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EXAM Roll No: 011603CM011
ROLL NO: BC-16-297



This is to certify that we have examined the project entitled “COMPARATIVE

ABHIJIT PANDA, Roll No-011603CM011. I hereby accord our manner required for
its acceptance for the partial fulfillment of the degree of Bachelor of Commerce of
Khallikote University, Berhampur during the academic year 2018-2019.

This is a record of the candidate own work carried out by her under my/our
supervision. The matter embodied in this project is original and has not been submitted
for the award of any other degree.

Signature of HOD Signature of External Signature of Guide


I do hereby declare that I have undergone a project on “COMPARATIVE

Khallikote University, under the guidance of Mrs. ANNAPURNA SAHOO, UG
Department of Commerce, Khallikote University, Berhampur.
I submit this report in partial fulfillment of the requirement for the Bachelor of
Commerce (B.COM) from Khallikote University, Berhampur. The report is
exclusively & comprehensively prepared & conceptualized by me. All the information
& data given here in this project are collected during my study from various sources &
it has not been published anywhere before.

Roll No: 011603CM011
UG Department of Commerce

This work was completed due to the grace of almighty god. I am highly
indebted to god that he has given the strength and encouragement to complete this
work and hope his blessings will continue to be showered on me so that I can achieve
the goal of my life.

I avail this opportunity to place my profound gratitude to my guide Mrs.

ANNAPURNA SAHOO, UG Department of Commerce for her constant
supervision, inspiration and encouragement, right from the beginning of the project. I
am also thankful for her help and valuable suggestion in completion of this project.

Finally, I would like to extend my sincere thanks to all staffs department of

commerce and all those persons who have rendered their valuable help directly or
indirectly in the completion of this project.

Roll No.011603CM011
UG Department of Commerce

Chapter Name Page No

 Certificate
 Declaration

 Acknowledgement

 Abstract

 CHAPTER 1:Introduction


1.2: Objectives of the study

 CHAPTER 2 : Market Structure
2.1 Market Structure
 CHAPTER 3 :Review of Literature
3.1 Review of Literature
 CHAPTER 4 : Research and Methodology
4.1 Research and Methodology
4.2 Research Statement
4.3 Research Design
4.4 Objective of The Study
i) Primary Objective
ii) Secondary Objective

4.5 Data Collection Techniques

4.6 Sample Selection

 CHAPTER5:Data analysis and interpretation

 CHAPTER 6 : Conclusion

6.1 Strengths/Opportunities of Insurance Industry

6.2 Weakness/Challenges of Insurance Industry

6.3 Suggestions

6.4 LIC Challenges

6.5 Customer Education

6.6 Product Innovation

6.7 Distribution Network

6.8 Foreign Direct Investment

6.9 Role of IRDA

6.10 Information Technology

6.11 Quality Service

7.1 Bibliography

1.1 Introduction

India is one of the fastest growing economies of the world. It is now Asia’s third
largest economy. The insurance industry has contributed in India’s growth story in
recent years. The contour of insurance business has been changing across the globe and
the rippling effect of the same can be observed in the Indian market as well as
insurance industry is a growth oriented industry. In India too, the industry has started to
reveal the potential after liberalization and privatization of the sector. The topic
basically revolves around the life insurance sector which has been recently opened for
the private players. LIC has for a long period of time has enjoyed a dominant market of
life insurance and the fact cannot be denied that LIC has a pre accomplished market
leadership which makes it difficult for the new players to compete.
While the new players struggle to increase their market in India, LIC continue to
leverage advantage of its old establishment and government support for maintaining its
growth. Life Insurance is the fastest growing sector in India since 2000 as Government
allowed Private players and FDI up to 26%. Life Insurance in India was nationalized by
incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance
companies at that time were taken over by LIC. In 1993 the Government of Republic of
India appointed RN Malhotra Committee to lay down a road map for privatization of the
life insurance sector. While the committee submitted its report in 1994, it took another
six years before the enabling legislation was passed in the year 2000, legislation
amending the Insurance Act of 1938 and legislating the Insurance Regulatory and
Development Authority Act of 2000. The same year that the newly appointed insurance
regulator Insurance Regulatory and Development Authority IRDA started issuing
licenses to private life insurers. Insurance is an upcoming sector. In India the year 2000
was a landmark year for life insurance industry, in this year the life insurance industry

was liberalized after more than fifty years.

Insurance sector was once a monopoly, with LIC as the only company, a public
sector enterprise. But now a day the market opened up and there many private players
competing in the market. There are twenty four (annual report 2012-13 issued by IRDA)
Private life Insurance companies entered in the industry. After the entry of these private
players, the market share of LIC has been considerably reduced. For the past some year’s
private players have launched many innovations in the industry in terms of products,
market channels and advertisement of products, agent training and customer services etc.
Life Insurance in its modern form came to India from England in the year 1818. Oriental
Life Insurance Company stated 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 being treated as sub-standard lives and heavy
extra premiums were being changed 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 Hindustan Co-operative Insurance
Company took its birth in one of the rooms of the Jorasanko, house of the great poet
Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and
Swadeshi Life (later Bombay Life) were some of the companies established during the
same period. 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 periodical valuations 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.

The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in force as Rs. 22.44 crore, it rose to 176
companies with total business-in-force as Rs. 298 crore in 1938. During the mushrooming
of insurance companies many financially unsound concerns were also floated which failed
miserably. The Insurance Act 1938 was the first legislation governing not only life
insurance but also non-life insurance to provide strict state control over insurance business.
The demand for nationalization of life insurance industry was made repeatedly in the past
but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was
introduced in the Legislative Assembly. However, it was much later on the 19th of January,
1956, that life insurance in India was nationalized. About 154 Indian insurance companies,
16 non-Indian companies and 75 provident were operating in India at the time of
nationalization, nationalization was accomplished in two stages; initially the management
of the companies was taken over by means of an Ordinance, and later, the ownership too
by means of a comprehensive bill. The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the 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.

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-
organization of LIC took place and large numbers of new branch offices were opened. As
a result of re-organization servicing functions were transferred to the branches, and
branches were made accounting units. It worked wonders with the performance of the
corporation. It may be seen that from about 200.00 crores of New Business in 1957 the
corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years
for LIC to cross 2000.00 crore mark of new business. But with re-organization happening
in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on
new policies.

Today LIC functions with 2048 fully computerized branch offices, 100 divisional
offices, 7 zonal offices and the corporate office. LIC’s 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. 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, Ahmadabad, 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. It has crossed the
milestone of issuing 1,01,32,955 new policies by 15 th Oct, 2018, posting a healthy growth
rate of 16.67% over the corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented
performance records in various aspects of life insurance business. The same motives which
inspired our forefathers to bring insurance into existence in this country inspire us at LIC
to take this message of protection to light the lamps of security in as many homes as
possible and to help the people in providing security to their families.

Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company
started its business.

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 are taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British


 Spread Life Insurance widely and in particular to the rural areas and to the socially and
economically backward classes with a view to reaching all insurable persons in the
country and providing them adequate financial cover against death at a reasonable cost.

 Maximize mobilization of people’ savings by making insurance-linked savings

adequately attractive.

 Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community as a
whole; the funds to be deployed to the best advantage of the investors as well as the
community as a whole, keeping in view national priorities and obligations of attractive

 Conduct business with utmost economy and with the full realization that moneys
belong to the policyholders.

 Act as trustees of the insured public in their individual and collective capacities.

 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.

 Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with

 Promote amongst all agent and employees of the corporation a sense of participation,
pride and job towards achievement of Corporate objective.

2.1 Market Structure

It is important to understand the market structure of life insurance sector.

LIC as a dominant player has gained an increase of 88% in new business premium
income. Despite of uncertain environment, total premium of Life Insurance
industry increase by 66% to Rs 62,361.34 crore in first six months of the current
fiscal from Rs 39,046.59 crore in same period last fiscal. In 2018, life insurance
companies witnessed new business premium collecting during first five months.
According to LIC‘s recent filing with IRDA the total value of its investments from
policy holders funds, as at June 30 2018, stood at Rs 867,935 crore as agencies Rs.
717,002 crore on June,2018, the value of investments in equity share has become
183,233 crore. Public sector Life Insurance Corporation of India (LIC) has clocked
a robust 72.53 per cent jump in fresh premium collection in January 2018 leaving
behind major private sector players, most of whom have posted negative growth in
the month as compared to January 2017. Data released by insurance sector
regulator IRDA shows that the first year premium of the life insurers for the period
of December, 2017 is again predominantly in favors of LIC. Herein mentioned are
some statistics given by IRDA regarding the individual single premium of several
life insurers in December 2018:-

1. Bajaj Allianz - 77.26crore

2. ING vyasa - 2.58crore

3. Reliance Life - 80.26 crore

4. SBI life - 248.54crore

5. Tata AIG - 14.02 crore

6. HDFC standard - 136.72crore

7. ICICI prudential - 251.97crore

8. Birla Sun life - 9.73crore

9. Aviva - 21.57crore

10. Max New York - 25.15crore

11. IDBI federal - 21.11crore

12. Star Union Dai-ichi - 44.98crore

13. LIC - 1774.43crore

Fig: - market split up of private life insurers only excluding LIC

These are some top companies and their premium collected in December
2018 which clearly depicts that LIC has lucrative market dominance and other
private players have a small market share. Such figures explain that LIC is a
dominant entity and can influence competition in market negatively due to the
regulation of the regulatory body and the government.

3.1 Review of Literature

This project reviews empirical research conducted in Strategic sectors such

as the banking and the financial sector were reformed. Time had come for the
policymakers to introspect the current policies in the Indian insurance industry as
well. Committees on insurance sector reforms followed suit and it was found that
India had continued to be one of the least insured countries till the late 20th
century. Experts emphasized that customer service, insurance coverage, allocation
of resources needed to be improved within the industry. Also more innovative
products were needed to suit varied customer needs and to change opinion of
people towards insurance, from tax exemption product to a tool for mitigating risks
and increasing savings. Thus it was recommended that the industry should be
opened up to enhance competition and autonomy be given to insurance companies
to improve their performance and enable them to act as independent companies
with economic motives. Thus the life insurance industry was liberalized with the
aim of increasing contribution to the GDP and to the society.

Life insurance traces its origins in India to the early nineteenth century when
companies in India insured the lives of Europeans living here. Eventually these
companies began to cover Indians as well but required them to pay higher
premiums. Regulations were passed to regulate the Indian insurers (but not the
foreign companies providing insurance services in India) and to allow collection of
information about insurance companies thus facilitating comparison amongst them.
However the legislations became insignificant with time and the government
nationalized the sector by combining all the 154 Indian private insurance
companies to give birth to one behemoth the Life Insurance Corporation of India.
Through this the Government strived to put an end to prevalent malpractices such
as poor Servicing standards along with the appalling management of companies
wherein funds were simply being divested to all types of securities without any
valuation of the borrowers. The Government took over the reins of the industry in
its own hands reasoning that insurance was a cooperative enterprise and should be
within the purview of the state in order to provide improved services to the public
at lower costs. It was also envisioned that the nationalization of this sector would
lead to more effective mobilization of funds to enable capital to be allocated to
development projects. Besides the charter of freedom also pleaded the control of
the state on key industries such as banking and insurance. Thus the industry was
transformed from a competitive one to a highly regulated monopoly.

4.1 Research methodology

The core concept underlying research is its methodology. The methodology controls the
study, dictates the acquisition of the data, and arranges them in logical relationships, sets
up a means of refining the raw data, contrives an approach so that the meanings that lie
below the surface of those data become manifest, and finally issue a conclusion or series
of conclusions that lead to an expansion of knowledge. The entire process is a unified
effort as well as an appreciation of its component parts.

According to J.W.B. est, “Research is considered to be formal, systematic,

intensive process of carrying on the scientific method of analysis. It involves a more
systematic structure of investigation usually resulting in some sort of formal record of
procedures and report of result or conclusions.”

According to P.M. Cook, “Research is an honest, exhaustive, intelligent searching

for facts and their meanings or implications with reference to a given problem. It is the
process of arriving at dependable solutions to problem through planned and systematic
collection, analysis and interpretation of data. The best research is that which is reliable,
verifiable and exhaustive so that it provides information in which we have confidence.”

The study will be carried on making content analysis from the data collected
from various secondary sources such as annual reports of insurance companies,
Insurance Regulatory Development Authority (IRDA) journal, and insurance
journal. The statistical tools used in the study will be descriptive statistics,
percentage analysis, growth trends. The hypothesis of the study is that there is no
difference in the growth and performance between the public and private firm in
insurance industry. The study is explorative, descriptive and empirical in nature.

4.2 Research statement
The research statement studied is entitled, “A comparative study of Life
Insurance Corporation of India and Private Life Insurance Companies in India”.
The present study focuses on the analysis of the performance of public.
4.3 Research Design
A Research design is a plan of action to be carried out in connection with a
research project. It is the conceptual structure within which research is conducted
and it constitutes the blue print for the collection, measurement and analysis of
data. It is the specification of methods and procedures for acquiring the
information needed for solving the problem. Decisions regarding what, where,
when, how much, by what means concerning an inquiry or a research study
constitute a research design.

4.4 Objective of the Study

(A) Primary Objective
1. To compare the relative effectiveness/ acceptance/ satisfaction of

2. To study the consumer behavior and investment pattern towards life insurance.

(B) Secondary objective:

1. To find out the current market scenario & current market standing of our

2. To provide the suggestion & recommendation to the company.

3. Data Sources

The data collection process was carried out in various stages. These stages can be
clubbed two major heads.
Primary source- survey:
A random survey was carried out according to my convenience while going
out to contact the respondents. The different employees of government offices,
private offices & different business houses were kept in mind.
Secondary Sources:
Internal: Company’s Prospectus
External: books, Magazines, Journal’s
4.5 Data collection techniques
The data was collected through open and closed ended questionnaire, in which
question were asked in a logical order. Each question has a specific meaning. The
data analysis is bases on the data collected through these questions.

Sample design
(A) Target Population or Sampling Unit

The universe for the research is Goregaon East Area

(B) Sample Size

The sample size taken for the study is 30 respondents.

(C) Sample Procedure

Sample procedure used in the project is non probability sampling. The

required information was collected through convenience and judgmental sampling.
4.6 Sample Selection
Some private and public sector life insurance companies in India from 2016 -17to 2018-
19 were selected for the study.
The companies selected for the research work are as follows:
(a) Public Sector:
Life Insurance Corporation of India.
(b) Private Sector:
1. HDFC Standard Life Insurance Co. Ltd.
2. Max New York Life Insurance Co. Ltd.
3. ICICI Prudential Life Insurance Co. Ltd.
4. Kotak Mahindra Life Insurance Co. Ltd.
5. Birla Sun Life Insurance Co. Ltd.

6. TATA AIG Life Insurance Co. Ltd.
7. SBI Life Insurance Co. Ltd.
8. ING Vysya Life Insurance Co. Ltd.
9. Bajaj Allianz Life Insurance Co. Ltd.
10. Met Life India Life Insurance Co. Ltd.
11. Reliance Life Insurance Co. Ltd.
12. Aviva Life Insurance Co. Ltd.
13. Future Generali India Life Insurance Co. Ltd.
14. IDBI Fortis Life Insurance Co. Ltd
15. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.

Data Analysis and interpretation
1. General Information about the Person

a. Name of the person

b. Educational background of the person

c. Age of the person

d. Information about policy taken by the person

Table -1: age of the respondent

between Persons
20-25 5
26-30 12
30-35 11
Above 35 2
Total 30



Table: 2 Qualification of respondents

Persons Education
7 H.S.C.
12 Graduate
2 Post Graduate
9 professional




According to the Question I asked the selected 30 people about their

name and general information about the policy is taken by the respondent
numbers of policy take small and their educational background.

2. Have you taken a life insurance policy? If yes, how many policies have
you taken? In numbers
Table 2: policy taken by the respondents

Person Numbers of Policy taken

7 4
4 3
11 2
8 1

Numbers of Policy taken

8 7


According to this question I found all the 30 peoples have the insurance
policy. As shown in diagram, 7 peoples have more than 4 numbers of policies
and 8 respondents have only 1 policy.

Why did you take them? Is it due to?

Table 3: reason for taking the policy

Reasons Persons
Agents force 5
for effective savings 14
To meet future expected 8
To meet contingencies. 3
Any other 0

Agentsforce foreffective Tomeetfuture To meet Any other
savings expected contingencies.

Many respondents gave answer for above question that insurance

policy is for effective savings and to meet there future expected
3. Do you know that insurance aims at covering risk and also a means of
Table 4: aim of taking the policy

Reason Persons

Covering risk 7

Investment 5

Both 18




Covering risk

0 5 10 15 20

The above diagram clearly shows that 18 persons said that insurances policy
aims at covering risk as well as the investment purpose.
4. Do you feel that the premiums paid in private life insurance companies are
Table 5: safety of premium paid

Ans. Persons

YES 11

NO 19

The respondent was little bit confuse about the premiums paid to
private life insurance companies is safe or not.


5. Do you think that the safety of the investments made in life insurance
companies and other private insurance companies shall be protected by
the regulatory body, i.e. IRDA

Table 6: knowledge about IRDA

Ans. Persons

YES 27

NO 3




The respondent was aware about the IRDA because of the ads on
television except 3 people.

6. Do you know that different life insurance companies have designed
policies for your different needs like children education, marriage of
the daughter, retirement needs etc.

Table 7: knowledge about different type of policies

Ans. Persons

YES 22

NO 8





For the above question I get the positive answers from the
respondent because more than 10 respondents have policies regarding
children education and others respondent also have policies regarding
daughter’s marriage and meet expenses of retirement needs.

7. Do you think that SBI Life Insurance Company is a private
company like ICICI of India?
Table 8: about SBI life insurance company

Ans. Persons

YES 30

NO 0




The respondent is known that SBI life Insurance Company is

government owned company like LIC of India. But the respondent said the
LIC is more trust insurance company than SBI.

8. Where do you invest your saving?

Table 9: saving your investment

Life insurance company 7
Private insurance Company 6
Post Office deposit 2
Bank deposit 6
Gold/Shares/Mutual fund 8
Real estate 1

1 Life insurance
7 company
8 Private insurance

6 Bankdeposit

2 Gold/Shares/Mutu
al fund

Many respondents gave very positive and interesting answers to this

question, as shown in diagram about 11 respondents were already invests
their savings in the different insurance policies and 8 respondent invest
their saving in the share market. The other 8 respondents invest their
savings in post office deposits and bank fixed deposits and 1 respondent
invest their savings in real estate.

9. Did you find any difficulty in effecting corrections in policy, viz
change of nomination, address change etc?

Table 10: effectiveness of insurance policy

Ans. LIC Private

YES 26 30

NO 4 0




15 NO


LIC Private

The above question shows that the respondent is not satisfied with
the services by the LIC whereas, respondent said the private insurances
companies are very effective in their services to the customer.


6.1 Strengths/Opportunities of Insurance Industry

The intense competition brought about by deregulation has encouraged the
industry to innovate in all areas; from underwriting, marketing, policy holder servicing
to record-keeping.
The existence of stringent licensing requirements ensures that only adequately
capitalized and professionally managed companies are eligible to carry out insurance
and reinsurance.

The Insurance Regulatory Development Authority of India’s (IRDA) emphasis on

quarterly reporting/monitoring of insurer solvency has enhanced capital adequacy and

Aggressive marketing strategies by private sector insurers will buoy consumer

awareness of risk and expand the markets for products.

Competition in a deregulated environment will allow market forces to set

premiums that are appropriate for exposure and push insurers to differentiate their
products and services.

Innovations in distribution and improvements in market penetration will follow as

public and private insurers compete to market their products. Allowing insurers to issue
their own policy wordings and set their own rates will enable underwriters to tailor
products to meet client needs.

Range of available products will increase because foreign companies bring with
them wide range of products and product development expertise.
Licensed brokers are very much part of the intermediary structure and only
those with adequate capital, professional experience and expertise will be licensed by
IRDA. Capital structure of entire insurance industry will improve as foreign companies
bring fresh capital with them. Market efficiency will improve due to information
dissemination, global operating knowledge and increased competition. Management
efficiency will increase because foreign companies bring with them global experience
and management innovation.

Customers’ service will improve competition which will finally benefit the consumers.

Globalization will also improve Regulatory and Governance system. It will also
improve market conduct and Ethical Business Standard.

6.2 Weaknesses/Challenges of Insurance Industry

Premiums rates will remain under pressure due to intense competition on more
profitable lines. Falling premium income without a corresponding reduction in claims
is likely to drive down profits.

Public and private sector insurers’ greater reliance on their investment portfolios
to generate sufficient income and gains for net profits would subject them to the
volatility of the financial markets.

Private insurers need to raise more capital otherwise growth could be constrained

since reliance on reinsurance for capital relief is not always viable or available.
Traditional distribution channels, especially tied agents, need to improve to
match the new product offerings.
There is general lack of transparency as financial and operational data for insurers are
not readily available as none of India’s insurers are directly listed on stock exchanges.

Like all developing economies on a fast track, the shortage of trained insurance
professionals and technicians at all levels cannot be remedied in the short term.

Natural catastrophes will always be present; the Indian sub-continent is vulnerable to

cyclones, floods, hurricanes and earthquakes, and until there is a national capacity
(similar to the terrorism pool) to manage losses, dependence on overseas reinsurers will

6.3 Suggestions

The life insurance density of India was 9.1 percent in the year 2017-18when the private
sector was opened up. It increased to 52.2 percent in. India’s life insurance density is
very low as compared to the developed countries and developing countries, inspite of
India being the second most populous country in the world. This shows that there is
much scope for life insurance sector to develop in India.

The life insurance penetration of India was 2.15 percent in the year 2014- 15when the
private sector was opened up. It increased to 4.90 percent in 2017-18.Since opening up
of Indian Insurance sector for private participation, India has reported an increase in
both life insurance density and penetration. But compared to UK, France, South Korea,
Japan and South Africa, India is way behind. Among developing countries, it stands

second to South Africa. There is much scope for the life insurance sector to develop in
India. The prediction of new business and total premium for both private and public
sector life insurance companies in India for the year 2018 also shows an upward trend
which signifies that there is a lot of scope for life insurance business in India.
For over a century, the United States has been the largest economy in the world but
major developments have taken place in the world economy since then, leading to the
shift of focus from the US and the rich countries of Europe to the two Asian giants India
and China. Economic experts and various studies conducted across the globe envisage
India and China to rule the world in the 21st century. India, which is now the fourth
largest economy in terms of purchasing power parity, may overtake Japan and become
third major economic power within 10 years. Life insurance will grow very rapidly over
the next decades in India. The major drivers include sound economic fundamentals, a
rising middle-income class, an improving regulatory framework and rising risk

6.4 LIC’s Challenges

India opened its insurance market to the private sector in 1999 when Parliament passed
a new law establishing an independent regulatory body to oversee the insurance market.
The law opened the door for participation of private insurance companies and a limited
participation of foreign insurance companies through joint ventures with Indian
companies. Since then, the life insurance markets have grown impressively. Since1999,
IRDA has licensed 22 new private Indian insurance companies, who have global
insurance companies as their partners. Due to globalization of financial services and
liberalization of economy, the Life Insurance Corporation of India has been facing
intense competition from the new entrants. The new private players with their

aggressive penetration strategies are creating insurance consciousness in the minds of a
wide cross-section of customers. The twenty-two private insurers in the life insurance
market have already grabbed nearly 30 percent of the market in terms of premium
income. The new business premium of the twenty two private players was 34.92
percent Meanwhile, LIC's new premium business has fallen from 99.93% in 2010-11 to
65.08% in 2017-18. Unless Life Insurance Corporation of India is alive to the emerging
trends, its performance may decline further.
Hence, Life Insurance Corporation of India has to work with renewed vigor and
enthusiasm so as to retain and improve its market share. In this regard, Life Insurance
Corporation of India has to focus on key result areas such as improving the productivity
of agents; marketing high sum assured policies and also the introduction of customer
friendly plans or products. Also Life Insurance Corporation of India has to focus on unit
linked plans, which are fast becoming popular in the current life insurance market. The
financial performance of Life Insurance Corporation of India is better than private life
insurance companies in India. In a business driven by competition, the high rising costs
is due to huge commission expenses by private life insurance companies. Most of the
private life insurance companies are making losses. It is necessary for them to cut their
operating costs. Also private life insurance companies have to improve their actuarial
efficiency, liquidity position and long term solvency position.

6.5 Customer Education

Insurance is a unique service industry. The key industry drivers are related to life style
issues in terms of perceiving insurance as a savings instrument rather than for risk
cover, need based selling, quality of service and customer awareness. In the present
competitive scenario, a key differentiator is the professional customer service in terms
of quality of advice on product choice along with policy servicing.

6.6 Product Innovation

Innovative products, smart marketing and aggressive Distribution-That's the triple

whammy combination that has enabled fledgling private insurance companies to sign
up Indian customers faster than anyone ever expected. Indians, who have always seen
life insurance as a tax saving device, are now suddenly turning to the private sector and
snapping up the new innovative products on offer. The private companies are coming
out with better products which are more beneficial to the customer. Among such
products are the Unit Linked Investment Plans which offer both life cover as well as
scope for savings or investment options as the customer desires.

The growing popularity of the private insurers shows in other ways too. Life Insurance
Corporation of India is still dominating segments like endowments and money back
policies which are traditional plans. But in the annuity or pension products business, the
private insurers have already wrested over 30 percent of the market. While in the
popular unit-linked insurance schemes they have a virtual monopoly, with over 90
percent of the customers. The private insurers also seem to be scoring big in other
ways. They are persuading people to take out bigger policies.

6.7 Distribution Network

While companies have been successful in product innovation, most of them are still
grappling with right mix of Distribution Channels for capturing maximum market share
to build brand equity, building strong and effective customer relationship and cost
effective customer service. In India Insurance is sold and not bought. The agents /
Advisors by using various strategies sell the product by convincing the customers.
Moreover, they push policies with the highest premium to pocket a higher commission.
The consultative approach to selling is the modern approach, which helps customers
and prospects to buy.
While the traditional channel of tied up advisors or agents would be the chief
distribution channel, insurer should innovate and find new methods of delivering the
products to customers. Corporate agency, brokerage, Bank assurance, e-insurance, co-
operative societies and Panchayats are some of the channels, which can be tapped by
the insurers to reach the appropriate market segments. Now days, the urban masses are
tapped with the new techniques provided by Information Technology through internet.
Rural masses should be attracted by the consultative approach adopted by the Insurers.

New private insurers have used innovative distribution channels to reach a broader
range of the population. Private insurance companies are also using banks,
microfinance institutions and co-operatives to increase their market share and compete
with well-entrenched state-owned insurance company.

There is huge potential in the largely undeveloped private pension market. Insurers
have to develop new products addressing the new challenges in society. Companies
will need to constantly innovate in terms of product development to meet ever-
changing consumer needs. Understanding the customer better will enable Insurance
companies to design appropriate products, determine price correctly and to increase
profitability. Since a single policy cannot meet all the insurance objectives, one should
have a portfolio of policies covering all the needs. Product development is made
possible by integrating actuarial, rating, and claims. Moreover, with increased
commoditization of insurance products, brand building is going to play a vital role. The
rural sector has potential for life insurance. To realize this potential, designing suitable
products is important. Insurers will need to pay special attention to the characteristics of
the rural labor force, like the prevalence of irregular income streams and preference for
simple products.

Legislation now allows insurance carriers and other financial institutions, such as banks
and securities firms, to sell each another’s products. More insurance carriers now sell
financial products such as securities, mutual funds and various retirement plans. This
helps access each other's client base and geographical markets.

6.8 Foreign Direct Investment

Insurance is a capital-intensive industry. It is also a long-gestation business. India's
insurance industry needs capital, and a major source of capital would be from foreign
investors, who are now limited to 26 percent ownership. India needs to raise the cap on
Foreign Direct Investment (FDI) to attract capital for the industry. For some time there
has been an understanding that the FDI cap will be raised to 49 percent, and many
companies entered the Indian market with this expectation. Leading foreign companies
will bring in more capital to the insurance industry if the cap on FDI is raised.

6.9 Role of IRDA

IRDA should also seek to create a regulatory regime that promotes the most efficient
use of capital, eliminates avoidable micro-management of business practices, allows
companies to price their products prudentially, and level the playing field between
private and state-owned insurance companies. When markets are competitive and
responsive to consumer demand and preference, it is the consumer that benefits in terms
of lower cost and increased ability to manage risks.

6.10 Information Technology
Private Insurance companies have discovered that the Internet is a powerful tool for
reaching potential and existing customers. Most carriers use the Internet simply to post
company information, such as sales brochures and product information, financial
statements, and a list of local agents. New technology gives the policyholders / insured
better, wider and faster access to products and services. The impact of Information
Technology in Insurance business is being felt at an accelerating pace. In the initial
years IT was used more to execute back office functions like maintenance of accounts,
reconciling broker accounts, client processing etc. With the advent of “database
concepts”, these functions are better integrated in an administrative efficiency. The real
evolution has however emerged out of Internet boom. Internet has provided brand new
distribution channels to the Insurers. Technology has enabled the Insurer to innovate
new products, provide better customer service and deeper and wider insurance coverage
to them. Insurance companies should give customers a distinct claim Id to track claim
son-line, entertaining on-line enrolment, eligibility review, financial reporting, billing
and electronic fund transfer to benefit clan customers.

In addition to individual carrier-sponsored Internet sites, several “lead- generating”

sites which have emerged in the developed countries should also be used in India.
These sites allow potential customers to input information about their insurance policy
needs. For a fee, the sites forward customer information to a number of insurance
companies, which review the information and, if they decide to take on the policy,
contact the customer with an offer. This practice gives consumers the freedom to accept
the best rate.

6.11 Quality Service

In the global era, Insurance companies are increasingly willing to spend more on the
customer satisfaction and brand building exercises. Though it is one of the highly
regulated industries, it still provides lot of scope for creativity and innovations. As this
industry is predominantly dominated by personal selling and personalized services,
many a time the service standards vary based on the intermediary involved in the
process. In order to achieve the competitive edge over others, it is necessary to
standardize the process and bring about quality improvement and get feedback from the
customers regarding the quality of services rendered. This will result in customer
satisfaction, customer retention, customer acquisition, employee retention and cost
reduction. Servicing focuses on enhancing the customer’s experience and maximizing
his convenience. This calls for effective Customer Relationship Management system,
which eventually creates sustainable competitive advantage and enables to build long
lasting relationship.