Full Length Research Paper
The impact of liberalization, privatization, and globalization (LPG) on life insurance corporation of India (LIC) R. Rajendran* and B. Natarajan
Department of Business Administration, Annamalai University, New Delhi, India. Accepted 19 April, 2010
The Indian life insurance industry has its own origin and history. Since its inception, it has passed through many obstacles, hindrances to attain its present status. The income earning capacity of an individual citizen of a nation and the eagerness and awareness of the general public are the two key determinants of the growth of any insurance industry. As a result, wider mass-employment opportunities and sound educational system should be made available. In addition, the general public must be kept abreast of more knowledge and importance of life insurance, as these steps help to boost the growth of insurance industries. In this Indian context, insurance habit among the general public during the independence decade was quite rare and in the following decades, it increased slowly. There was a remarkable improvement in the Indian insurance industry soon after the acceptance and adaptation of liberalization, privatization, and globalization (LPG) in the year 1991. After 1991, the Indian life insurance industry has geared up in all respects, as well as it being forced to face a lot of healthy competition from many national as well as international private insurance players. The fall in the savings rate and increased competition in the primary market and particularly the aggressive mobilization by the mutual fund posed serious challenges to LIC. Key words: Life insurance, liberalization, globalization. INTRODUCTION The nationalization of insurance business in the country resulted in the establishment of life insurance corporation of India (LIC) in 1956 as a wholly-owned corporation of the Government of India. The following are the objectives of LIC: (I) Spreading life insurance much more 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 with adequate financial coverage against death at a reasonable cost. (II) Maximizing mobilization of people’s savings by making insurance linked savings adequately attractive. (III) Investing funds to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. (IV) Meeting the various life insurance needs of the community that would arise in the changing social and economic environment through its family schemes and group insurance schemes. The above objectives are framed by the LIC at the time of its establishment and it is trying to materialize its objectives over the subsequent years. However, the Indian life insurance industry is facing several challenges and issues throughout its career and is establishing meaningful strategies to overcome these challenges and issues from time to time. Since its establishment, it has earmarked a steady growth, but many factors affected its abnormal growth and progress. They are as follows:
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Afr. J. Bus. Manage.
(I) The mega illiteracy percentage. (II) Improper awareness among the general public regarding the savings. (III) Least percentage of employment opportunities. (IV) Lowest wage and salary pattern, etc. When compared with the developed foreign countries, the Indian life insurance industry has achieved only a little because of the followings: lack of quality strategies adopted by the LIC, lack of standard education and awareness about savings, low capital per income and lack of employment opportunities. Since the...