A COMPARATIVE ANALYSIS OF LIFE INSURANCE CORPORATION AND PRIVATE INSURANCE COMPANIES
The history of Insurance can be said to be very old as old as the time when human beings came into existence. The same principle of fear exists in todays’ business man just like it existed for the ancient men. They also wanted to keep at bay the evil outcomes of fire and flood and loss of life and were persistent to make some sort of contribution in order to achieve this security. The concept of insurance can be said to be a recent development after civilization, eminently after the industrial age past few centuries, but the concept dates back to 6000 years.Insurance is a means of protection or safeguarding from financial loss.It is a form of risk management Primarily used to tackle against the risk of contingent,uncertain loss.
CONCEPT OF LIFE INSURANCE
The concept of Life Insurance in its contemporary/current status came to India from England in the year 1818. Oriental Life Insurance Company which was started by Europeans in Calcutta was the first ever life insurance company in India.The Insurance companies which were set up during that time had the main aim of looking after the needs and purpose of European section and Indian people were not given the advantage of such privilege by these companies. Eventually the efforts of renowned people like Babu Muttylal Seal, Foreign Insurance companies started giving the Indian people Insurances. But, the problem with it was that Indians were not seen as equal or worthy and they were charged with hefty extra premiums. Bombay Mutual Life Assurance Society gave birth to the first Indian life insurance company in the year 1870, which covered Indian people's lives at nominal and reasonable rates.beginning as Indian venture with highly nationalistic motives, insurance companies came into being to carry the sense of insurance and social security via insurances to various fragments and sectors of society. Bharat Insurance Company of 1896 was also a company based on the pillar of Nationalism. The Swadeshi movement of 1905-1907 gave an upsurge to more insurance companies. In 1906, the United India in Madras, the National Indian and National Insurance in Calcutta, and the Co-operative Assurance in Lahore were all established. In 1907, the Hindustan Co-operative Insurance Company was established in Jorasanko, the home of poet Rabindranath Tagore in Calcutta.The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same time.Earlier to 1912 India had no legislation to regulate insurance business, and in 1912 the Life Insurance Companies Act, and the Provident Fund Act were passed.
The first two decades of the twentieth century saw a lot of increase in insurance business.During the spread of insurance companies many unrealistic and not so important issues were also concerning the companies which failed poorly. The Insurance Act 1938 was the first ever codification which governed not only life insurance but also non-life insurance which provided strict control of state over insurance business.The demand for nationalization of the life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it had been much afterward the 19th of January, 1956, that life assurance in India was nationalized. At the time of Nationalization there were about a 154 of Indian Insurance Companies with 16 non Indian Companies and 75 providents. Nationalization was accomplished in two stages; initially the management of the businesses was appropriated by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Life Insurance Corporation of India was established on 1st of September,1956 after the Parliament passed the Life Insurance Corporation Act on 19th June 1956, with the target of spreading life assurance far more widely and especially to the agricultural areas with a view to succeed in all insurable persons within the country, providing them adequate financial cover at a reasonable cost.
PROFILE OF LIFE INSURANCE COMPANIES IN INDIA
Public sector insurance companies are those in which the government has a direct holding of 51% or more.The government can be state or central.So, after Nationalisation and all the legislations which were passed, the government took holdings in Insurance companies.
LIFE INSURANCE CORPORATION OF INDIA
The Role Of LIC from the time it was established was that of-
Spreading life Insurance widely amongst the rural areas and to the socially and economically backwards strata of our society with an aim to reach all insurable people and provide them adequate financial cover against death at reasonable cost.
Maximizing the faction of People’s saving by making the insurance linked with savings attractive.
Act as trustees to the public who have insured their money in their personal as well as collective sense.
Conduct business with full understanding that money belongs to the Insurance policy holders.
Meet the various demands of people in lieu of life Insurance which would occur due to the dynamic nature of social and economic Environment.
FUNCTIONS OF LIC
Has to issue insurance policy to people at reasonable rates
Invest fund into government Securities to protect the money of people who have invested in LIC
Give loans to various national projects which are important for the economic growth
Main link for savings and Investment in India
Housing loans at reasonable rate
All the entry restrictions by the government of India in the year 2000 & 2001 was lifted for private sector investors in the life insurance market.Foreign investment in the life insurance market was also allowed. Now, the Indian life insurance market currently has 23 private players fighting a rigorous battle for taking the largest possible slice of the growing life insurance market and at the same time maintaining their current hold.
HDFC Standard Life Insurance Company
Max Life Insurance Company Ltd
ICICI Prudential Life Insurance Co. Ltd.
Kotak Mahindra Life Insurance Co. Ltd.
Aditya Birla Sun Life Insurance Co. Ltd.
TATA AIA Life Insurance Co. Ltd.
SBI Life Insurance Co. Ltd.
Exide Life Insurance Co. Ltd.
Bajaj Allianz Life Insurance Co. Ltd.
PNB MetLife India Insurance Co. Ltd.
Reliance Nippon Life Insurance Company
Aviva Life Insurance Company India Ltd.
Sahara India Life Insurance Co. Ltd.
Shriram Life Insurance Co. Ltd.
Bharti AXA Life Insurance Co. Ltd.
Future Generali India Life Insurance Co. Ltd.
IDBI Federal Life Insurance Co. Ltd.
Canara HSBC Oriental Bank of Commerce Life Insurance
Aegon Life Insurance Co. Ltd.
Pramerica Life Insurance Co. Ltd.
Star Union Dai-Ichi Life Insurance Co. Ltd.
indiaFirst Life Insurance Co. Ltd.
Edelweiss Tokio Life Insurance Co. Ltd.
ROLE OF PRIVATE INSURANCE COMPANIES
The Government having tried various models for the insurance industry such as privatization with negligible regulation (pre 1956) and nationalization (1956- 2000) and having observed sub optimal performance of the sector, resorted to adopting a hybrid model of both these, resulting in privatization of the sector with an efficient regulatory mechanism (post 2000). This was initiated with the aim of making the industry competitive so that there are more players offering a greater variety of products over a large section of the population. The role of private insurance companies is the same as that of public insurance companies the only difference is that of shareholding.
OVERVIEW OF CURRENT MARKET SCENARIO
In India, the total market size of the insurance sector is expected to be around 280 Billion Dollars in 2020.
Government's intervention in policy of insuring the uninsured has gradually put a pedestal in insurance infiltration in the country and generation of insurance schemes.
The total or Gross premium collected by life insurance companies in India retained a hike from 39.7 Billion Dollars in Financial Year 12 to 94.7 Billion Dollars in Financial year 20. During the Financial year 12-20 premium from new business of life insurance companies in India increased at a rate of 15% to reach 37 billion Dollars in FY20.
The total of insurance (premiums as% of GDP) in India reached 3.71% in Financial year 19 from 2.71% in Financial year 20.
The following are some of the major accomplishments of the Investment and banking sector:-
Companies are trying to give a vital and strategise partnership in lieu of various services as follows:
SBI General Insurance collaborated with IntrCity RailYatri to provide bus travellers with domestic travel insurance. SBI General Insurance, under this collaboration will include a good range of coverage, including accidental death, permanent complete disability and emergency evacuation.
ICICI Lombard General Insurance has collaborated with Plum, India's fastest growing employee insurance start-up, to reimagine and co-create India's first technologically backed group of insurance products. ICICI Lombard and Plum plan to fix four key elements of community health insurance such as real-time pricing, onboarding, programme administration and claims.
Bajaj Allianz General Insurance collaborated with Muthoot Finance to offer insurance on gold jewellery. This scheme seeks to provide insurance coverage for gold jewellery pieces for the customers at the time of closing of the gold loan and release of gold ornaments. As a loyalty programme, it will provide insurance coverage to Muthoot Finance's clients.
The International Financial Services Centres Authority (IFSCA) got membership of International Association of Insurance Supervisors (IAIS).
HDFC ERGO General Insurance firm and NSDL Payments Bank Limited,NSDL Subsidiary, joined to provide customers a full sort of general insurance products. This partnership aims to integrate NSDL Payments Bank's broad distribution network and HDFC ERGO's wide innovation pipeline to contribute to financial inclusion in the country.
Life Insurance Corporation of India launched its first software application, ANANDA, an acronym for ‘Atmanirbhar Agents New Business Digital App’ which aids the agent/broker to get life insurance policy through paperless module
The Government of India took a wide variety of initiatives to break the insurance industry. Some of them are as follows:
The Union Budget of 2019-20 gave 100% foreign direct investment (FDI) to insurance intermediaries.
Uttarakhand announced its initiative to offer ‘COVID-19 Insurance Policy’ to international tourists. A proposal of request was submitted to the Union Tourism Minister, Mr. Prahlad Patel, for introducing special life insurances for foreign tourists.
one-time measure was announced by, IRDAI that it has granted up to 5% of the prevailing premium rates to change the base premium. This move ensurensured viability and longevity for smooth transformation of the existing goods.
PNB MetLife India Insurance Company collaborated with India Post Payments Bank (IPPB) and announced the launch of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) for customers.
The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue improved initial public offering (IPO) guidelines for insurance companies which are looking to divest equity through the IPO route.
Andhra Pradesh has come up with free of cost crop insurance scheme for the state farmers.
COMPARISON OF LIC WITH PRIVATE COMPANIES
LIC can be compared with the total of 23 private players on the basis of 3 credentials which are of MARKET SHARE, CUSTOMER BASE and CLAIM SETTLEMENT RATIO. LIC as of now holds around 71.8% of the total Indian Life Insurance market and around 28.19% is held by all the private players of the Insurance market. In the year 2017 all the life insurance companies issued a whooping 264.56 lakhs policies, and LIC alone had 201.32 Lakh policies and the combined number of policies by private sectors was 63.24 lakh.One of the main thing which the Individual sees before buying any insurance policy is that of the Claim settlement reputation of the Insurer.LIC stands with an average of 98.31% in this context whereas the private players combined have a percentage of 93.72.
Life Insurance with LIC
LIC was formed and registered in September, 1956.
The insured person has to take the policy from the proposal form provided by LIC only.
The amount of Premium charged by LIC is less than that of private insurance companies.
LIC does not provide service tax and education on the basis of premium collected by it..
The LIC does not provide riders on its products.
The life insurance products of LIC are not tailor-made i.e. as per the requirement of the customers.
The mode of payment of premium in case of LIC may be yearly, half yearly, quarterly, monthly, salary saving schemes.
Life Insurance with private player
The IRDA issued the primary license to ICICI Prulife in December 2000.
In the case of life policy with a private player 24 different insurance companies issue different application forms.
The premium charges by the private players are comparatively more than that of LIC.
The private players have to pay service tax and education cess on the premiums collected by them.
The private players provide different types of services and conditions with their products.
The life products of private players are tailor made and can be designed according to the requirement of different customers.
The mode of payment of premium schemes under private players are generally yearly, half-yearly, monthly or salary savings.
LIC is a dominant player in context of life Insurance. The size of the market has grown and the size of the population in India which are to be insured is vast and the existing players have managed to cover about one-fourth of the population. The opportunities are at large for players in terms of targeting the audience. The falling of Interest rate, collapse of small time financial institutions, and the scope of entering into the market with areas related to pension, banking and E-commerce are other opportunities. Life insurance has today become an essential of any economy since it offers a plenty of scope for getting large sums of money for a long period of time. A well regulated life insurance company is what India strives for a hassle free stress free tomorrow.
Gairola, V. (2016) A Comparative Study of Public and Private Life Insurance Companies in the Post Liberalization Era. IJMBS Vol. 6, Issue 4, Pp.15-18.
SUBMITTED BY:-ASMITA SAHAY
AMITY LAW SCHOOL,DELHI