The new millennium has exposed the insurance sector to new challenges of competition and struggle for survival. The era of liberalization, privatization and globalisation has ended the monopolistic tendency in this sector. It has been over four years since the Indian insurance market has opened up and the new entrants into the market have set up their shops throughout the country.
Until the late nineties, the Indian insurance industry was under State control with no private participation. In April 1993 the Government of India appointed the Malhotra Committee to evaluate the insurance industry and to suggest its future direction. The Committee submitted its report in 1994, strongly recommending private participation in the industry. The discussion and efforts to open up the insurance market continued for about six years. The policymakers were in a ‘Catch 22’ situation. On the one hand, they wanted competition for the development and growth of the insurance sector, and on the other, they feared that the insurance premium would seep out of the country. Thus they adopted a cautious approach towards opening up the sector to foreign participation. Ultimately, the Insurance Regulatory and Development Act (IRDA) was passed in December 1999 and with this the globalisation of the Indian insurance sector became a reality. Certainly, these developments were bound to have an impact on Life Insurance Corporation (LIC) of India too. The present paper tries to review the current status of LIC in the changed competitive scenario of the insurance industry.
LIC of India: History and Present Position
Life insurance in its present form came to India from England in the year 1818, when the Oriental Insurance Company, the first corporate entity in India offering life insurance cover was established in Calcutta. From then onwards, for the next 138 years, several companies and societies were formed for providing life insurance cover. The period was marked by a turbulent economic backdrop, sometimes also interspersed with periods of relative economic stability. The period witnessed India’s First War of Independence, adverse effects of the World War I and World War II on the economy of India, and in between them the period of worldwide economic crises triggered by the Great Depression of 1929-30. The aggregate effect of these events led to a high rate of bankruptcies and liquidation of life insurance companies in India. This had adversely affected the faith of the general public in the utility of obtaining life cover. Against this background, the Parliament of India passed the Life Insurance of India Act on 19th June 1956, and the Life Insurance Corporation of India came into existence on 1st September, 1956, by consolidating the life insurance business of 245 life insurers and other entities offering life insurance services.
Over its existence of 50 years, Life Insurance Corporation of India, which commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses, and currently contributes around 7 percent to India’s GDP. The Corporation which started its business with 300 offices, 5.6 million policies and a corpus of INR 45.9 crores, has grown to 2,048 offices servicing around 18 Crores policies and a corpus of INR 3,40,000 crores.
At present, the Life Insurance Corporation of India (LIC) is the largest life insurance company in India. It is fully owned by the Government of India. Headquartered in Mumbai, which is considered the financial capital of India, the Life Insurance Corporation of India currently has 7 Zonal Offices and 100 divisional offices located in different parts of India. It has at least 2048 branches located in different cities and towns of India, and a network of around one million agents.
Mission Of LIC: To Serve Its Customers
The Life Insurance Corporation of India has been established to attain some specific objectives in the interest of its policyholders in...