Life Insurance Corporation of India: Coping with Uncertainty
LIFE INSURANCE CORPORATION OF INDIA :
COPING WITH UNCERTAINTY
INTRODUCTION TO CASE
The year 1996 was a significant one for the pension fund business in India. Till then, by virtue of Section 30 of LIC Act, 1956, only the Life Insurance Corporation (LIC) was authorized to transact life insurance business and the pension business was treated as a part of life insurance business according to the provision of the Insurance Act, 1938. In 1996 Government of India made a momentous decision to allow the Unit Trust of India (UTI) to set up a pension fund business. Following the policy of 1996, the announcement allowing UTI to operate the pension fund business made by the finance minister of India when he delivered his budget speech for the year 1997-98. The budget envisaged the separation of pension fund business from life insurance business and allowed UTI to operate a full-fledged pension fund which would compare with LIC’s pension schemes. Simultaneously, the government also granted permission to LIC to set up and promote joint venture to the pension business.
Opening up of the pension business for competition was just a forerunner to opening up of the entire insurance sector. The insurance sector encompasses general and life insurance, and pension fund business. The insurance sector reform envisaged opening up of the insurance sector to private players which had till now the monopoly of public sector corporations. Since the liberalization exercise in 1991, the government of India had taken a number of initiatives in the financial sector. New policies were formulated covering the banking sector and the capital markets with the objective of creating a more efficient and competitive financial system. Insurance was an important part of the overall financial system and reforms were considered necessary in the insurance sector too. Therefore, under the chairmanship of former governor of the Reserve Bank of India, R.N. Malhotra, the government of India appointed a committee
COPING WITH UNCERTAINTY
INTRODUCTION TO CASE
The year 1996 was a significant one for the pension fund business in India. Till then, by virtue of Section 30 of LIC Act, 1956, only the Life Insurance Corporation (LIC) was authorized to transact life insurance business and the pension business was treated as a part of life insurance business according to the provision of the Insurance Act, 1938. In 1996 Government of India made a momentous decision to allow the Unit Trust of India (UTI) to set up a pension fund business. Following the policy of 1996, the announcement allowing UTI to operate the pension fund business made by the finance minister of India when he delivered his budget speech for the year 1997-98. The budget envisaged the separation of pension fund business from life insurance business and allowed UTI to operate a full-fledged pension fund which would compare with LIC’s pension schemes. Simultaneously, the government also granted permission to LIC to set up and promote joint venture to the pension business.
Opening up of the pension business for competition was just a forerunner to opening up of the entire insurance sector. The insurance sector encompasses general and life insurance, and pension fund business. The insurance sector reform envisaged opening up of the insurance sector to private players which had till now the monopoly of public sector corporations. Since the liberalization exercise in 1991, the government of India had taken a number of initiatives in the financial sector. New policies were formulated covering the banking sector and the capital markets with the objective of creating a more efficient and competitive financial system. Insurance was an important part of the overall financial system and reforms were considered necessary in the insurance sector too. Therefore, under the chairmanship of former governor of the Reserve Bank of India, R.N. Malhotra, the government of India appointed a committee
References: http://www.acadjournal.com/2008/V22/part7/p2/ http://business.mapsofindia.com/insurance/brief-history-of-insurance-sector.html http://www.licindia.in/rtiact_popup.htm http://www.bimadeals.com/life-insurance-india/lic-life-insurance.php http://www.licindia.in/images/Orgn_Structure_New.pdf http://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4&mid=2 http://www.indiacore.com/insurance.html http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan023811.pdf http://en.wikipedia.org/wiki/Unit_Trust_of_India