CHAPTER 1 INTRODUCTIO OF INDIAN LIFE INSURANCE INDUSTRY

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1.1 INSURANCE- AN INTRODUCTION

1.1.1 Meaning:
Insurance may be described as a social device to ensure protection of economic value of life and other assets. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus, collective bearing of risk is insurance. Insurance = Collective Bearing of Risks

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. The term "risk" is used to describe the possibility of adverse results flowing from any occurrence or the accidental happenings, which produce a monetary loss. Insurance is a pool in which a large number of people exposed to a similar risk make contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. The sharing of risk among large groups of people is the basis of insurance. The losses of an individual are distributed over a group of individuals. Insurance is nothing but a system of spreading the risk of one onto the shoulders of many. While it becomes somewhat impossible for a man to bear by himself 100% loss to his own property or interest arising out of an unforeseen contingency, Insurance is a method or process which distributes the burden of the loss on a number of persons within the group formed for this particular purpose.

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1.1.2 Definitions:
Fundamental Definition In the words of D.S. Hansell, Insurance accumulates contributions of all parties participating in the scheme. Contractual Definition In the words of Justice Tindall, Insurance is a contract in which a sum of money is paid to the assured as consideration of insurers incurring the risk of paying a large sum upon a given contingency.

1.1.3 Working of Insurance

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1.2 LIFE INSURANCE A BRIEF OVERVIEW

1.2.1 Introduction:
According to the U.S. Life Office Management Inc. (LOMC), "Life Insurance provides a sum of money if the person who is insured dies whilst the policy is in effect." Life insurance has come a long way from the earlier days when it was originally conceived as a risk-covering medium for short periods of time, covering temporary risk situations, such as sea voyages. As life insurance became more established, it was realized what a useful tool it was for a number of situations that includes temporary needs/threats, savings, investment, retirement etc.

1.2.2 Origin of Life Insurance in India:

In India, after failure of two British companies, the European and the Albert in 1870, which attempted writing business on Indian lives, first Indian Life Assurance Society was formed in the same year called Bombay Mutual Assurance Society Ltd. It was followed by the Oriental Life Assurance Company Limited in 1874, Bharat in 1896 and Empire of India in 1897. The Idea of insurance was born out of a desire of the people to share loss of an individual by many. Originally it restricted to forms other than life assurance. The Government began to exercise a certain measure of control on Insurance business by passing the `Insurance Act in 1912. For controlling investment of funds, expenditure and management, a comprehensive Act was passed known as `The Insurance Act 1938. For controlling the affairs, the office of Controller of Insurance was established. The act was extensively amended in 1950. In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund Societies had been registered for transacting Life Assurance business in India. There were malpractices in insurance business. For achieving the following purposes it was felt necessary to nationalize the insurance business in India. The Life Insurance Corporation Act was passed by the Parliament in June 1956 which came in force on 1st July 1956.
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1.2.3 Important Milestones in the Life insurance business in India:

1870: Bombay Mutual life assurance society is the first Indian owned life insurer. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crores from the Government of India. 1997: Insurance regulator IRDA set up. 2000: IRDA starts giving licenses to private insurers like Kotak Life Insurance, ICICI Prudential and HDFC Standard Life insurance first private insurers to sell a policy. 2001: Royal Sundaram Alliance first non life insurer to sell a policy. 2002: Banks were allowed to sell insurance plans. As Third Party Administrations (TPAs) enter the scene, insurers start setting non-life claims in the cashless mode. 2004-05: The Government proposed for increasing the foreign equity stake to 49%. 2007: First Online Insurance portal, set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt. Ltd.

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1.3 INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included:
Structure of the Indian Insurance Industry. Competition. Regulatory Body. Investments. Customer Service.

The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body i.e. The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents.
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1.4 INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)

The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the role of Controller of Insurance diminished considerably in significance since the Government owned the insurance companies. The Insurance Regulatory and Development Authority Act, 1999 is an act 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 amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 to end the monopoly of the Life Insurance Corporation of India (for life insurance business). Following are some of the powers, functions and duties of IRDA:
Issue to the applicant a certificate of registration, renew, modify, withdraw,

suspend or cancel such registration.

Specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents.

Specifying the code of conduct for surveyors and loss assessors. Promoting efficiency in the conduct of insurance business. Promoting efficiency in the conduct of insurance business; promoting and

regulating professional organisations connected with the insurance and reinsurance business.
Specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector.

Supervising the functioning of the Tariff Advisory Committee;

Exercising such other powers as may be prescribed.

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1.5 INSURANCE MARKET- PRESENT

The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance markets have witnessed dynamic changes because of Indian Insurers going global. Most of the private insurance companies have formed Joint ventures partnering well recognized foreign players across the globe. There are now 22 Life insurance companies operating in the Indian market. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help Joint ventures partners to bring in funds for expansion.

State Insurers Continue To Dominate: There may be room for many more
players in a large underinsured market like India with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and thereby failing to make any impact in the market. Also as the private sector controls over 26.18% of the life insurance market a public sector companies still call the shots. The countrys largest life insurer, Life Insurance Corporation of India (LIC), had a share of 64% in new business premium income in November 2009. ICICI Prudential Life Insurance Company continues to lead the private sector with a 9% market share in terms of fresh premium.

Reaching Out To Customers: No doubt, the customer profile in the insurance

industry is changing with the introduction of large number of divergent intermediaries such as brokers, corporate agents, and bancassurance. The industry now deals with customers who know what they want and when, and are more demanding in terms of more demanding in terms of better service and speedier responses.
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Intense Competition: In a de-tariffed environment, competition will manifest

itself in prices, products, underwriting criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each other to capture market share through better pricing and client segmentation. The battle has so far been fought in the big urban cities, but in the next few years, increased competition will drive insurers to rural and semi-urban markets.

Global Standards: While the world is eyeing India for growth and expansion,
Indian companies are becoming increasingly world class. Take the case of LIC, which has set its sight on becoming a major global player following Rs. 280-crore investment from the Indian government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, and Nepal and will soon start operations in Saudi Arabia. It has already ventured into the African and Asia-Pacific regions in the year 2006. With life insurance premiums being just 2.5% of GDP, the opportunities in the Indian market place is immense. The next five years will be challenging but those that can build scale and market share will survive and prosper.

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1.6 LIST OF LIFE INSURANCE COMPANIES IN INDIA AND THEIR MARKET SHARE

List of Life Insurance Companies in India

1. Aegon- Religare 2. Aviva 3. Bajaj Allianz 4. Birla SunLife 5. Bharti- Axa 6. Future Generali 7. HDFC Standard Life 8. India First Life 9. ICICI Prudential 10. IDBI Fortis 11. ING Vysya 12. Kotak Mahindra Life 13. LIC 14. Max Newyork Life 15. Met Life 16. Reliance Life 17. Sahara India 18. SBI Life 19. Shriram Life 20. Tata AIG Life 21. DLF Pramerica 22. Canara HSBC OBC
(Source: www.irdaindia.org)

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MARKET SHARE
2% 3% 2% 3% 3% 7% 1% 6% LIC ICICI PRUDENTIAL BAJAJ ALLIANZ SBI LIFE RELIANCE HDFC STANDARD LIFE 9% 64% BIRLA SUNLIFE MAX NEWYORK LIFE KOTAK MAHINDRA OTHERS

(Source: www.irdaindia.org)

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CHAPTER 2 CONTRIBUTION OF LIFE INSURANCE INDUSTRY TO THE INDIAN ECONOMY

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2.1 FLOW OF INSURANCE INDUSTRY IN INDIA

The Insurance sector in India initially took off with the establishment of the public sector insurance company known as, Life Insurance Corporation of India. The insurance sector in India has grown in leaps and bounds to become the most significant financial players in the Indian financial market. The popularity of the insurance sector has mainly evolved on account of the large investments flow from this sector that facilitates the growth of the overall economy of the country. The foreign insurance companies have stated forming pacts and collaborations with the Indian insurance companies to influence the Indian Insurance sector. The insurance companies offer protection to their clients, collect the small savings of the clients to turn into a huge capital to reinvest in priority sectors of the economy.

Insurance and Banking:

The insurance companies in India are constantly collaborating with the banking institution, following the foreign countries to impart more efficiency in the entire insurance sector. More and more insurance companies are signing Memorandum of Understanding (MOUs) with the Indian banks in order to carry on their marketing activities through the branches of the banks. The prominent Indian banks that have already signed such MOUs include the Vysya Bank, the State Bank and the Jammu and Kashmir Bank.

Products and Services offered by Insurance Companies in India:

The insurance companies in India dealing in life insurance are mainly engaged in offering two categories of life insurance products- the Endowment Assurance Products and the Money Back Products. The vehicle insurance products rank next to life insurance product in terms of demand. The up coming products comprise linked products. The products offer various facilities to the investors as for example they are available with free look facility so that the investor gets time to examine the policy within the free look period.
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2.1.1 Structure of Insurance Industry: Snapshot

Prior to 1956 - 242 companies operating. 1956 2001 - Nationalization LIC monopoly player Government control. 2001 - Opened up sector.

2.1.2 Potential of Life Insurance Sector:

Total Population Total Population of Insurable Class Total Population Insured 1.4 billion 253 million 88.5 million

(Source: Financial Times)

2.1.3 Market Share Based on Premium:

Company Indian Promoter Foreign Partner Market Share based on Premium 1.12% 6.12% 1.84% 2.96% 7.11% 1.32% 0.40% 1.78%
(Source: Financial Times)
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Aviva Life Bajaj Allianz Birla Sunlife HDFC Standard ICICI Prudential Max New York MetLife Tata AIG

Dabur Bajaj Auto Aditya Birla HDFC ICICI Bank Max India Jammu and Kashmir Bank Tata Group

Aviva, UK Allianz, Germany Sunlife, Canada Standard Life, UK Prudential, UK New York Life, US MetLife, US AIG, US

2.2 CONTRIBUTION TO INDIAN ECONOMY

2.2.1 Life Insurance garners Long term savings:
Insurers are increasingly introducing innovative products to meet the specific needs of the prospective policyholders. An evolving insurance sector is of vital importance for economic growth. While encouraging savings habit it also provides a safety net to both enterprises and individuals. Insurance Companies receive, without much default, a steady cash stream of premium or contributions to pension plans. Various actuary studies and models enable them to predict, relatively accurately, their expected cash outflows. Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent and their investments are also long-term in nature. Since they offer more than the return on savings in the shape of life-cover to the investors, the rate of return guaranteed in their insurance policies is relatively low. Consequently, the need to seek high rates of returns on their investments is also low. The risk-return trade off is heavily tilted in favour of risk. As a combined result of all this, investments of insurance companies have been largely in bonds floated by Government of India, PSUs, State governments, local bodies, corporate bodies and mortgages of long term nature.

Aggregation of Long Term Savings:

Total Assets of Life Insurance Companies 2006-2007 2,80,450Cr 2007-2008 3,52,608Cr 2008-2009 4,23,000 Cr
(Source: Financial Times)

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Total Premiums generated 2006-2007 57,708 Cr 2007-2008 66,278 Cr 2008-2009 79,000 Cr

(Source: Financial Times)

The Life Insurance Industry is growing @ 19% per annum. So at this growth rate the future premium incomes generated will be as follows: 2006-2007 94,000 Cr 2007-2008 1,12000 Cr 2008-2009 1,33,000 Cr

(Source: Financial Times)

Life Insurance funds accounts for 15% of Household savings. So the industry has the potential to increase the share to 20% in the next 2 years.

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2.2.2 Generation of Long term funds for Infrastructure:

For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. Estimates of funds required for development of infrastructure vary widely. An investment of 6, 19,600 crores is anticipated in the next 5 years. Tenure of funding required for infrastructure normally ranges from 10 to 20 years. The insurance industry also provides crucial financial intermediary services, transferring funds from the insured to capital investment, critical for continued economic expansion and growth, simultaneously generating long-term funds for infrastructure development. In fact infrastructure investments are ideal for asset-liability matching for life insurance companies given their long term liability profile. According to preliminary estimates published by the Reserve Bank of India, contribution of insurance funds to financial savings was 14.2 per cent in 2005-06, viz., 2.4 per cent of the GDP at current market prices. Development of the insurance sector is thus necessary to support continued economic transformation. Social security and pension reforms too benefit from a mature insurance industry. The insurance sector in India, which was opened up to private participation in the year 1999, has completed over seven years in a liberalized environment. With an average annual growth of 37 per cent in the first year premium in the life segment and 15.72 per cent growth in the nonlife segment, together with the largest number of life insurance policies in force, the potential of the Indian insurance industry is still large. Life insurance penetration in India was less than 1 per cent till 1990-91. During the 1990s, it was between 1 and 2 per cent and from 2001 it was over 2 per cent. The tenure of funding required for infrastructure normally ranges from 10 to 20 years. In 2005 it had increased to 2.53 per cent and now it is near to 3.21%. An investment of 6, 19,600 crores is anticipated in the next 5 years. The major portions of these funds are routed through debt/ private equity participation.
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2.2.3 Spread of Financial Services in Rural areas:

IRDA Regulations provide certain minimum business to be done - in rural areas. - in the socially weaker sections. Life Insurance offices are spread over nearly 1400 centres. Presence of representative in every tehsil deeper penetration in rural areas. Insurance agents numbering over 6.24 lakhs in rural areas. Policies sold in rural areas (2008-09) - No. of policies - 55 lakhs, Sum assured 46,000 crores. Social security - No. of lives covered in 2007-08 was 17.4 lakhs whereas in 2008-09, it increased to 42.1 lakhs.

2.2.4 Employment Generation:

Employment generation in the country increased considerably in the eight-year period - 2001 to 2009, as compared to between 1990 and 2000, according to the Economic Census released by the government recently. Employment grew at the rate of 4.78 per cent in 2001-2009, which is much higher than the 1.75 per cent recorded during 1990-2000, the 5th Economic Census report said. The report, compiled by the Central Statistical Organisation, listed the top five states in India in terms of employment generation which includes Jammu and Kashmir, Haryana, Kerala, Andhra Pradesh and Maharashtra. Life insurance industry provides increased employment opportunities. Employees in insurance sector as on 31st March, 2009 is around 9.5 lakhs. Many agents depend on insurance for their livelihood. No. of agents as on 31st March 2009 30.50 lakhs. Brokers, corporate agents, training establishments provide extra employment

opportunities. Many of these openings are in rural sectors.

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2.2.5 Development of Capital Markets / Economic Growth:

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of shortterm funds takes place on other markets. The capital market includes the stock market (equity securities) and the bond market (debt). Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. The primal role of the capital market is to channelize investments from investors who have surplus funds to the ones who are running a deficit. The capital market offers both long term and overnight funds. The financial instruments that have short or medium term maturity periods are dealt in the money market whereas the financial instruments that have long maturity periods are dealt in the capital market. Industry also contributes in economic development through investments in capital market. Present level of investments is over Rs. 40,000 crores. (Mark to Market basis around 80,000 Crores). Life Insurance makes an Annual Investment of around 9000 crores in capital markets. Contribution of Life Insurance to Five Year Plans is Rs.2, 30,900 Crores. It helps to inculcate a sense of security by protecting earning of people in case of untimely death and also provides benefits to Policy Holders. 2006-2007 20,800 Cr 2007-2008 24,200 Cr 2008-2009 28,700 Cr

(Source: Financial Times)

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2.3 SPECIAL FEATURES

Tax clubbing of various savings short term and long term into same bracket have a bias towards short term savings.

Distinction between the short term savings and long term savings is critical from investors point of view. More prone to inflationary pressures.

Clearly, long term savings more than 10 years deserve special consideration under tax regime.

Life insurance companies are Capital Intensive Industry. 2007-2008 Total Income Capital Employed 3623 4329 2008-2009 5440 6128
(Source: Financial Times)

2.3.1 Growth Potential:

At present Insurance penetration in India is quite low at 2.26% of Gross Domestic Product. If we compare with other Asian countries, Korea Insurance penetration stands at 6.77% whereas in Singapore it stands at 6.38% of their GDP.

2.3.2 Phase of Transition:

Life Insurance industry is under the phase of infancy after 50 years of monopoly. First LIC had the monopoly for Life Insurance policies in India and with the entry of foreign players the whole scenario has changed and customers are more attracted towards private insurers.

Competition from within and other sectors of financial markets like the Banks selling Insurance products with strategic alliance between Banks and Insurance Companies.

It also needs environmental support till it reaches a comfort zone.

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CHAPTER 3 POTENTIAL 0F LIFE INSURANCE BUSINESS IN INDIA

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3.1 INTRODUCTION
Indias life insurance market has grown rapidly over the past six years, with new business premiums growing at over 40% per year. The premium income of Indias life insurance market is set to double by 2012 on better penetration and higher incomes. Insurance penetration in India is currently about 4% of its GDP, much lower than the developed market level of 6-9%. In several segments of the population, the penetration is lower than potential. For example, in urban areas, the penetration of life insurance in the mass market is about 65%, and its considerably less in the low-income unbanked segment. In rural areas, life insurance penetration in the banked segment is estimated to be about 40%, while it is marginal at best in the unbanked segment. The total premium could go up to $80-100 billion by 2012 from the present $40 billion as higher per capita income increases per capita insurance intensity. The average household premium will rise to Rs 3,000-4,100 from the current Rs 1,300 as will penetration by the existing and new players. Indias ratio of life insurance premium to its GDP is around 4 per cent against 69 percent in the developed world. It could rise to 5.1-6.2 by 2012 in tandem with the countrys demographic profile. India has 21 life insurers and the state owned Life Insurance Corp. of India dominates the industry with over 60 percent market share, though private players have been growing aggressively. Considering the worlds largest population and an annual growth rate of nearly 7 per cent, India offers great opportunities for insurers. US based online insurance company ebix.com plans to enter the Indian market following deregulation of its insurance sector. Online insurer ebix.com expansion into India is a major step for the company to become a global supplier of internet-based insurance tools for consumers and insurance professionals. In a diverse country such as India it is imperative that a universal insurance infrastructure be created to maximize efficiency in the insurance industry. Online insurer ebix.com can offers the Indian market a business-to-consumer internet portal where consumers have more choice while purchasing insurance and an internet-based agency.

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Foreign holding in Indian insurance companies is limited to 26 per cent. The government wants to increase the cap to 49 percent, but its communist allies oppose such a move. The market is moving beyond single-premium policies and unit linked insurance products which are easier to sell. The agency model is the dominant sales channel accounting for more than 85 per cent of fresh premiums but overall inactivity and attrition is much higher at 50-55 per cent than the global average of 25 per cent. Opportunities include health insurance and pensions, the report said; adding only 1.5-2 percent of total healthcare expenditure in India was currently covered by insurance. A life insurance policy covers ones personal self. Unlike with general insurance, it is not like insuring a vehicle. Having said that, if we consider that Indias population is over one billion and growing, we get a picture of the true potential of the life insurance sector in India. LIC has been in business for 50 years now and has not covered the entire population base yet. About 250 to 300 million Indians are still insurable. LIC has issued about 120 million policies till now, with new premium income of US$ 1 billion. Its assets have been estimated at $37 billion and in the last quarter it reported a 60 per cent growth in new business. LICs business is growing at the rate of 20 per cent every year. That is the kind of potential one is talking about in life insurance in India. It would not be wrong to say that a lot of the advantage of advertising by new private sector insurance companies has by default gone to LIC. While they have created a lot of awareness through private insurers advertisements, LIC have benefited because LIC has a much wider branch network, and buyers are surer of LIC because it has been in existence for long; they are more comfortable about its safety. Some LIC agents continue to follow the unethical practice of offering discounts from their commissions to new policy buyers; this makes a difference.

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3.2 PENETRATION- LOWER THAN POTENTIAL

Management consultancy firm McKinsey has forecast that Indias life insurance industry will be double in the next five years from $40 billion to $80-100 billion in 2012. This growth would improve the level of insurance penetration from 5.1% of gross domestic product to 6.2% in 2010-2012. The Indian life insurance industry could witness a rise in the insurance sector premiums between 5.1% and 6.2% of GDP in 2012, from the current 4.1%. Total market premiums are likely to more than double during this period, from about $40 billion to $80-100 billion. This implies a higher annual growth in new business annual premium equivalent (APE) of 19% to 23% from 2007 to 2012. The large part of the growth would come from second- and third-tier cities and small towns. Based on MGI forecasts, 26 tierII cities with population greater than one million and 33 tier-III towns with the population of more than 5 lakhs will account for 25% of the middle class and newly bankable class in 2025. Over 5,000 tier-IV small towns will account for as much as 40% of these two classes in 2025. However, if an insurer decided to be a niche player and concentrated on metros and their suburbs, they will have a big market, since 60% of the very rich (annual income over Rs 10 lakhs) would be concentrated in the top eight cities. Although these consumers will be highly accessible, players will have to reckon with intense competition that is only going to increase and extend to other segments as well.

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3.3 LIC- AHEAD OF ALL

LIC of India has mobilized Rs 12,361 crores of new business premiums in March 07 the highest recorded by the corporation in any single month. This has enabled the corporation post new business premium of Rs 55,934 crores in 06-07, a 118% growth over the previous year. LICs premium collection in March 07 was higher than the premium collected in the whole of whole of 03-04. LICs has been the growth driver for the entire life insurance industry which grew 110.7% to Rs 75,406 crores from Rs 35,897 crores during the current financial year. The rise in premium gives LIC a market share of over 74% of the total new business premium mobilized in India, which is substantially higher than the 72% as on March 106. The rise in premium is on the back of unit-linked policies which account for nearly 70% of the total individual premium. The surge in sales in March attributed to higher sales of unit linked insurance and group insurance business. In March the corporation booked over Rs 4,826 crores in group insurance, which accounted for nearly 30% of total collections. Collection from single premium plans amount to Rs 24,927 crores, which is nearly 44% of the premium raised by the corporation during the current fiscal. Single premium plans are a demand of the market. There are a large section of people who do not want to commit premium payments for every year. Meanwhile, the private life insurance industry has recorded a growth of 89% with total new business premium for the year standing at Rs 19,471 crores as against Rs. 10,252 crores in the corresponding period last year. ICICI Prudential continues to be the largest private life insurance player with a market share of 7% followed by Bajaj Allianz Life Insurance which has a market share of 5.7%. The companies that have recorded the fastest growth in the current year include Reliance Life Insurance, which grew 381% recording new business premium of Rs 931 crores, followed by SBI Life Insurance which grew 209% to Rs. 2,566 crores. The high growth has enabled SBI Life to move into the number three positions after Bajaj Allianz Life Insurance.

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3.4 NEW JOINT VENTURE SET UPS

Canara Bank, Oriental Bank of Commerce (OBC) and HSBC Insurance (AsiaPacific) Holdings Ltd. have signed an agreement to jointly establish a life insurance company in the country. The company has been christened Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. Canara Bank would take a 51 per cent stake in the company, while HSBC and OBC will hold 26 per cent and 23 per cent stake respectively. The new life insurance company will be capitalised at Rs 325 crores, of which Canara Bank will contribute Rs 102 crores, HSBC Rs 177 crores and OBC Rs 46 crores. Under the terms of the agreement, HSBC would provide a range of management services, which would include nominating executives for certain senior roles. While both Canara Bank and OBC offer an extensive client base, complementary distribution networks and broad local market knowledge, HSBC brings to the partnership its considerable insurance experience, product range and proven bancassurance capabilities. IRDA gave clearance to a joint venture between Kishore Biyanis Pantaloon Retail India and Italian insurance firm The Generali Group to start insurance businesses. The joint venture, Future Generali India Life Insurance Company Ltd, would transact life insurance business. Besides, it also granted approval to Future Generali India Insurance Company to transact general insurance business. Generali is one of the largest insurance groups in the world, operating in 40 countries through 107 companies. It ranks 22 in the list of Fortune 500 companies and is the largest corporation in Italy with an asset base of over 300 billion euro.

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3.5 EYING ABROAD

Although Japanese insurance companies account for one-fifth of the total life insurance premium in the world, they have been slow to expand internationally as most companies were going through a consolidation phase locally. The crash in interest rates to near-zero levels in Japan had made it difficult for insurance companies to generate surpluses to cover costs. Financial sector juggernaut LIC of India is now on the look out for a potential buy abroad. The company is planning to use its massive cash reserve to finance the acquisition of a company in the New Zealand and Australia markets. If approved, LIC would become the second public sector financial institution, after State Bank of India, to acquire a company abroad. For LIC, a buyout of an insurance company Down Under could make sense, as it has already established its presence in some of the Oceania markets, like Fiji. The plan would, however, require prior passage of the amendments to the LIC Act, to enable the company to raise its paid-up capital from Rs 5 crores to Rs 100 crores, at par with private insurers. The government plans to amend the Act passed in 1956 to give more flexibility to the largest insurance company to expand its footprint. LIC commands a 77% market share. Its premium income soared to 182.26% during the period against the industry average of 177.44%. Its new premium grew 191% to Rs 10,381.57 crores as in August 06. It has offices in the UK, Nepal, Bahrain, Kenya and Mauritius other than Fiji. But its UK operations have not been able to grow at the expected rate. While the insurance industry in the UK is growing at 10- 12%, LIC has been growing at 4-5% annually. It is understood that it has been capitalised a couple of times.

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3.6 RIDING ON WOMAN POWER

A woman has unique needs and concerns when it comes to preparing for the future. While the basic life insurance policy protects the bread-earner and his loved ones, he also needs some protection against health risks specific to women. In todays society, there is no difference in professional men and women and they both have the same earning power and both contribute to the family kitty. Both incomes are important for family lifestyle and standard. When the whole world seems to be riding on woman power, can insurance companies remain far behind? Today even banks and financial institutions are regularly churning out innovative schemes to woo the dames. Insurance traditionally has been targeted at the earning member of the family as insurance means helping the family to maintain the standard of living for a few years in case something unfortunate happens to the main breadwinner. Moreover, insurance products not only provide security for family, but also help in savings, investment towards creating a fortune for needs in future or pension for the golden years. There is a strong-felt need for women to also insure and invest and, therefore, insurance companies are targeting women with specially-designed products. What is more, some insurance companies also offer some discounts to women, although they dont have any specific product for them. For instance, ING Vysya Life Insurance Company doesnt have any product targeted specifically at women; however, women enjoy lower rates of premium than men owing to their longevity. Whatever be the case, insurance companies penchant for woman customers is growing by the day and not without reasons. Women investors have shown longer investment tenure and regular saving habits. So, the future products are aimed to target these two specific characteristics and would span over both health and investment domain. Insurers also feel that the women-specific insurance market is expected to grow much faster than the overall insurance sector. No wonder, this is one domain which will become a strong focus point for them in the near future.
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3.7 AGENTS
A remarkable achievement is that Indias third largest private sector insurance company SBI life Insurance has been ranked fifth across the world in terms of number of Million Dollar Round Table (MDRT). Life insurance agents from India are moving fast into the realm of global insurance. The total number of Indian agents registering with the Million Dollar Round Table, a prestigious international trade association of insurance agents, has more than tripled to 1,931 agents for 2007 compared with 532 in 2006. The MDRT has a total of 35,781 qualifiers, which is 1% of the total insurance agents or advisors in the world. Within the MDRT, there are three levels such as the basic MDRT, the Court of Table (CoT) and Top of Table (ToT). To qualify for that MDRT, an Indian insurance agent has to get a premium of Rs. 23.92 lakhs to his insurance company or earn a commission of Rs. 5.98 lakhs. For the agent to qualify for the COT he has to do thrice the MDRT business, while to qualify for the TOT; insurance agent has to do six times the business required for the MDRT. On the other hand IRDA has taken the first step to crack the whip on agents misleading customers on unit-linked insurance plans. To start with, it has tightened the norms for sale of actuarial-funded unit-linked products which are on their way out. The Regulator intends asking customers and agents to sign illustrations on the entire gamut of ULIP products offered by insurers. While the features of ULIPs vary from product to product, the onus will be on agents to indicate the explanation that customers have been given on the nature of investment. Agents will also have to give a break-up of the money spent on various expenses. The objective is to enlarge the scope of disclosures made by agents and such transparency will be in the interest of the entire insurance sector. IRDA appears to be taking the UK route to tackle mis-selling of policies. In the UK, if an agent is accused of mis-selling, the onus is upon the insurer to prove that the policy was explained. Similarly, insurers in India will now have to retain documentary evidence to prove that the policy was properly explained to the insured. In the UK, the experience has

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been the complaints of mis-selling emerge after a period when policyholders discover that their investments were performing far worse than they were told to expect. Actuarialfunded products have a complex structure, where the insurance company allocates significant sums to the policyholders account in the first year. However, these initial allocations are notional i.e. in the form of actuarial units, which convert into real money only in the future. The downside of such products is that there is not much balance in the policyholders account in the initial years.

3.8 UNIT LINKED INSURANCE PRODUCTS

The regulator had given an indication that checks would be in place to prevent misselling of ULIPs, which have become popular investment instruments. IRDA is understood to have extended the deadline for Bajaj Allianz to phase out its actuarialfunded product or capital unit. This is set to be replicated in other ULIPs as well in due course. The regulator has asked private insurer Bajaj Allianz Life Insurance to ensure that policyholders investing in the actuarial-funded products sign on sales illustration given out by agents. This will form part of the policy document, and IRDA will have the authority to inspect it at a later stage, if need be. The entire exercise is aimed at ensuring that the customer is fully aware of the features of the product. Aviva Life Insurance is the other company that has been asked to withdraw actuarial-funded products. IRDA justified the withdrawal of these products, saying that its objective was to enable the policyholders of ULIP products to compare features and charges across products and companies. However this order of IRDA is stayed by the High Court of Chennai. The regulator has also introduced safeguards to see that actuarial-funded products are not sold aggressively while they are being phased out. In the case of Bajaj Allianz, for instance, the regulator has stipulated that the total premium collected under this product between August 2008 and September 15, 2009 should not exceed the average growth in sales posted in the previous quarter of July 31, 2008.Although ULIPs may have become popular for more wrong reason that right ones, the segment does have its fair share of positives.

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The right reasons includes multiple benefits to the customers like Life protection, Investment and Savings, Flexibility, Adjustable Life Cover, Investment Options, Transparency, Options to take additional cover against, Death due to accidents, Disability, Critical Illness, Surgeries, Liquidity and Tax Planning. The Regulator is in the process of modifying the guidelines for ULIPs so that products with high concentration of investments will be treated as mutual funds and term products if the proportion is tilted towards a greater risk. The reviewed is aimed at bringing in better information, transparency standards and understanding of such products among customers. Customers should have an idea as to what the risk and the return in the policy are when they subscribe to them. IRDA has also proposed to make it mandatory for insurance companies to issue sales of document with illustration as a part of the over all policy document. This would give an idea to policyholders about the instruments they are investing in and risks are taking. The company, in this document, will have to explain what component actually goes towards life cover and what towards investment. The Regulator has clarified that the policyholders in the unit-linked scheme could remain invested in the policy for another five years after the maturity, but could not withdraw any amount. The decision to continue with the scheme after maturity will be purely at the option of policyholders. The objective was to ensure that the insurance companies cannot act as a fund manager while it can only provide the option to the policyholder for waiting for a better NAV. The Regulator has observed that the proportion of unit linked insurance plans in the total product portfolio has gone up by 6570 per cent, which ties the fortunes of the insurance company and its investors to the vagaries of the stock market. Meanwhile, all companies are well above the solvency margin of 150%. The life insurance industry is growing at 30 per cent each year; its one of the fastest growing industries in the country. Private players have captured a sizeable chunk of the market in these six years, with the Life Insurance Corporation of Indias (LIC) share in

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the new business falling to 64 per cent. The upside includes improved service, riders with policies; unit linked insurance policies health care for as little as Rs100 per month, needfocused products with flexibility, and sales channels to suit the customers convenience. Theres a wide range of products and services competing to deliver the best value to customers, which has increased the market. Expansion coupled with a rapidly growing business is the big reason for the fresh capital infusion at regular intervals. Most private insurers have stabilized their operations in the last five years and fine-tuned their business models. Now is the time for expansion and launching their services beyond metros and big cities, to get the real benefits of mass business and exponential growth. Pension and health are two areas that have tremendous growth potential in the future. Almost 90 per cent of the people in the country have no old age benefits or health cover. New products are launched targeting niche markets. Pension products are developing in a big way, and will benefit a large section of people in the organized and unorganized sector. The annuity market has also started growing, and new players are offering a plethora of new and innovative products. Alternate channels of distribution like corporate brokers, online selling and bancassurance are increasing their share in the business of all the companies. Increasing the insurance sector FDI limit to 49 per cent is the foremost issue, to provide financial flexibility to the existing players and make the Indian market attractive for foreign investment. Also, the Fringe benefit tax (FBT) needs to be eased, especially for group products like superannuation schemes. FBT has caused this market to stagnate, and most companies have withdrawn this product, as companies find it increases their costs by more than 30 per cent. Now FBT restricted to more than Rs. 1 lakh contribution per member per year. The prospects for Indias insurance sector are good on the back of expected buoyant economic growth and rising levels of wealth in society. The new insurance companies aims to fulfill the needs of high net worth individuals, professionals, small and medium enterprises, farmers and also rural and semi-urban masses. Private insurance ventures,

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allowed to compete with state owned Life Insurance Corporation and non-life companies beginning 2000, are trying to tap expanding demand for insurance in an economy growing nine percent a year. The demand, which has seen annual premiums double to more than 20 billion dollars since 2000, is being driven by the absence of a social security system and low penetration dating back to the decades when government-owned insurers enjoyed a monopoly. The life insurance industry is close to eclipsing the mutual fund sector in terms of its total investment in equities through the success of unit-linked products. The Mutual Fund industry registered a total AUM of Rs 4.86 lakhs crores till July 2009, while the investment in equities stood at Rs 1.59 lakhs crores. As per figures compiled by the Life Insurance Council. Life insurers total investment in equities was close to Rs 1.5 lakhs crores as of March 2009, while total Assets under Management (AUM) stood at about Rs 6.1 lakhs crores. As much as 75% of investments made in ULIPs get routed to the stock markets at SBI Life. At least 60% of the funds from unit-linked products are invested in the equity market. ULIPs are sold like hot cakes but still they are under constant scrutiny. ULIPs have given Life Insurance market a big boost to grow and expend. The reason behind foreign companies making a beeline to enter the insurance business in the country is pretty obvious: Insurance in India is only 3.14 per cent of its GDP compared with the global average of 7.52 per cent. And this is expected to rise to only 4 per cent. At present, there are 22 companies providing life insurance in the country. In India, insurance is seen with an improper perspective. Insurance products are sold rather than bought, as most people do not realize that insurance is for the security and benefits of their dependants. While the objective of life insurance is to provide a lump sum amount in the eventuality of untimely death of the insured, most Indians buy insurance to save taxes. This is evident from that around 40 per cent of the insurance business of any insurer takes place in March, which marks the deadline for submission of investment details for computation of income-tax liabilities.

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CHAPTER 4 A COMPARATIVE ANALYSIS OF POTENTIAL OF LIFE INSURANCECORPORATION (LIC) AND ICICI PRUDENTIAL

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4.1 LIFE INSURANCE CORPORATION (LIC)

4.1.1 Company Profile:
Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office. LICs Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. Over 54 years, LIC has become a household name for providing security for a lifetime and is synonymous to life insurance in India. LIC ranks No.1 in the list of top 500 companies on the basis of Net Worth as well as Net Profit - Dun & Bradstreet (India 500).

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4.1.2 Mission Statement:

"Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."

4.1.3 Vision Statement:

"A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."

4.1.4 Products of LIC:

Insurance plans

Withdrawn plans

Pension plans

Products of LIC

Special plans

Unit plans

LIC provides all types of products ranging from normal insurance plans to that of ULIPs and Withdrawn plans. They offer various ranges of products to Childrens, Senior citizens, Corporate, High worth individuals, Special policies for women and even for married couples. They have different pension plans, Group schemes and even Endownment Insurance plans.
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4.1.5 Challenges before LIC:

New age companies have started their business. Some of these companies have been able to float 3 or 4 products only and some have targeted to achieve the level of 8 or 10 products. At present, these companies are not in a position to pose any challenge to LIC and all other four companies operating in general insurance sector, but if we see the quality and standards of the products which they issue, they can certainly be a challenge in future. Because the challenge in the entire environment caused by globalisation and liberalization the industry is facing the following challenges:
The existing insurer, LIC, have created a large group of dissatisfied customers due

to the poor quality of service. Hence there will be shift of large number of customers from LIC to the private insurers.
LIC may face the problem of surrender of a large number of policies, as new

insurers will woo them by offer of innovative products at lower prices.

The corporate clients under group schemes and salary savings schemes may shift

their loyalty from LIC to the private insurers.

Reaching the consumer expectations on par with foreign companies such as better

yield and much improved quality of service particularly in the area of settlement of claims, issue of new policies, transfer of the policies and revival of policies in the liberalized market is very difficult for LIC.
Intense competition from new insurers in winning the consumers by multi-

distribution channels, which will include agents, brokers, bank branches, and direct marketing through telesales and interest, is also a challenge for LIC.
Major challenges in canalizing the growth of insurance sector are product

innovation, distribution network, investment management and customer services.

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4.1.6 Potential of LIC in the Indian Insurance Industry:

LIC, in the near future has a great potential in India. It will still rule Life Insurance market in India. The market share of LIC as now is 64% which is decreasing at a huge rate. With the emergence of competition, LIC will implement strategic moves for business growth, as well as ensured quality improvement in service standards. As on today, they have been providing service to around 18 crore policy holders and their track has been well acknowledged as reflected through continual upgradation of service standards cumulating into a world class performance in the area of claim settlement operations. It is well acknowledged that LIC will be able to provide appropriate IT support in furtherance of prompt service to their valued policy holders. The complex task of conversion of computerization of all the branches with their conversion as Front Line offices has been completed in a phase manner. In addition to this, the launching of the IVRS facility and Wide Area Network operations has helped the co-operation improve its servicing. LICs Strength lies in:
Wide network of branches covering rural areas. A large and well- spread agency organization. An acknowledged record of performance. Adequate yield with high risk cover being offered keeping the policy holders

satisfied in the existing in the economic scenario.

Well accepted brand equity throughout the country.

In addition to this, LIC will establish a well administered Grievance Redressal Mechanism and Ombudsman intervention, where the customers will appear to be well attended. However, this mechanism has to be restructured keeping in view the additional legal provisions laid down by the regulator as expounded in the IRDA act.
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Till today, LIC enjoyed a monopoly. It is now that reality exists in the area of marketing (i.e. sales and after sales service operations). It will now have to follow a multi-faceted strategy towards customer retention and also expanding to a new client data base. With the new face of the market, relationship management seems to be the new mantra. At the nucleus of this approach is the concept of Customer Relationship management. The need is to have a comprehensive review of the business keeping in view customer expectations. LIC, to be in the reckoning, has to have an efficient feed-back system, so as to understand what the customer desires in terms of product design, service procedures, relationship convenience, accessibility, responses in terms of personalized service, attendance, core and complimentary on an individual basis. The new players in the market like India First Insurance, Aegon Religare etc. will definitely be very aggressive in the open market. LIC has to go ahead with their former customers, existing customer, in a very gentle and courteous manner, reassuring them of their better services with personal attention.

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4.2 ICICI PRUDENTIAL 4.2.1 Company Profile:

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank one of India's foremost financial services companies-and Prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). At present it is growing at a tremendous pace. The company has a network of about 56,000 advisors as well as 7-bancassurance and 150 corporate agent tie-ups. For the past five years, ICICI Prudential has retained its position as No. 1 private life insurance in the country, with a wide range of flexible products that meet the needs of Indian customer at every step in life. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As they grow their distribution, product range and customer base, continue to tirelessly uphold their commitment to deliver world-class financial solutions to customers all over India. ICICI Prudential has recruited and trained about 56,000 insurance advisors to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers. Today the total market share of ICICI Prudential is 9% of the total life insurance industry and the largest private sector Life insurance company in India. In June, 2009 ICICI Prudential Life Insurance has decided to snap its tie up with TTK Healthcare to settle insurance claims of its users.

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4.2.2 Vision Statement:

To be the dominant Life, Health and Pensions player built on trust by world-class people and service. Vision statement is hoped to achieve by:

Understanding the needs of customers and offering them superior products and service.

Leveraging technology to service customers quickly, efficiently and conveniently.

Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders.

Providing an enabling environment to foster growth and learning for their employees.

And above all, building transparency in all their dealings.

4.2.3 Values:
Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundaryless, Ownership, and Passion. These values shine forth in all they do, and have become the keystones of their success.

4.2.4 ICICI Group:

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4.2.5 Products offered by ICICI Prudential:

Life Insurance plans

Group plans

Products of ICICI Prudential

Pension and Retirement solutions

Health Product suite

4.2.6 Challenges before ICICI Prudential:

The biggest challenge for the company today is to understand the customer better which will enable company to design appropriate products, determine price correctly and increase profitability.

ICICI

Prudential

has

overstaffing

and

with

the

introduction

of

full

computerization, a large number of the employees will be surplus. However they cannot be retrenched. This will be a disadvantage in the competitive market, as the new insurers will operate with lean office and high technology to reduce the operating costs.

Management of claims will put strain on the financial resources of the company since it is not up the mark.

The company will have to face an acute problem of the redressal of the consumers, grievances for deficiency in products and services.

Major challenges in canalizing the growth of ICICI Prudential are product innovation, distribution network, investment management and customer services.
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4.2.7 Potential of ICICI Prudential in the Indian Insurance Industry:

ICICI Prudential with a market share of 9% has a great potential in India. In a significant move, ICICI Prudential Life Insurance - a joint venture between the ICICI group and Prudential Plc. of the UK - has expanded its marketing platform for promoting life insurance products to 1,500 banks branches from 642 branches through its existing bancassurance tie-up with seven banks. If we look at the financial performance the company has sold over 10 million policies and crossed Rs. 28,000 crore in assets held during last nine years of its operation. The company continued its strong performance with retail new business weighted premium of Rs. 6,684 crores, registering 68 per cent growth over last year. The company has tripled its branch network to 1960 branches in 1665 cities across the country including over 1000 branches in rural segments in 2009-10. The total premium income of the company jumped by 71 per cent to Rs. 13,561 crore from Rs. 7,913 crore in 2008-09. The last financial year we saw increase in their distribution network and strength their service infrastructure and continued to introduce innovative products in health, retirement and wealth creation space, has created a great potential for the company to grow in the Indian market. Further, the company having released advertising campaign through print, outdoor and radio, the company has also recently released a new advertising campaign through the electronic media for promoting their various policies. The Company recently tied up with the Forbes Six Sigma rated Dabbawalla organization in Mumbai for a direct marketing exercise. In a Unique effort to create awareness about a tax saving product, the company attached a creative of a bitten apple to Mumbais ubiquitous lunchboxes. It worked wonderfully with Mumbais office-goers and one that translated into substantial business for the company. Being a number one private life insurer with a market share of 9%, ICICI Prudential is fast emerging to serve its customers and provide excellent customer service to increase their profits and maintain their stability in the Indian market.
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4.3A COMPARATIVE ANALYSIS OF POTENTIAL OF LIC AND ICICI PRUDENTIAL

The potential of LIC and ICICI Prudential can be compared based on the following considerations:

(A) Total Premium:

(Rs. in Crores)

2008-09 LIC ICICI Prudential 127,822 7913

2009-10 149,789 13,561

(Source: www.licindia.in, www.iciciprulife.com)

The total premiums collected by LIC for the year ended 2009-10 were Rs. 149,789 crores as compared to that of ICICI Prudential was Rs 13,561 crores, is quite high. ICICI Prudential has collected more premiums if we compare with other private life insurers.

(B) Total Income:

(Rs. in Crores)

2008-09 LIC ICICI Prudential 174,425 16,860.48

2009-10 206,363 16,212.02

(Source: www.licindia.in, www.iciciprulife.com)

The total income of LIC for the year ended 2009-10 was RS. 206,363 crores as compared to that of ICICI Prudential which was Rs. 16,212 crores. All over Income is much more than of ICICI Prudential due to the fact that LIC being a government agency is being trusted by lot of companies and has large number of shares in big corporate.

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(C) Number of Branches:

2008-09 LIC ICICI Prudential 2301 1645 2009-10 2522 1960

(Source: www.licindia.in, www.iciciprulife.com)

When the matter of total number of branches comes its very much obvious that LIC, being the oldest existing insurance company in India, has the large number of offices in the country by any single insurance company. ICICI Prudential is giving tough competition to LIC in case of number of branches with continuous expansion in their business.

(D) Market Share:

2% 2% 1% 3% 3% 3% LIC ICICI PRUDENTIAL 7% 6%

9%

64%

(Source: www.irdaindia.org)

LIC is still the market leader in insurance industry with 64 % share. But we cannot forget that in last five years market share of LIC has decreased. It was 73.9 % in year 2003-04 which came down to 64 % in 2009-10.
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(E) Total Number of Policies:

2008-09 LIC
( S

2009-10 51.23 million 10.23 million

30.76 million 8.12 million

ICICI Prudential

(Source: www.licindia.in, www.iciciprulife.com)

LIC is an undoubted leader in the field of average number of policies per year in the last five years. It is seen that private insurance companies are gaining momentum and are trying to defeat LIC in case of new insurances. Main reason behind LIC having such a large number of policies is the trust of a common man. LIC being a government agency has got a faith of Indian mass. People are not yet prepared to give their savings in the hands of private players. Thus from the above facts and figures it is seen that LIC is the clear market leader in the life insurance business while ICICI Prudential is trying to compete LIC in some aspects of the business. Thus the potential of LIC in Indian Life Insurance Industry is comparatively more than six times higher than that of ICICI Prudential.

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