed to best
advantage of the investors as well as the community as a whole keeping in
view national priorities and obligations of attractive return.
7. To conduct business with utmost economy and with the full realization
that the money belongs to the policy holders.
.
POLICIES OF LIC
Komal Jeevan
Product summary
This is a Children's Money Back Plan that provides financial protection against death
during the term of plan with periodic payments on survival at specified durations. This plan
can be purchased by any of the parent or grand parent for a child aged 0 to 10 years.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions,
as opted by you, up to the policy anniversary immediately after the life assured (child)
attains 18 years of age or till the earlier death of the life assured. Alternatively, the
premium may be paid in one lump sum (Single premium).
Guaranteed Additions:
The policy provides for the Guaranteed Additions at the rate of Rs.75 per thousand Sum
Assured for each completed year. The Guaranteed Additions are payable at the end of the
term of the policy or earlier death of the Life Assured.
.
Loyalty Additions:
This is a with-profit plan and participates in the profits of the Corporation’s life insurance
business. It gets a share of the profits in the form of loyalty additions which are terminal
bonuses payable along with death or maturity benefit. Loyalty addition may be payable
depending on the experience of the Corporation.
.
ENDOWMENT ASSURANCE PLANS
Jeevan Anand
Product summary:
This plan is a combination of Endowment Assurance and Whole Life plans. It provides
financial protection against death throughout the lifetime of the life assured with the
provision of payment of a lump sum at the end of the selected term in case of his
survival.
Premium:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary
deductions as opted by you throughout the selected term of the policy or till earlier death.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporation’s life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary
Bonuses are declared per thousand Sum Assured annually at the end of each financial
year. Once declared, they form part of the guaranteed benefits of the plan. Bonuses will
be added during the selected term or till death, if it occurs earlier. Final (Additional)
Bonus may also be payable provided the policy has run for certain minimum period.
.
PLANS FOR HIGH WORTH INDIVIDUALS
Jeevan Shree
Product summary:
This is an Endowment Assurance plan offering the choice of many convenient premium
paying terms. It provides financial protection against death throughout the term of plan
with the payment of maturity amount on survival to the end of the policy term.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary
deductions, as opted by you, throughout the premium paying term or till earlier death.
Alternatively premium may be paid in one lump sum (Single premium).
GuaranteedAdditions:
The policy provides for the Guaranteed Additions at the rate of Rs. 50/- per thousand
Sum Assured for each completed year for first five years of the policy. The Guaranteed
Additions are payable along with the Basic Sum Assured at the time of claim.
Bonuses:
The policy participates in the profits of the Corporation’s life insurance business from the
6th year onwards. It will get a share of the profits in the form of bonuses. Simple
Reversionary Bonuses will be declared per thousand Basic Sum Assured annually at the
end of each financial year. Once declared, they will form part of the guaranteed benefits
of the plan.
.
MONEY BACK PLANS
Features:
Unlike ordinary endowment insurance plans where the survival benefits are payable only
at the end of the endowment period, this scheme provides for periodic payments of partial
survival benefits as follows during the term of the policy, of course so long as the policy
holder is alive.
In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes
payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus
become payable at the 20th year.
For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes
payable each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus
become payable at the 25th year.
An important feature of this type of policies is that in the event of death at any time
within the policy term, the death claim comprises full sum assured without deducting any
of the survival benefit amounts, which have already been paid. Similarly, the bonus is
also calculated on the full sum assured.
.
Money Back Policy 25 years
Unlike ordinary endowment insurance plans where the survival benefits are payable only
at the end of the endowment period, this scheme provides for periodic payments of partial
survival benefits as follows during the term of the policy, of course so long as the policy
holder is alive.
In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes
payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus
become payable at the 20th year.
For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes
payable each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus
become payable at the 25th year.
An important feature of this type of policies is that in the event of death at any time
within the policy term, the death claim comprises full sum assured without deducting any
of the survival benefit amounts, which have already been paid. Similarly, the bonus is
also calculated on the full sum assured.
.
JEEVAN SURABHI
Jeevan Surabhi plan is similar to other money back plans. However main differences in
regular money back plans and Jeevan Surabhi are as under
The actual term and the premium paying term for these plans are as under.
Policy
Plan no. Premium Paying Term
Term
106 15 years 12 years
107 20 years 15 years
108 25 years 18 years
Full sum assured is paid back as survival benefit by the end of premium paying term.
However, the risk cover and additional risk cover continue and the policy participates in
profits till the end of policy term.
Accident Benefit is restricted to the premium paying period and to the overall limit of
Rs.5 lakhs on a single life.
Suitable For:
This plan holds special interest to people who besides wishing to provide for their old age
and family feel the need for lump sum benefits at periodical intervals.
.
Bima Bachat
LIC’s Bima Bachat is a money-back policy which offers financial security and assurance
to the policy holder and his family. Bima Bachat requires the policy holder to pay only
one premium. The amount paid for the premium depends on the duration of the policy
taken and life insurance is available till the date of maturity.
What other benefits do I receive during the specified duration of the policy?
For a term of 9 years: The policy holder will receive 15% of the sum assured at the end of
every 3rd and 6th policy year.
For a term 12 years: The policy holder will receive 15% of the sum assured at the end of
every 3rd, 6th and 9th policy year.
.
For a term 15 years: The policy holder will receive15% of the sum assured at the end of
every 3rd, 6th, 9th and 12th policy year.
The policy holder is insured for an amount equal to the sum assured.
The guaranteed surrender value is available only after completion of at least one policy
year. This value is equal to 90 % of the single premium paid (excluding extra premium).
.
What other benefits does this insurance cover offer?
Bima Bachat is the only money-back policy that offers a loan facility. The rate of interest
Jeevan Bharathi
This is a with-profits plan offered to women. It provides life insurance cover throughout
the term of the plan along with the periodic payments on survival at specified durations
during the policy term. The plan also provides the cover against affliction of certain
Female Critical Illnesses and occurrence of certain Congenital Disabilities in newly born
children.
Premium:
Premiums at yearly intervals are payable throughout the term of the policy or till earlier
death. After at least two full years’ premiums have been paid, full insurance cover is
available even when premiums are not paid for up to three years. Premium for congenital
disability benefit ceases at policy anniversary after the life assured completes the age of
40 years.
.
each financial year. Once declared, they form part of the guaranteed benefits of the plan.
.
WHOLE LIFE PLANS
This plan is mainly devised to create an estate for the heirs of the policyholder as the plan
basically provides for payment of sum assured plus bonuses on the death of the
policyholder. However, considering the increased longevity of the Indian population, the
Corporation has amended the above provision, thereby providing for payment of sum
assured plus bonuses in the form of maturity claim on completion of age 80 years or on
expiry of term of 40 years from date of commencement of the policy whichever is later.
The premiums under the policy are payable up to age 80 years of the policyholder or for a
term of 35 years whichever is later.
If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum
assured will be automatically secured provided the reduced sum assured exclusive of any
attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to
participate in the bonus declared thereafter but the bonuses already declared on the policy
will remain attach, provided the policy is converted in to a paid-up policy after the
premiums are paid for 5 years.
Suitable For:
This policy is suitable for people of all ages who wish to protect their families from
financial crises that may occur owing to the policyholder’s premature death.
The Whole Life plan is mainly devised to create an estate for the heirs of the policyholder
as the plan basically provides for payment of sum assured plus bonuses on the death of
the policyholder. However, considering the increased longevity of the Indian population,
the Corporation has amended the above provision, thereby providing for payment of sum
assured plus bonuses in the form of maturity claim on completion of age 80 years or on
expiry of term of 40 years from date of commencement of the policy whichever is later.
.
The premiums under the policy are payable up to age 80 years of the policyholder or for a
term of 35 years whichever is later.
If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum
assured will be automatically secured provided the reduced sum assured exclusive of any
attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to
participate in the bonus declared thereafter but the bonuses already declared on the policy
will remain attach, provided the policy is converted in to a paid-up policy after the
premiums are paid for 5 years.
.
The Whole Life Policy – Limited Payment
This is the best form of life assurance for family provision since it enables the Life
Assured to pay all the premiums during the ordinarily vigorous and most productive
years of life. He need not pay any premium in the later stages of life if and when his
conditions might become adverse.
With Profits Limited Payments Policies do not cease to participate in profits after
completion of the premium paying period but continue to share in the periodical Bonus
Distribution until the death of the Life Assured. The Without-Profit option is available
under Table no. 3.
If the policyholder pays at least 3 years' premiums and then discontinues paying any
more premium, a reduced paid-up assurance policy comes into force.
Such a reduced paid-up Policy will not be entitled to participate in the profits declared
thereafter, but such Bonus as has already been declared on the Policy will remain
attached thereto. The premium paying term under this plan is five years minimum and 55
years maximum.
.
Jeevan Anand
Product summary:
This plan is a combination of Endowment Assurance and Whole Life plans. It provides
financial protection against death throughout the lifetime of the life assured with the
provision of payment of a lump sum at the end of the selected term in case of his
survival.
Premium:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary
deductions as opted by you throughout the selected term of the policy or till earlier death.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporation’s life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary
Bonuses are declared per thousand Sum Assured annually at the end of each financial
year. Once declared, they form part of the guaranteed benefits of the plan. Bonuses will
be added during the selected term or till death, if it occurs earlier. Final (Additional)
Bonus may also be payable provided the policy has run for certain minimum period.
.
Jeevan Tarang
Introduction:
This is a with-profits whole of life plan which provides for annual survival benefit at a
rate of 5½ % of the Sum Assured after the chosen Accumulation Period. The vested
bonuses in a lump sum are payable on survival to the end of the Accumulation Period or
on earlier death. Further, the Sum Assured, along with Loyalty Additions, if any, is
payable on survival to age 100 years or on earlier death.
Accumulation Period:
The plan offers three Accumulation periods – 10, 15 and 20 years. A proposer may
choose any of them.
Payment of Premium:
Premiums can be paid regularly at yearly, half-yearly, quarterly or monthly intervals or
through salary deductions over the Accumulation Period. Alternatively, a Single
Premium can be paid on commencement of a policy.
Regular premiums
Accumulation period
Age 10 years 15 years 20 years
Up to 40 years 109.10 71.40 51.50
41 to 45 years 109.10 71.40 53.40
46 to 50 years 109.10 73.80 56.60
51 to 55 years 111.80 77.90 -
56 to 60 years 116.60 - -
.
CHAPTER-3
Participation in Profits:
Policies under this plan shall participate in profits of the Corporation. During the
accumulation period policies shall be entitled to receive simple reversionary bonuses
which will be payable on survival to the end of the accumulation period or on earlier
death. After the accumulation period, policies will be entitled to receive a Loyalty
Addition payable on maturity or earlier death. The amount of simple reversionary bonus
and Loyalty Addition will depend on the experience of the Corporation.
800
600
400 Series1
200 Series2
0
-5 0 5 10 15
-200
Anmol Jeevan
Restrictions
Minimum age at entry 18 years (completed)
Maximum age at entry 55 years (nearer birthday)
Maximum age at maturity 65 years
Minimum Term 5 years
Maximum Term 25 years
Minimum Sum Assured Rs.5,00,000/-
Rs. 3,00,00,000 (Inclusive of all
Maximum Sum Assured
Term Assurance plans)
Yearly, Half- Yearly and Single
Mode of Premium Payment*
premium
Note: The policy would be issued in multiples of Rs. one lakh for Sum Assured above
Rs. five lakh.
Rebate
i) Sum Assured Rebate: NIL in case of regular premium policies and Re.1 per Rs.1000
Sum Assured for policies of Rs.25 lakh and above in case of single premium policies.
ii) Mode Rebate: 1 % of Annual premium for yearly mode and nil for Half-Yearly mode.
.
Mode of Premium Payment*
1
0.8
0.6 Mode of Premium
0.4 Payment*
0.2
0
18 years (completed)
Loan
No loan will be granted under this plan.
Grace Period for Non-Forfeiture Provisions
A grace period of 15 days will be allowed for payment of yearly or half-yearly premiums.
If death occurs within this period and before the payment of the premium then due, the
policy will still be valid and the Sum Assured paid after deduction of the said premium as
also unpaid premiums falling due before the next policy anniversary of the Policy. If the
premium is not paid before the expiry of the days of grace, the Policy lapses.
Revival
If the Policy has lapsed, it may be revived during the life time of the Life Assured, but
before the date of expiry of policy term, on submission of proof of continued insurability
to the satisfaction of the Corporation and the payment of all the arrears of premium
together with interest at such rate as may be prevailing at the time of the payment. The
corporation reserves the right to accept or decline the revival of discontinued policy. The
revival of the discontinued policy shall take effect only after the same is approved by the
Corporation and is specifically communicated to the Life Assured. The cost of the
Medical reports, including Special Reports, if any, required for the purposes of revival of
the policy, should be borne by the Life Assured.
Payment Of claims
No Claims concession will be applicable to this Policy.
Back-Dating Interest
The policy can be back dated within the financial year. No dating back interest shall be
charged.
.
Amulya Jeevan
RESTRICTIVE CONDITIONS
REBATES
• Mode Rebate
There is no mode rebate for yearly mode of premium payment under this plan. In
.
case of half-yearly mode, there is an additional premium of 2% of the tabular
annual premium.
Policies issued to Corporation Employees on their own lives under this plan will
be eligible for a reduction @ 10% of the Tabular premium for Half-yearly and
yearly mode. In case of a single premium policy this rebate will be 2% of the
tabular premium.
The Plan will be allowed to standard and substandard lives. In case of female lives, this
plan will be restricted to Category-I and II lives only. Physically handicapped persons
falling under Group A with loss of one limb will be eligible for this Plan with standard
extra rates. This Plan can be allowed to persons engaged in hazardous occupations by
charging appropriate occupation extra or with Clause 86. Further, the following points
should be noted
• Standard age proof will have to be submitted along with the Proposal Form.
• Proposals will be considered on the basis of Medical Reports and Special reports
(if any). FMR will be required to be done by DMR / Addl. DMR or by TPA. FMR
from MEs with enhanced powers will not be accepted.
.
• For the purpose of SUC and underwriting (Special Reports, Financial
underwriting etc.), the Sum Assured under the plan is to be considered.
LOAN
No loan will be granted under this plan.
If the policy has lapsed, it may be revived during the life time of the Life Assured, but
within a period of 5 years from the date of first unpaid premium and before the date of
maturity, on submission of proof of continued insurability to the satisfaction of the
Corporation and the payment of all the arrears of premium together with interest at such
rate as may be prevailing at the time of revival. The Corporation reserves the right to
.
accept at ordinary terms, accept with modified terms or decline the revival of a
discontinued policy.
Period from
Requirements for revival
First Unpaid
Premium
16 days to 60
Arrears of premiums with interest thereon
days
Arrears of premiums with interest thereon subject to submission of
61 days and
proof of continued insurability to the satisfaction of the Corporation
above
as per underwriting rules prevailing at the time of revival.
The cost of the medical reports, including special reports, if any, required for the
purposes of revival of the policy, shall be borne by the Life Assured.
The revival of a discontinued policy shall take effect only after the same is approved by
the Corporation and is specifically communicated to the Proposer/Life Assured.
PAYMENT OF CLAIMS:
No claim concession and extended claim concession will be applicable to this policy.
.
REINSURANCE:
BACK-DATING INTEREST:
The policy can be dated back within the financial year. No dating back interest shall be
charged. However, policies issued in this year cannot be back-dated before the date of
introduction.
.
JOINT LIFE PLAN
Jeevan Saathi
Product summary:
This is an Endowment Assurance Plan issued on the lives of husband and wife. The plan
provides financial protection against death of both the lives. It pays the maturity amount
on survival of one or both the lives to the end of the policy term.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary
deductions as per opted by you throughout the term of the policy or till the first death of
the lives covered, whichever is earlier.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporation’s life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary
Bonuses are declared per thousand Sum Assured annually at the end of each financial
year. Once declared, they form part of the guaranteed benefits of the plan. Such bonuses
are to be added till date of maturity or the second death of the lives covered, whichever is
earlier. Final (Additional) Bonus may also be payable provided policy has run for certain
minimum period.
.
ULIPS
Although this is how the ULIP options are generally designed, the exact debt/equity
allocations may vary across insurance companies. Individuals can opt for a variant based
on their risk profile. For example, a 30-Yr old individual looking at buying a life
insurance plan that also helps him build a corpus for retirement can consider investing in
.
the Balanced or even the Aggressive ULIP. Likewise, a risk-averse individual who is not
comfortable with a high equity allocation can opt for the Conservative ULIP.
3. Flexibility:
Individuals may well ask how ULIPs are any different from mutual funds. After all,
mutual funds also offer hybrid/balanced schemes that allow an individual to select a plan
according to his risk profile. The difference lies in the flexibility that ULIPs afford the
individual. Individuals can switch between the ULIP variants outlined above to capitalize
on investment opportunities across the equity and debt markets. Some insurance
companies allow a certain number of `free' switches. This is an important feature that
allows the informed individual/investor to benefit from the vagaries of stock/debt
markets. For instance, when stock markets were on the brink of 7,000 points (Sensex),
the informed investor could have shifted his assets from an Aggressive ULIP to a low-
risk Conservative ULIP.
Switching also helps individuals on another front. They can shift from an Aggressive to a
Balanced or a Conservative ULIP as they approach retirement. This is a reflection of the
change in their risk appetite as they grow older.
.
time amount in the ULIP either to benefit from opportunities in the stock
markets or if they have an investible surplus in a particular year that they
wish to put aside for the future.
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual
funds in terms of their structure and functioning. As is the case with mutual funds
investors in ULIPs are allotted units by the insurance company and a net asset value
(NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to
the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds
and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund
schemes with an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs.
Despite the seemingly comparable structures there are various factors wherein the two
differ.
In this article we evaluate the two avenues on certain common parameters and find out
how they measure up.
Mutual fund investors have the option of either making lump sum investments or
investing using the systematic investment plan (SIP) route which entails commitments
.
over longer time horizons. The minimum investment amounts are laid out by the fund
house.
ULIP investors also have the choice of investing in a lump sum (single premium) or
using the conventional route, i.e. making premium payments on an annual, half-yearly,
quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting
point for the investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the
starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's
tenure. For example an individual with access to surplus funds can enhance the
contribution thereby ensuring that his surplus funds are gainfully invested; conversely an
individual faced with a liquidity crunch has the option of paying a lower amount (the
difference being adjusted in the accumulated value of his ULIP). The freedom to modify
premium payments at one's convenience clearly gives ULIP investors an edge over their
mutual fund counterparts.
2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to pre-
determined upper limits as prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per
annum on a recurring basis for all their expenses; any expense above the prescribed limit
is borne by the fund house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most cases, either is
applicable). Entry loads are charged at the timing of making an investment while the exit
load is charged at the time of sale.
.
Insurance companies have a free hand in levying expenses on their ULIP products with
no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
Development Authority. This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that insurers are required to
notify the regulator of all the expenses that will be charged on their ULIP offerings.
3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors get the opportunity to see
where their monies are being invested and how they have been managed by studying the
portfolio.
There is lack of consensus on whether ULIPs are required to disclose their portfolios.
During our interactions with leading insurers we came across divergent views on this
issue.
While one school of thought believes that disclosing portfolios on a quarterly basis is
mandatory, the other believes that there is no legal obligation to do so and that insurers
are required to disclose their portfolios only on demand.
.
ULIPs vs. Mutual Funds
* There is lack of consensus on whether ULIPs are required to disclose their portfolios.
While some insurers claim that disclosing portfolios on a quarterly basis is mandatory,
others state that there is no legal obligation to do so.
.
4. Flexibility in altering the asset allocation
As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are
largely comparable. For example plans that invest their entire corpus in equities
(diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced
funds) and those investing only in debt instruments (debt funds) can be found in both
ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt
from the same fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift
investments across various plans/asset classes either at a nominal or no cost (usually, a
couple of switches are allowed free of charge every year and a cost has to be borne for
additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the
ULIP investor's equity component has appreciated, he can book profits by simply
transferring the requisite amount to a debt-oriented plan.
5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This
holds good, irrespective of the nature of the plan chosen by the investor. On the other
hand in the mutual funds domain, only investments in tax-saving funds (also referred to
as equity-linked savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example
diversified equity funds, balanced funds), if the investments are held for a period over 12
months, the gains are tax free; conversely investments sold within a 12-month period
attract short-term capital gains tax @ 10%.
.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-
term capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have
their unique set of advantages to offer. As always, it is vital for investors to be aware of
the nuances in both offerings and make informed decisions.
• LIC’s proactive approach to settlement has earned it a lot of goodwill. During the
tsunami, LIC was the only one to set up a camp at the affected areas along with
.
the list of policy holders and settled the claims immediately. It had earned LIC
recognition in the Manila based Asia Insurance Review.
• Emphasis on market conduct and business ethics has contributed a lot to its
success.
• The most critical area is quick claim settlement- The benchmark is that the policy
holders ought to get post- dated checks before the date of maturity. In case of
death claims , the time lag has been brought down from 90 days to 60 days, and in
the near future it is recommended to be brought down to just 45 days.
• It has targeted both the urban and rural segments.50% of LICs agents are based in
rural areas.
• With the help of the social security fund, LIC has covered even those families
who are marginally above poverty line.
• It has increased the emphasis on value- added services through its online portal
and allowed for premium collection through ATM machines and ECS.
• It has given due consideration to its internal structure and has been streamlined,
besides this, the company ensures that it gets feedback from its agents, Customer
Relationship Management (CRM) and planning managers.
• What really help LIC retain an edge over its competitors are its agents. It is
paying more attention towards its agents than before and is offering a pretty good
package.
• On the communication front, LIC has focused a lot on corporate advertisements
commemorating with LIC’s golden jubilee and many others wiz reminding people
who want a concession for taxation.
• LIC is the leader in the insurance sector with around 83% market share.
.
• LIC has tied up with Corporation Bank and Vijaya Bank for distribution of its
product.
• LIC has computerized and linked all 2048 branches.
• LIC was the first to introduce online premium payment facilities.
• LIC is focusing on rural market because of its established brand name.
ICICI Pru. is the major competitor of LIC. It has the maximum market share among
private players.
Max New York Life is operating with 2500 agents spread in activities in India.
.
• The company is using various methods like media advertising, event sponsorship,
etc. and tools like direct marketing relationship building to generate awareness and
build customer base.
• The company focuses on the quality of its first sales personnel, i.e, agents.
MET LIFE:
Met Life is a global leader in the financial services and it has tied up with Geojet
Infolin Technologies for marketing and distribution of its products in India.
TATA- AIG:
The company is following mass marketing to cover as many as lives as possible in the
initial years of its operation. It has expertise in assessing the risk covered.
BAJAJ- ALLIANZ:
.
BIRLA- SUN LIFE:
It is focusing mainly on high net worth people so that higher sum assured can be
taken up.
HDFC is the leader in housing finance in India and Standard Life is the UK market
leader.
The company is using direct marketing tactics to build HDFC brand and convincing
the customer insurance as a protection tool.
.
The Life Insurance Corporation has earned Rs.5800 crore profit in 2005-06 while its first
year premium income during the period grew by a record 48% to Rs.18085 crore. Besides
new products in existing categories, LIC has approached regulator IRDA for launching a
micro insurance product for the rural poor.
POLICIES
SUMASSURED
PREMIUM
INCOME
.
“Our surplus (profit) was Rs.5800 crore in 2005-06”, LIC chairman A.K. Shukla said on
the sidelines of the inauguration of LIC Zindagi Express, an exhibition showcasing LIC’s
50-year history on a train. LIC collected Rs.18085 crore as premium during the fiscal
ended March 2006 by selling 3.17 crore policies compared to Rs.12170 crore collected
by selling 2.39 crore policies in the same period last year. Shukla said LIC’s total
investment in stocks is likely to increase to Rs.40000 crore from Rs.34000 crore at
present. LIC, which is celebrating its Golden Jubilee year, has launched new products in
life insurance, pension and annuity, and is now working on a micro insurance product.
“We have sent a micro insurance product to IRDA for approval,” Shukla said, adding that
it would be launched soon. He said LIC has also requested IRDA to allow it to partner
with more than one general insurer for micro insurance due to large-scale operations in
the country.
The settlement of claims is the best yardstick to judge the performance of any insurance
company. LIC has shown best results in the area by settling 94.55 lakh claims. The
claims performance has been improving year after year. Earlier, the outstanding claims
ratio was 0.66% in terms of number of claims, the same has touched the lowest ebb at
0.23% during 2005-06 and this matches with the performance of any such insurance
company in the world.
The Corporation is committed to fulfill the objective of spreading the life insurance
message to every nook and corner of the country by increasing the number of sales
.
GROWTH OF LIC IN TERMS OF PREMIUMS
Max New
Kotak
Birla Sun life
Sahara Life
Bajaj
HDFC
Reliance
BONUS FROM LIC TO ITS POLICY HOLDERS FOR THE
YEAR 2004-05
Bonus of Life Insurance Corporation of India was announced on 15th November, 2005 for
its policy holders for the year 2004-05 pursuant to the Acturial Valuation as on 31 st
March, 2005. A surplus of Rs.13,904.21 crore emerged as a result of valuation. Out of the
surplus declared, 95% i.e. Rs.695.21 crore is the share of Government of India. The
number of in-force policies has gone up from 15.62 crore to 16.59 crore as on 31st March,
2005.
In addition to the above Reversionary Bonuses, LIC has also declared Final (Additional)
Bonus and Loyalty Addition to give add on value to those policyholders who keep their
policies in force. The rates of Final (Additional) Bonus are up to Rs.1,400 per thousand
sum assured depending upon term and sum assured of the policy for policies fulfilling the
stipulated conditions. Also, as in the previous year, the Loyalty Addition in respect of
Jeevan Shree policies maturing on completion of term up to 9 years in Rs.75.00 per
thousand Sum Assured and with policy term 10 years at the rate of Rs.125.00 per
thousand Sum Assured.
It may be mentioned that on the 1st September, 2005, the Golden Jubilee Year celebration
was inaugurated by the Hon’ble Prime Minister Dr. Manmohan Singh. On the occasion a
Special Golden Jubilee Reversionary Bonus ranging from Rs.5 to Rs.50 per thousand
sum assured was announced by the Hon’ble Finance Minister Shri P. Chidambaram. That
bonus was in addition to the bonus now declared.
INVESTMENTS IN LIC
TOTAL 213477
0
50 000
100 000
150 000
200 000
250 000
STATE GOVT.
HOUSING
STATE ROAD
LOANS TO
ROADWAYS,
MUNICIPALITI
TOTAL
INVESTMENTS IN LIC
CHAPTER -4
RECOMMENDATIONS
AND
CONCLUSION
CONCLUSION:
On the basis of my study of the subject, I would like to summarize the whole report by
giving the following conclusions:
1. LIC still remains to be at the top by having a hold over 71% market share
in the Indian market.
2. In terms of its products, LIC has introduced many new policies under
various plans such as endowment plans, policies for women, whole life
plans and many more.
3. LIC made the biggest achievement by introducing Unit Linked Insurance
Plans (ULIPS) in the insurance market. Currently ULIPS are the most
demanding policies of LIC.
4. LIC has brought a shift in its marketing strategies such as; it is now
advertising all its new policies on various Medias.
5. LIC has made a step ahead and has made significant achievements in the
rural sector.
6. LIC has always worked for providing security to all and with the coming
up of Pension Plans in the recent years, LIC has been able to secure the
future of the service class people in a better manner.
7. If we talk in terms of growth and progress then, LIC remains to be at No.1
position in the Indian Market and at No.6 in the world.
BIBLIOGRAPHY
BOOKS:
1. Mishra M.N; Principles of Insurance; Sultan Chand and Sons; 2007
2. Gupta P.K; Insurance and Risk Management; Himalaya Publishing
House., 2004
3. Mittal Alka and Dr. S.L.Gupta; Principles of Insurance and Risk
Management; Sultan Chand and Sons.,2007
JOURNAL:
WEBSITES:
1. www.licofindia.com
2. www.irda.com
3. www.google.com
4. www.wikipedia.com