A Research Report Subject Code: 536221(36) On Comparative study between lic and private life insurance compony Submitted

for partial fulfillment of requirement for the award of degree Of Master of Business Administration Of CHHATTISGARH SWAMI VIVEKANAND TECHNICAL UNIVERSTY BHILAI (C.G.) Session 2010-12 Supervision By Submitted by Name of the Guide Name of the student Designation Roll No. Department MBA II Semester Section A/B/C/D DEPARTMENT OF MANAGEMENT DISHA INSTITUTE OF MANAGEMENT AND TECHNOLOGY (Disha Education Society) Satya Vihar, Vidhansabha-Chandra huri Marg, Mandir Hasaud, Raipur (C.G.)492007

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This to certify that the report of the project submitted is the outcome of the p roject wor entitled <Title of the project> carried out by <Name of the student> bearing Roll No.: & Enrollment No.:.. carried by under my guidance and supervision for the award of Degree in Master of Business Administration of Chhattisgarh Swami V ive anand Technical University, Bhilai (C.G), India. To the best of the my nowledge the report i) Embodies the wor of the candidate him/herself, ii) Has duly been completed iii) Fulfils the requirement of the ordinance relating to the MBA degree of t he University and iv) Is up to the desired standard for the purpose of which is submitted

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Department of Management

ACKNOWLEDGEMENT (Body of the text should be paragraphed. The text should be typed in Times New R omans Font, Justified line spacing 1.5 and font size 12 _______________________ (Signature of the student) Name: Roll.No MBA. II Semester Section A Declaration i. Certificate by Guide ii. Certificate by Examiner iii. Ac nowledgement iv. Preface v. List of Symbols vi. List of Abbreviations vii. List of Tables viii. List of Figures

CONTENTS

I n t r o d u c t i o n

A c

n o w l e d g e m e n t

 I r

C o n c e p t N e P e n d e r u s I d f s u n s o t r I

o f o f r r a n m y n d a c

I n s u r a n c e I n e i a y c n e s s r o f e c t a n I o c n r e d r i e a f n o

I n m s

R e s e a r c h R e s e a r c h R e s e a r c h R e s e a r

M e t h o d o l o g O b j e c t i v e s D e s i g n c h o f o f P r t h e t h e o

L i m i t a t i o n s S i g n i f i A n a l y s i s F i n d i n R e f e g r s e c a n c e a n d &

S t u d y s t u d y i o n

I n t e r p r e t a t C o n c l u s i o n n c e s s

Chapter I Introduction

Concept of insurance On the one hand, human life is subject to various ris sris of death or disabilit y due to natural or accidental causes. Humans are also prone to diseases, the tr eatment of which may involve huge expenditure. On the other hand, property owned by man is exposed to various hazards, natural and man-made. When human life is lost or a person is disabled permanently or temporarily, ther e is a loss of income to the household. The family is put to hardship. Sometimes survival itself is at sta e for the dependants.

When it comes to property, loss or damage to property results in either whole o r partial loss in income to the person or entity. Ris has the element of unpredictability. Death/disability or loss/damage could occur at anytime. Losses can be mitigated through insurance. Insurance is a comm odity which offers protection against various contingencies. Insurance products available for life and non-life are many. In non-life, apart form personal covers such as accident covers and health insurance, there are pro ducts covering liabilities under a particular law and or common law. The various products are designed to cater to different needs of an individual or industry such as fire insurance policy on multi-storeyed building, householders policy. An insurance contract promises to ma e good to the insured a certain sum in cons ideration for a payment in the form of premium from the insured.

Need of insurance Do you need insurance? Many people wonder whether or not insurance is really tha t important. Insurance is something that most people need. Here is some informat ion that will help you understand who needs insurance and why. Why Do You Need Insurance? You may wonder why you need insurance. While there are many different types of i nsurance that you may need, the main reason for any type of insurance is to prot ect yourself from financial loss. It is a form of ris management. Whether it is health insurance, car insurance, homeowners insurance, life insura nce or long term care insurance, the reason you have insurance is to transfer th e ris of loss from you to the insurance company. If you need insurance now, then use our free insurance quote finder to compare t he insurance quotes you need! Compare insurance quotes from top companies side b y side to find the insurance policy you need today! Needs For Insurance Since there are many different needs for insurance, there are many different typ es of insurance policies. Find out what inds of insurance you need today! Our f ree insurance quote finder can help you meet all your insurance needs quic ly an d easily.

THE BIRTH OF INDIAN INSURERS With the advent of the 20th century, the glorious renaissance of swadeshi days d

awned. Atthe same time, well- to do Indians realized the potentiality of Indian Insurance business. TheSwadeshi movement of 1905-1907 gave rise to more insuranc e companies. The United Indiain Madras, National Indian and National Insurance i n Calcutta and the Co-operativeAssurance at Lahore were established in 1906. In 1907, Hindustan Co-operative InsuranceCompany too its birth in one of the rooms of the Jorasan o House of the great poetRabindranath Tagore, in Calcutta. The I ndian Mercantile (1907) was started in Bombay General Assurance (1908) at Ajmer and the Swadeshi Life (Later Bombay Life) in B ombayin 1908.The end of the First World War (1914-18) witnessed an influx of ins urance companies inIndia. Famous Indian business houses started new insurance co mpanies. Industrial andPrudential Bombay, Western India, Satara, were floated be fore the war, but by 1919,companies li e Jupiter General, New India, Vulcan Insu rance Company etc. came into being.Pandit K.Santhanam with blessing of Lala Lajp at Rai and Pandit Motilal Nehru started LaxmiInsurance Co. Similarly, Andhra Ins urance was started in Masulipatnam, with the initiative of stalwarts li e Dr. Pa ttabhi Sitaramaiah. From political platforms also, national leaderssupported thi s cause. It is duty to every Indian to support only Indian Insurance. The eynot eof our Swaraj is in placing all our insurance with our Indian companies", said MahatmaGandhi in his message. "I hope Indians will realize the importance of pat riotism only throughIndian insurance institution", stated Pandit Jawaharlal Nehr u. Thus, the cause of Indianinsurance became a national issue. The pursuit to bo ost Indian insurance represented acrusade to extricate the Indian economy from f oreign domination

Insurance act, 1938 The Insurance Act, 1938, was the first comprehensive legislation governing not o nly life butalso non- life branches of insurance to provide strict state control over insurance business. Insub- sections to dealt with provident companies, mut ual offices and co-operative societies aswell.The silent features of the Act wer e as follows: (A) Constitution of a Department of Insurance under a superintendent vested with wide powers of supervision and control over all inds of insurance companies. (B) Regulation for the compulsory registration of insurance companies and for fi

lingof returns of investment and financial conditions. (C) Provisions for deposit, to prevent insurers of inadequate financial resource s of speculative concerns for commencing business. (D) Provisions that 55% of the net life fund of an Indian or non- Indian insurer shouldinvested in Indian Government and approved securities with at least 25% i n IndianGovernment Rupee securities.. All other companies, i.e., foreign compani es mustinvest 100% of their Indian liabilities in Indian Government and approved securities,with at least 33.3% Indian Government securities. (E) Prohibition of rebating, restriction of commission, licensing of agents etc. Maximum rates of commission were fixed at 40% of the first premiums and 5% of th erenewal premium in respect of life assurance business. The agent must be licens ed, toimprove the status of the profession. (F) Periodical valuation of Indian Insurance business of foreign companies and t hebusiness of Indian companies. (G) Provision for policyholders directors, ma ing it possible for the represent atives of policyholders to be on the Board of directors. (H) Standardization of policy conditions required all companies to file standard formsand tables of premium approved by an Actuary. Under this requirement, the initialdeposit for life insurance business was raised from Rs. 25000 in Governme ntsecurities to Rs. 50000 in cash approved securities, which was subsequently to beraised by installments to Rs. 2 la h within a specified time limit Nationalization THE LIFE INSURANCE CORPORATION OF INDIA: 1956 This was the first step ta en towards the nationalization of life insurance busi ness in India.On 20th January, 1956 all life insurance companies were ta en over by 43 nominatedcustodians. The custodians were experienced senior executives of private insurancecompanies, reporting directly to the Finance Ministry. From th e word go, the complex tas of running the industry on a permanent basis and con tinuing the services to policy holderswithout interruption were their major conc erns. The actual wor of integration had to awaitlegislation. The custodians man aged the insurance companies till 1-09-1956, when LifeInsurance Corporation was established under the general direction and control of the Ministryof Finance.Th e Ordinance provided for the transfer of the control of 154 Indian insurers, 16 non Indianinsurers and 75 provident societies. These arrangements were designed to ensure that noinconvenience whatsoever was caused to the policy holders. With the Government ta e overthe management aimed towards the evolution of a common uniform premium rate, policyconditions and service and wor ing procedures and ab ove all to help promote team spirit.The corporation, a body corporate shall cons ist of not more than 15 members appointed bythe Central Government, one of them being appointed by the government as chairman.The capital of the corporation was at Rs 5 crore provided by the central government

Liberalization Liberalization : OPENING UP OF INSURANCE SECTOR 1999 THE INSURANCEREGULATORY AND DEVELOPMENT AUTH ORITY Reforms in the Insurance sector were initiated with the passage of the IRDA Bill inParliament in December 1999. The IRDA since its incorporation as a statutoryb ody in April 2000 has fastidiously stuc to its schedule of framing regulations andregistering the private sector insurance companies.The other decision ta en s imultaneously to provide the supporting systems to theinsurance sector and in pa rticular the life insurance companies was the launch of the IRDA s online servic e for issue and renewal of licenses to agents.The approval of institutions for i mparting training to agents has also ensured thatthe insurance companies would h ave a trained wor force of insurance agents inplace to sell their products, whic h are expected to be introduced by early next year.Since being set up as an inde pendent statutory body the IRDA has put in aframewor of globally compatible reg ulations. In the private sector 14 lifeinsurance companies have been registered. ENTRY OF PRIVATE COMPANIES Under the IRDA Act, private companies can now operate in India s insuranceindust ry. However, they must obtain a license from the IRDA before beingpermitted to w rite business.To have its license application considered, a domestic private com pany must beregistered in accordance with the Companies Act of 1956 and have app roximatelyUS$ 20 million of investment capital. The specific licensing requireme nts thatPrivate Indian Companies must fulfill are set forth in the Registration on IndianInsurance Companies Regulations, published by the IRDA 2000.

How Insurance Wor s? The mechanism of insurance is very simple. People who are exposed to the same ri s s cometogether and agree that, if any one of them suffers a loss, the others w ill share the loss andma e good to the person who lost. All people who send good s by ship are exposed to thesame ris s, which are related to water damage, ship sin ing, piracy, etc. Those owningfactories are not exposed to these ris s, but they are exposed to different inds of ris s li e,fire, hailstorms, earthqua e, lightning, burglary, etc. Li e this, different inds of ris s can beidentified a nd separate groups made, including those exposed to such ris s. By this method,t he heavy loss that any one of them may suffer (all of them may not suffer such l osses at thesame time) is divided into bearable small losses by all. In other wo rds, the ris is spreadamong the community and the li ely big impact on one is r educed to smaller manageableimpacts Example 1. In a village, there are 400 houses, each valued at Rs. 20000. Each year, on the average, 4houses get burnt, resulting into a total loss of Rs. 80000. If all the

400 owners come togetherand contribute Rs. 200 each, the common fund would be R s. 80000. this is enough to pay Rs.20000 to each of the 4 owners whose houses go t burnt. Thus, the ris of 4 owners is spreadover 400 house-owners of the villag e.

RESEARCH OBJECTIVES: 1.To compare the performance of LIC and private insurance companies in India.2.T o find out the performances of LIC and private insurance companies in eachcatego ry (size. growth, productivity and efficiency)3.To compare grievance management of LIC and private insurance companies. RESEARCH DESIGN : a.Type of research design : Analytical Researchb. Data collection : Secondary So urcesc.Statistical Tools : Ratio AnalysisBar Graph RESEARCH PROCESS In this research my research objective was to compare the performance of LIC and Privateinsurance companies. For this purpose I decided the four broad categorie s under which I havecompared the LIC and Private insurance companies. These are: 1.Size2.Growth3.Productivity4.Grievance HandlingUnder these Broad Categories I h ave analyzed 13 factors which are:1.Size Total Premium Total Income Size of Balance Sheet Total number of Policies Total number of Branches2.Growth Growth in Premium Growth in Income 40 Growth in number of Policies

Growth in Mar et share3.Productivity Business per Branch Income per Branch New Premium per Branch4.Grievance HandlingI have used the Secondary data of last five financial years. I have collected data from thevarious balance sheet of LI C and other private insurance companies, web sites and in somecases I personally met some employees of some insurance companies. I tried to find out mostof the information required to compare the LIC and private insurance companies.In Analy sis I have found all the required data and on the basis of performance gave the ran to LIC and Private Insurance Companies on each factor and then points. Now these Pointshave been multiplied with the weightage of that factor. And then aft er the analysis of eachfactor a consolidated point table has been prepared to n ow that which sector is performingbetter than other.

LIMITATIONS: 1. Could reach to a limited number of documents of different insurance comp anies inregard to the management and other policies and resultant figures so as to identifythe exact cause of their lag in performance. 2. Due to the limited time could not study all the insurance companies orig inaldocuments individually. 3. Non-Proficiency in technical aspects of insurance companies might have hindered thebest analysis of the findings. SIGNIFICANCE OF THE STUDY: The Detailed Study has been done with the purpose of finding out the relative sh are of LIC andPrivate Insurance in India. It is useful for the people associated with the Insurance Industry andthe research associates related to the Insurance Sector in India. This study will acquaint themwith the data of all the ban s co mplied at one place along with the findings, conclusion andrecommendations. REFRENCES : Data on Indian Insurance fromhttp://www.irdaindia.org Journals published by Insurance Regulatory & Development Authority. Management of financial institutions by R.M. Srivastava http://www.economictimes.com Profile of Indian Insurance Companies by IRDA. www.licindia.co.in