Role of Life Insurance Corporation in Insurance Sector of India


Dhruva Ravani
MBA Semester III
R.D. Gardi Department of Business Management


It is worth interesting to note that the origin of the concept of insurance is very old and dates back almost 4500 years ago in the ancient empire of Babylonia. This concept prevailed and developed during the medieval period in Europe. The emphasis of insurance was on traders' merchants and seafarers in marine industries at that time to provide them safety in terms of money against certain unseen risks including death. The concept of insurance has its origin in Indian scriptures. The Vedas give the idea of 'Yougkshema' means a promise to provide community insurance to the risk bearers as back as around 1000 B.C., which was practised by the Aryans.

In 1956 a radical step was taken by the central govt. regarding nationalization of insurance industries which emerged as the Life Insurance of India the major objective of this corporation was to give maximum benefits to maximum citizens of India by providing them wide range of benefits against a number of risks. The details of Lick's business during last 5 years are given in the paper, which are self explanatory.


Almost 4500 years ago, in the ancient Land of Babylonia, traders used to bear risk of the caravan trade by giving loans that had to be later repaid with interest when the goods arrived safely. In 2100 B.C. the code of Hammurabi granted legal status to the practice. That perhaps, was how insurance made its beginning.

Life insurance had its origins in ancient Rome, Where citizens formed burial clubs that would meet the funeral expenses of its members as well as help survivors by making some payments.

In 1347, in Genoa, European maritime nations entered into the earliest known insurance and decided to accept marine insurance as a practice. Back to the 17th century, in 1693, astronomer Edmond Halley constructed the first mortality and compound interest. In 1756, Joseph Dodson reworked the table, linking premium rate to age. The 19th century saw huge developments in the field of insurance, with newer products being devised to meet the growing needs of urbanization and industrialization.


Insurance in India can be traced back to the Vedas. For instance, Yougkshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of 'community insurance' was prevalent around 1000 BC and practised by the Aryans.

Bombay Mutual Assurance Society, the first Indian life assurance society, was formed in 1870. Other companies like Oriental, Bharat and Empire of India were also set up in the 1870 90s.

The Insurance Act was passed in 1912, followed by a detailed and amended Insurance Act of 1938 that looked into investments, expenditure and management of these companies' funds.

By the mid 1950s, there were around 170 insurance companies and 80 provident fund societies in the country's life insurance scene. However, in the absence of regulatory systems, scams and irregularities were almost a way of life at most of these companies' funds.

As a result, the government decided to nationalise the life assurance business in India. The Life Insurance Corporation of India was set up in 1956 to take over around 250 life assurance companies. After the RN Malhotra Committee report of 1994 became the first serious document calling for the re-opening up of the insurance sector to private players that the sector was finally opened up to private players in 2001.


Life Insurance is a contract for payment of a sum of money to the person assured on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. It is concerned with two hazards that stand across the life- path of every person that of dying prematurely leaving a dependent family to fend itself and that of living to old age without visible means of support.


During the 1997-98 LIC sum assured through policies 63927.83 Crore Rs. In 1998-99 LIC sum assured 75606.26 Crore Rs. In 1999-00 LIC sum assured 91490.94 Crore Rs. In 2000-01 LIC sum assured 124950.63 Crore Rs. In 2001-02 LIC sum assured 192784.96 Crore Rs. We can see that LIC gets success in new business.


In 1997-98 LIC's number of polices are 850.03 in lakh. In 1998-99 LIC'S number of polices are 917.26 in lakh. In 1999-00 LIC's number of polices are 1013.89 in lakh. In 2000-01 LIC's numbers of policies are 1131.11 in lakh. In 2001-02 LIC's number of policies 1258.76 in lakh.  We can see that LIC's position is very good. Numbers of policies are increased.


This chart shows various income of LIC. LIC gets 14.11 % income through first year premium. LIC gets 40.74 % income from Renewal Premium. LIC gets 12.43 % income from Single Premium. LIC gets 31.19 % income from investments. LIC gets income 1.53 % from Miscellaneous.


LIC gets achievement in various fields. We can see that LIC gets success in new business. Numbers of policies are increased.  We can see LIC's income from various fields. Overall LIC has doing profitable business. But it is only LIC's own business. But it is not compared with other's insurance institute. So it is not completed.

Dhruva Ravani
MBA Semester III
R.D. Gardi Department of Business Management

Source : E-mail September 27, 2006




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