Chapter – 3

Research
Methodology

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 INDEX

Sr. No. Topics Pg. No.

3.1 Introduction 127

3.2 History of Insurance In India 128-130

3.3 Growth Of LIC Since 1956 Till Today 130-131

3.4 Review Of Literature 131-134

3.5 Objectives of The Study 134

3.6 Sample Size And Universe 134

3.7 Data 134

3.8 Hypothesis 134-135

3.9 Significance 135

3.10 Limitations 136

3.11 Chapter Plan 136

3.12 Next Chapter Plan 136

References

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3.1 Introduction:
Yogakshem Vahamyaham, the famous words from Lord Krishana discourses at Kurukshetra,
is the catch phrase. LIC has convincingly used all these years in its monopoly avatar as a sole
life insurers, ―Your Welfare is Our Responsibility‖, is what LIC proclaims through its catch
phrase. Ever since the Life Insurance Industries were nationalized in 1956 and the Life
Insurance Corporation born on September 1, 1956 the monopoly grew in size and stature
with every passing decade. From 57 hundred thousand policies in 1957 is some 985 thousand
by the end of the year 20013-2014. The LIC has come a long way.
Human life is a full of risk. The effective solution of reducing the burden of these risks/
losses is insurance. Insurance occupies an important position in the financial sector of an
economy. In a period of less than half century the insurance sector in a country has come in a
full circle from being an open competitive market to complete nationalization and then back
to a liberalized market. The entry of private players in the Indian insurance market has
changed the nature of competition. But LIC continuous to be the dominant life insurer even in
the liberalized scenario of Indian insurance and it moving fact on a new growth trajectory
surpassing its own past records. Insurance Regulatory and Development Authority (IRDA)
has been established to protect the interest of holders of insurance policy and to regulate,
promote and insure growth of the insurance industry. The present research work is an attempt
to study the performance of Lic after liberalization policy regime. The aim of this study is to
evaluate the financial & business performance of LIC for the years from 2009 – 10 to 2013 –
2014. This study has been divided into six parts. The First part is introductory in nature and
explains overview of the insurance sector. The Second part focuses on the Literature Review
of related study. The Third part focuses on Research Methodology of the study. The Fourth
part focuses on Data Analysis of Sum Assured and Premium Received in Various Schemes.
The Fifth part focuses on Data Analysis of Claim and Claim Settlement. While Sixth part
shows summary, findings, conclusions and suggestions for present research study.

The insurance industry in India is now open and the new players have already started
capturing the market share of the Lic. One estimate is that the LIC has loss some 18
percentage already by the end of 2009-10.

With reference to above reason, the “Researcher” has decided to go through the study of the
performance of LIC after the liberalization policy till today. Thus, researcher‘s section of

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problem is based on this issue i.e. ―Performance Evaluation of Life Insurance Corporation of
India.‖

3.2 History of Insurance in India:

The story of insurance is probably as old as the story of mankind. The same instinct that
prompts modern businessmen today to secure themselves against loss and disaster existed in
primitive men also. They too sought to avert the evil consequences of fire and flood and loss
of life and were willing to make some sort of sacrifice in order to achieve security. Though
the concept of insurance is largely a development of the recent past, particularly after the
industrial era – past few centuries – yet its beginnings date back almost 6000 years.
In India insurance has a deep rooted history. It finds mention in the writings of Manu
(Manusmrithi), Yagnavalkya (Dharmsastra) and Kautilya (Arthsastra). The writings talks in
terms of pooling of resources that could be re – distributed in times of calamities such as fire,
flood, epidemics and famine. This was probably a pre – cursor to modern day insurance.
Ancient Indian history has preserved the earlier traces of insurance in the form of marine
trade loans and carriers‘ contract. Insurance in India has evolved over time heavily drawing
from other countries, England in particular.

Life insurance in its modern form came to India from England in the year 1818. Oriental Life
Insurance Company started by Europeans in Calcutta was the first life insurance company on
Indian soil. All the insurance companies established during that period were brought up with
the purpose of looking after the needs of European community and Indian natives were not
being insured by these companies. However, later with the efforts of eminent people like
Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But
Indian lives were treated as sub – standard lives and heavy extra premium were being
charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian
life insurance company in the year 1870, and covered Indian lives at normal rates. Starting
as Indian enterprise with highly patriotic motives, insurance companies came into existence
to carry the message of insurance and social security through insurance to various sectors of
society. Bharat Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905 – 1907 gave rise to more insurance companies.
The United India in Madras, National Indian and National Insurance in Calcutta and the Co
– operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co –operative
company took its birth in one of the rooms of the Jorasanko, house of the great poet

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Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established during the same period.
This era, however, was dominated by foreign insurance offices which did good business in
India, namely Albert Life Insurance, Royal Insurance, Liverpool and London Globe
Insurance and the Indian offices were set up for hard competition from the foreign
companies.

Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, The
Life Insurance Companies Act, and The Provident Fund Act were passed. The Life insurance
Companies Act, 1912 made it necessary that the premium rate tables and periodically
valuation of companies should be certified by an actuary. But the Act discriminated between
foreign and Indian companies on many accounts, putting the Indian companies at a
disadvantage.

In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate
the life business, in 1928, the Indian Insurance Companies Act was enacted to enable the
Government to collect statistical information about both life and non – life business
transacted in India by Indian and foreign insurers including provident fund insurance
societies. In 1938, with a view to protecting the interest of the insurance public, the earlier
legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive
provisions for effective control over the activities of insurers.

The insurance Amendment Act of 1950 abolished Principle Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also
allegations of unfair trade practices. The Government of India, therefore, decided to
nationalize insurance business.

An ordinance was issued on 19th January, 1956 nationalizing the Life insurance sector and
Life Insurance Corporation came into existence in the same year. The LIC absorbed 154
Indian, 16 non – Indian insurers as also 75 provident societies – 245 Indian and foreign
insurers in all. The LIC had monopoly till the late 90s when the insurance sector was
reopened to the private sector.

This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re –opening of the sector has begun in the early 1990s and the last

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decade and more has seen it been opened up substantially. In 1993, the Government set up a
committee under the chairmanship of R N Malhotra, former Governor of Reserve Bank of
India, to propose recommendations for reforms in the insurance sector. The objective was to
complement the reforms initiated in the financial sector. The committee submitted its report
in 1994 wherein, among other things, it recommended that the private sector be permitted to
enter the insurance industry. They stated that foreign companies should be allowed to enter
by floating Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body
in April, 2000. The key objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and lower premiums, while
ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The authority has the
power to frame regulations under section 114A of the insurance Act, 1938 and has from 2000
onwards framed various regulations ranging from registration of companies for carrying on
insurance business to protection of policyholders‟ interest.

The insurance sector is a colossal one and is growing at a speedy rate of 15 – 20%. Together
with banking services, insurance services add about 7% to the country‘s GDP. A well
developed and evolved insurance sector is a boon for economic development as it provides
long – term funds for infrastructure development at the same time strengthening the risk
taking ability of the country.

3.3 Growth of LIC since 1956 till Today:

LIC had 5 Zonal Offices, 33 Divisional Offices and 212 Branch offices, apart from its
corporate office in the year 1956. Since life insurance contracts are long term contracts and
during the currency of the policy it requires a variety of services need was felt in the later
years to expand the operations and place a branch office at each district headquarter. Re –
organisation of LIC took place and large numbers of new branch offices were opened. As a
result of re – organisation servicing functions were transferred to the branches, and branches
were made accounting units. It worked wonders with the performance of the corporation. It

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may be seen that from about 200 crores of new business in 1957 the corporation crossed
1000 crores only in the year 1969 – 70, and it took only 10 years for LIC to cross 2000
crores mark of new business. But with the re – organisation happening in the early eighties,
by 1985 – 86 Lic had already crossed 7000 crores Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8
zonal offices, 992 Satellite offices and the corporate office. LIC‘s Wide Area Network covers
109 divisional offices and connects all the branches through a Metro Area Network. LIC has
tied up with some Banks and Service providers to offer on – line premium collection facility
in selected cities. LIC‘s ECS and ATM premium payment facility is an addition to customer
convenience. Apart from on – line Kiosks and IVRS, Info Centers have been commissioned at
Mumbai, Ahmedabad, Bangalore (now Bengaluru), 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 continuous 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 oven one crore policies during the current year. It has crossed the milestone of
issuing 1, 01, 32, 955 new policies by 15th October, 2005, posting a healthy growth rate of
16.67% over the corresponding period of the previous year.

3.4 Review of Literature:

Mr. J. Hari Narayan, Chairman, IRDA emphasized on working of insurance sector and
particularly the working of Life Insurance Corporation of India in the conference organized
by Insurance Institute of India, Mumbai on ‗Back to the Basics of Insurance‘ held on 27th
January, 2012 at Mumbai.

Mr. Adam Hamm, NAIC Vice President & Commissioner, North Dakota Insurance viewed in
IRDA Journal February 2012, Volume X, no: 2 that “According to our survey, more than 2/3
of consumers don‟t know some types of life insurance including a cash value and nearly a
half don‟t think of life insurance as an investment option. At this stage LIC has to concentrate
on this area as its infrastructure and manpower is the best.”

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Mr. H. Sadhak, in his book ―Life Insurance in India: Opportunities, challenges and strategic
Prospective‖ Sage Publications Pvt. Ltd. 19/05/2009 (416 pages) ISBN: 8178298465 has
focused on structural change, market potential and emerging challenges for the Indian life
insurance industry and also covered the global life insurance industry, regulatory regime and
market friendly practices abroad. Thus it provides a powerful insight into emerging trends in
the life insurance industry as a whole.

Business Today. ―The Monitory Group Study on Insurance I and II.‖ 22/3/2000 and
7/4/2000. An article emphasized on monitory working of different insurance companies and
in that it is stated that working of Life Insurance Corporation is highly affected due to large
numbers of policies introduced by the corporation and it can be solved through proper
evaluation of policies and reducing the numbers of least earning policies.

Vaswati Kumari, ―India Insurers Seek Perfect Partners.‖ National Underwriters, March 5,
2001, pg 33 – 38 has mainly emphasized on financial and managerial structures of insurance
sector but she has also stated in her book that, “…. Like other sectors government can also
rethink about structure of LIC of India as its financial and managerial capacity is greater than
any other corporation.”

Abhijit Roy, ―Pension Fund Business in India.‖ The Hindu, July 16, 1997, pg – 25, has
written mainly about pension funds of different insurance sectors and government pension
plans. In his article he stated that due to large capital structure and work base Life Insurance
sector succeeded in pension plan…” which reflect greater working efficiency of LIC.

Samit Roy, ―Insurance Sector: India.‖ Industry Sector Analysis, National Trade and
Development Board, Us Department of State, Washington, DC, December 1999, has
discussed a lot about why Life Insurance Corporation of India is still leading in India. He has
also give reasons for the success of LIC and even gave some suggestion to improve few
deficiencies of the corporation.

Performance of various plans marketed by Life Insurance of India – A case Study of Rajkot
division, a dissertation by Mrs. Sonal Naina evaluates the operating efficiency of Rajkot
division with different plans in Saurashtra University. She tried to find out which type of
policies is sold more than others and their reasons.

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Dr. P. Pariasamy, ―Principles and Practices of Insurance‖ Himalya Publishing House. This
book provides details on coverage of risk management, general insurance, life insurance, fire
insurance and marine insurance in a comprehensive way.

―Need for Change‖ Mr. Sandeep Batra, IRDA Journal, February 2004, has focused on
proposed amendments and progress of Life Insurance in India. He has covered the effects of
the changes in the Laws on insurance industry.

The researcher is registered active member of “www.authorstream.com” which is well known

site for projects and research work. One can become member of the site when he/she submits
at least one paper or PDF presentations. Lot of research work like policies, management,
plans, investment etc is done in the field of Life Insurance Corporation of India on this site.

Charter Financial Analyst – February – 2003 has a special survey of insurance sector. Issue
covers many articles such as ―A high growth Market‖, ―New Distribution Channels‖,
―Customer Focus‖, and ―Legal Issues.‖

Dr. A. N. Agrawal has written a book, ―Insurance in India – A Study of Insurance Aspect of
Social Security in India.‖ This has published by Allahabad Law General Press. He has
covered history of insurance sector of India and legal aspects of insurance.

Mr. N. D. Gupta has written an article named, ―Insurance – A Booming Professional

Opportunity‖, in the Charted Accountant Journal – June – 2003. He provides information on
history of insurance, evolution or present Indian Insurance Industries and professional
opportunity in insurance.

Roshani Jaykar has written an article named, ―Covering life‖ in Business Today – June –
2003. She has focused on, How Private Life Insurer take market share away from yesterday‟s
monopolists.

Dr. M. N. Mishra (Department of Commerce, Banaras Hindu University, Varanasi) has

written a book titled, ―Law of Insurance‖ (1977). IT is published by Central Law Agency
Allahabad, in his book he has mainly emphasized on condition of LIC, essentials of LIC and
different insurance Acts in detail.

Researcher has collected various significant informations about private and public companies
and their financial data, legal aspects and latest reforms in insurance industries of India from

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the different web sites like, www.irdaindia.com, www.bimaonline.com,
www.indiainfoonline.com, www.google.com, and its search engines.

3.5 Objectives of the Study:

1. To know working aspects of LIC

2. To evaluate the various aspects related to insurance business like sum assured,
Premium received, Claim, Claim settlement etc.
3. To understand the organisational structure of LIC.
4. To refer problem and challenges before LIC.
5. To suggest the better option for managerial requirement.

3.6 Sample Size and Universe:

As it is suggested in title of the study, LIC is only PSU for insurance business so this is
universe of study. Hence further sampling is not required.

3.7 Data:
Researcher has decided to take secondary data from various published information sources.
Further collected data would be tabulated as per the objectives and need of the study, in
addition to this; this data would be tested as per need of the study like average, percentages,
ANOVA and time series analysis.

3.8 Hypothesis:
As per the objectives if the study following hypothesis would be formulated:

Ho: 1.There would be no significant difference in main score of Sum Assured by the LIC
during the period of study.

Ho: 2.There would be no significant difference in main score of Premium Received by the
LIC during the period of study.

Ho: 3.There would be no significant difference in main score of Total Claim by the LIC
during the period of study.

Ho: 4.There would be no significant difference in main score of Claim Settlement by the LIC
during the period of study.

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Ho: 5.There would be no significant difference in main score of Claim Pending by the LIC
during the period of study.

Ho: 6.There is no significant difference in the growth of Total Income during the
period of study.

Ho: 7.There is no significant difference in the growth of Total Outgo during the period
of study.

Ho: 8.There is no significant difference in the trends of growth of Business in force in India
(Individual Insurance) – Premium Income during the period of study.

Ho: 9.There is no significant difference in the growth of Life Insurance Fund during
the period of study.

Ho: 10.There is no significant difference in the trends of growth of Business in force in India
(Individual Insurance) – Number of Policies during the period of study.

Ho: 11.There is no significant difference in the trends of growth of Business in force in India
(Individual Insurance) – Sum Assured during the period of study.

Ho: 12. There would be no significant difference in total income by the LIC during the period
1996-2006 and 2006-2014.

In addition to this, required hypothesis will be arranged on the basis of nature of data.

3.9 Significance:

1. The present research will be able to find out the working of LIC and will be able to
provide a guide to proposed clients in LIC regarding their investment/risk cover plans.

2. This research would help LIC in introducing new types of insurance cover, how to
extend services of LIC to smaller places, how the message of LIC should made more
popular etc as research work includes all these topics directly or indirectly.

3. This would help to increase organisational and operational efficiency of LIC.

4. This research would help LIC to 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, as it
includes deep analysis and evaluation of all types of policies introduced by LIC.
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3.10. Limitations:

1. Limitations of secondary data will be remaining with the study.

2. As the present study do not take the policy quality, recruitment of D.O., A.D.O., Agents
etc, name/brand image of LIC and other aspects of LIC management, the study cannot
be generalized one and there is further scope for other researchers as India‟s booming
population, currently 1.2 billion and increasing at a 2% annual rate. By 2030, India is
expected to surpass China as the world‟s most populous nation. By 2050, the
population is projected to reach 1.6 billion, there is a grave need to concentrate on
India‟s Insurance sector particularly LIC.

3.11. Chapter Plan:

1. Overview of Insurance and LIC

2. Literature Review

3. Research Methodology

4. Data Analysis of Sum Assured and Premium Received in Various Schemes

5. Data Analysis of Claim and Claim Settlement.

6. Summary, Findings, Suggestions.

3.12 Next Chapter Plan:

Chapter – 4

Performance Evaluation of Life Insurance Corporation of India

4.1 Introduction
4.2 Analysis of Total Income
4.3 Analysis of Total Outgo
4.4 Ratio of Total Outgo to Total Income
4.5 Analysis of Composition of Income
4.6 Analysis of Net Retention Ratio
4.7 Analysis of Life Insurance Fund

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4.8 Analysis of Total Investment of LIC in India
4.9 Analysis of Ratio of Single Premium Income (Growth in Percentage)
4.10 Analysis of Benefits Paid
4.11 Analysis of Claim Settlement
4.12 Analysis of Sum Assured
4.13 Analysis of Total Premium Received
4.14 Next Chapter Plan

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 REFERENCES:

1. Dr. M. N. Mishra (Department of Commerce, Banaras Hindu University, Varanasi)

has written a book titled, “Law of Insurance” (1977). IT is published by Central Law
Agency Allahabad.
2. Abhijit Roy, “Pension Fund Business in India.” The Hindu, July 16, 1997, pg – 25.
3. Samit Roy, “Insurance Sector: India.” Industry Sector Analysis, National Trade and
Development Board, Us Department of State, Washington, DC, December 1999.
4. Business Today. “The Monitory Group Study on Insurance I and II.” 22/3/2000 and
7/4/2000.
5. Vaswati Kumari, “India Insurers Seek Perfect Partners.” National Underwriters,
March 5, 2001, pg 33 – 38.
6. Mr. N. D. Gupta has written an article named, “Insurance – A Booming Professional
Opportunity”, in the Charted Accountant Journal – June – 2003.
7. Roshani Jaykar has written an article named, “Covering life” in Business Today –
June – 2003.
8. Charter Financial Analyst – February – 2003.
9. “Need for Change” Mr. Sandeep Batra, IRDA Journal, February 2004.
10. Mr. H. Sadhak, in his book “Life Insurance in India: Opportunities, Challenges and
Strategic Prospective”. Sage Publication House Pvt. Ltd. 19/05/2009.
11. Mr. J. Hari Narayan, Chairman, IRDA, on „Back to the Basics of Insurance‟ held on
27th January, 2012 at Mumbai.
12. Mr. Adam Hamm, NAIC Vice President and Commissioner, North Dakota Insurance
viewed in IRDA Journal February 2012, Volume X no: 2.
13. Performance of various plans marketed by Life Insurance of India – A case Study of
Rajkot division, a dissertation by Mrs. Sonal Naina.
14. Dr. P. Pariasamy, “Principles and Practices of Insurance” Himalya Publishing House.
15. Dr. A. N. Agrawal has written a book, “Insurance in India – A Study of Insurance
Aspect of Social Security in India.”
16. www.irdaindia.com, www.bimaonline.com, www.indiainfoonline.com,
www.authorstream.com, www.google.com, and its search engines.

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