LIFE INSURANCE CORPORATION OF INDIA

MINOR PROJECT REPORT

ON
LIFE INSURANCE CORPORATION OF INDIA

Submitted in partial fulfillment of the requirement for the

degree of Bachelor of Business Administration

SUBMITTED BY:-

UNDER THE GUIDANCE

Vishisht Bhutani

Dr. Manju Gupta

BBA (Gen)

Associate Professor

09114701712

MAIMS

STUDENTS DECLARATION
1

LIFE INSURANCE CORPORATION OF INDIA

This is to certify that I have completed this Project titled Life

Insurance Corporation of India under the guidance of Dr. Manju
Gupta in partial fulfillment of the requirement for the award of
degree of Bachelor of Business Administration at Maharaja Agrasen
Institute Of Management Studies, Delhi. This is an original piece of
work and I have not submitted it earlier elsewhere.

VISHISHT BHUTANI
Roll. No. 09114701712

CERTIFICATE
2

LIFE INSURANCE CORPORATION OF INDIA

This is to certify that Report entitled Life Insurance Corporation of

India which is submitted by Vishisht Bhutani in partial
fulfilment of the requirement for the award of degree Bachelor of
Business

Administration

to

Maharaja

Agrasen

Institute

of

Management Studies, Delhi is a record of the candidate own work

carried out by him under my supervision. The matter embodied in this
report is original and has not been submitted for the award of any
other degree.

Dr. MANJU GUPTA

ASSOCIATE PROFESSOR
MAIMS

ACKNOWLEDGEMENT
3

LIFE INSURANCE CORPORATION OF INDIA

First of all, I would like to express my thanks to Dr. C. S. Sharma

(Director, MAIMS) for giving me such a wonderful opportunity to
widen the horizons of my knowledge.
In no small measures, I would also like to gratefully thank to all those
who gave me constructive suggestions for the improvement of all the
aspect related to this project.
In particular, I would like to thank Dr. Manju Gupta, my research
guide for her valuable suggestions and guidance.
I also owe a deep sense of gratitude to other faculty members for their
continuous encouragement.
Despite all efforts, I have no doubt that error and obscurities remain
that seen to afflict all research project and for which I am culpable.

VISHISHT BHUTANI
Roll. No.: 09114701712

LIFE INSURANCE CORPORATION OF INDIA

TABLE OF CONTENTS
CONTENTPAGE NO.
1. INTRODUCTION
WHAT AND WHY OF LIFE INSURANCE
OBJECTIVES OF THE STUDY
SCOPE OF THE STUDY
RESEARCH METHODOLOGY
LIMITATIONS OF STUDY

1
2
3
3
4
4

2. COMPANY PROFILE
HISTORY AND FORMATION OF LIC
OBJECTIVES OF LIC
POLICIES OF LIC

5
6
8
9

3. DATA ANALYSIS AND INTERPRETATION

MARKETING STRATEGIES OF LIC
MARKETING STRATEGIES OF OTHER COMPANYS
WORKING RESULTS

35
36
37
40

4. CONCLUSIONS
CONCLUSIONS

46
47

5. BIBLIOGRAPHY

50

1. INTRODUCTION

WHAT AND WHY OF LIFE INSURANCE

WHAT IS LIFE INSURANCE

Life insurance is a contract for payment of a sum of money to the person assured (or failing
him/her, to the person entitled to receive the same) 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. Among
other things, the contract also provides for the payment of premium periodically to the
corporation by the assured. Life insurance is universally acknowledged to be an institution,
which eliminates RISK, substituting certainty for uncertainty and comes to the timely aid
the family in the unfortunate event of death of the breadwinner. By and large, life insurance is
civilizations partial solution to the problems caused by death.

WHY IS LIFE INSURANCE REQUIRED

Life insurance is basically required to cover the two hazards that stand across the life path of
every person:
1. Of dying prematurely leaving a dependent family to fend for it.
2. Of living to old age without visible means of support.

OBJECTIVES OF THE STUDY

1. To study the various products offered by LIC.
2. To study the changes in the marketing strategies of LIC with entrance of private
insurance players.
3. To study the progress of LIC from its inception till recent developments.

SCOPE OF THE STUDY

Insurance is the most dynamic and growing sector in todays business environment. A big
number of business houses of India have jumped into the business of insurance.
Life Insurance today plays a major role in ones life at various stages because of the various
benefits it offers.
This report presents a brief background of how LIC came into existence and how it became
as one of the top insurance players of India.
The project deals with the market share of LIC and the current position of LIC with the
coming up of various other private insurance players.

RESEARCH METHODOLOGY
METHOD OF DATA COLLECTION
Data may be obtained either from the primary sources or from the secondary sources. A
primary source is a one that itself collect the data and a secondary source is a one that makes
use of available data which was collected by some other agencies. Depending on the source,
statistical data is classified under two categories.
1. PRIMARY DATA,
2. SECONDARY DATA.
Primary is that which is collected for the first time and thus happens to be original in
character.
Secondary is that which is already being collected by someone else and which has already
passed through the statistical process.
My research is based upon secondary data which is collected from various Books, Internet
and various records of LIC.

LIMITATIONS OF THE STUDY

1. This project is entirely based upon secondary data so, it lacks the personal touch.
2. Because of time constraint, I was not able to collect much of information.

2. COMPANY PROFILE
(LIFE INSURANCECORPORATION OF
INDIA)

HISTORY OF LIFE INSURANCE

Life insurance first started in England in the 16 th century. The first life that was insured was
of William Gibbons on June 18, 1653. The first registered office of life was in England with
the name Hand-in-Hand Society in 1696. In USA, the life insurance did not gain momentum
till 18th century mainly because of fluctuations in death rate. But after 1800 it gained
momentum.
In India, some Europeans started the first life insurance company in Bengal Presidency with
the name Orient Life Assurance Company in 1818. Then in 1871 Bombay Mutual Life
Assurance Society was established which was alandmark in the Indian Insurance Industry.
Before 1871 Indians were charged about 15% more premiums as compared to Europeans. But
Bombay Mutual Life Assurance Society did not differentiate between Indians and Europeans
in the matter of fixation of premiums. Then in 1874 Oriental Government Security Life
Assurance Company Ltd. was established. Since then, several offices developed in India.
In India the private sector was prevalent in life insurance before 1956. Then it was
nationalized in 1956 and then again with coming up of IRDA Act, it has been privatized in
2000. Thus, life insurance has completed a cycle in its evolution.

11

FORMATION OF LIC
First attempt to regulate insurance business was made through Indian Life Insurance
Companies Act in 1912. Then this was broad based and the insurance act came into existence
from the year 1928 onwards. This act was later reviewed and a comprehensive legislation was
enacted called the Insurance Act 1938. Then nationalization of life insurance business took
place in 1956, when 245 Indian and foreign insurance and provident societies were first
amalgamated and then nationalized. Then the Life Insurance Corporation of India (LIC) came
into existence with its central office located at Mumbai.

Nationalization was done due to following reasons:

1.

Because of the unhealthy practices by insurers, there were repeated popular

demands for nationalization in parliament.

2.

There was a feeling that funds from insurance may be utilized for countrys
economic development.

3.

The foreign exchange drain for import business would be stopped.

4.

The monopolistic control of the business by a few industrialists insures would

end.

5.

The living and working conditions of general insurance officers were highly
unsatisfactory.

6.

There was high concentration of economic power in a few hands.

13

OBJECTIVES OF LIC

Spread Life Insurance 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 adequate financial cover against death at a
reasonable cost.

Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.

Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community
as a whole; the funds to be deployed 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.

Conduct business with utmost economy and with the full realization that the moneys
belong to the policyholders.

Act as trustees of the insured public in their individual and collective capacities.

Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.

Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with
courtesy.

Promote amongst all agents and employees of the Corporation a sense of

participation, pride and job satisfaction through discharge of their duties with
dedication towards achievement of Corporate Objective.
15

POLICIES OF LIC
As individuals it is inherent to differ. Each individuals insurance needs and requirements are
different from that of the others. LICs Insurance Plans are polices that talk to you
individually and give you the most suitable options that can fit your requirement.

CHILDREN PLANS

JeevanAnurag
LICs Jeevan ANURAG is a with profits plan specifically designed to take care of the
educational needs of children. The plan can be taken by a parent on his or her own life.
Benefits under the plan are payable at prespecified durations irrespective of whether the Life
Assured survives to the end of the policy term or dies during the term of the policy. In
addition, this plan also provides for an immediate payment of Basic Sum Assured amount on
death of the Life Assured during the term of the policy.
Assured Benefit:
Payment of 20% of the Basic Sum Assured at the start of every year during last 3 policy years
before maturity. At maturity, 40% of the Basic Sum Assured along with reversionary bonuses
declared from time to time on full Sum Assured for the full term and the Terminal bonus, if
any shall be payable. For example, if term of the policy is 20 years, 20% of the Sum assured
will be payable at the end of the 17th,18th, 19th year and 40% of the Sum Assured along with
the reversionary bonuses and the terminal bonus, if any, at the end of the 20th year.
Death Benefit:
Payment of an amount equal to Sum Assured under the basic plan immediately on the death
of the life assured.

17

KomalJeevan

Product summary:
This is a Children's Money Back Plan that provides financial protection against death during
the term of plan with periodic payments on survival at specified durations. This plan can be
purchased by any of the parent or grandparent for a child aged 0 to 10 years.

Commencement of risk cover:

The risk commences either after 2 years from the date of commencement of policy or from
the policy anniversary immediately following the completion of 7 years of age of child,
whichever is later.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions, as
opted by you, up to the policy anniversary immediately after the life assured (child) attains 18
years of age or till the earlier death of the life assured. Alternatively, the premium may be
paid in one lump sum (Single premium).
Guaranteed Additions:
The policy provides for the Guaranteed Additions at the rate of Rs.75 per thousand Sum
Assured for each completed year. The Guaranteed Additions are payable at the end of the
term of the policy or earlier death of the Life Assured.
Loyalty Additions:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of loyalty additions which are terminal
bonuses payable along with death or maturity benefit. Loyalty addition may be payable
depending on the experience of the Corporation.

19

JeevanChhaya

Product summary:
This is an Endowment Assurance plan that provides financial protection against death
throughout the term of the plan. Besides payment of Sum Assured immediately on death, onefourth of Sum Assured is payable at the end of each of last four years of policy term whether
the life assured dies or survives the term of the policy.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions as
opted by you throughout the term of the policy or till the earlier death.
Bonuses:
This is a with-profits plan and participates in the profits of the Corporations life insurance
business. It gets a share of profits in the form of bonuses. Simple Reversionary Bonuses are
declared per thousand Sum Assured annually at the end of each financial year. Once
declared, they form part of the guaranteed benefits of the plan. Bonuses for full term on the
full Sum assured are paid at the end of the term even if death occurs during policy term. Final
(Additional) Bonus may also be payable provided policy has run for certain minimum period.

21

PLANS FOR HANDICAPPED DEPENDENTS

JeevanAdhar
Product summary:
This plan may be offered to a person who has a handicapped dependant satisfying conditions
as specified in Section 80DDA of Income Tax Act, 1961. The plan provides life insurance
cover throughout the lifetime of the purchaser. The benefits under the plan are for the
handicapped dependantwhich are partly in lump sum and partly in the form of an annuity.
The premiums paid under this plan are eligible for Income Tax relief under Section 80DDA
of Income Tax Act.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions, as
opted by you, within the selected premium paying terms of 10, 15, 20, 25, 30 or 35 years or
till the earlier death. Alternatively, the premiums may be paid in one lump sum (Single
Premium).
Guaranteed Additions:
The policy provides for the Guaranteed Additions at the rate of Rs.100 per thousand Sum
Assured for each completed policy year. The Guaranteed Additions will accrue up to age 65
of the life assured or till his/her death, if earlier.
Terminal Additions:
This is a with-profits plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of Terminal Additions. The policy will be
entitled for Terminal Additions if at least 10 years premiums have been paid. The Terminal
additions would depend on the future experience of the Corporation.

23

JeevanVishwas

Product summary:
This is an Endowment Assurance plan designed for the benefit of handicapped dependants.
Premiums:
Premiums are payable quarterly, half-yearly or yearly throughout the term of the policy or till
the earlier death. Alternatively, the premium may be paid in one lump sum (single premium).
Guaranteed Additions:
The policy provides for the Guaranteed additions at the rate of Rs.60 per thousand Sum
Assured for each completed policy year while the policy is in full force. The Guaranteed
Additions are payable at the end of the policy term or on earlier death.
Loyalty Additions:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of loyalty additions which are terminal
bonuses payable along with death or maturity benefit. Loyalty addition may be payable from
fifth year onwards depending on the experience of the Corporation.

25

ENDOWMENT ASSURANCE PLANS

JeevanAnand
Product summary:
This plan is a combination of Endowment Assurance and Whole Life plans. It provides
financial protection against death throughout the lifetime of the life assured with the
provision of payment of a lump sum at the end of the selected term in case of his survival.
Premium:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions as
opted by you throughout the selected term of the policy or till earlier death.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of bonuses.
Simple Reversionary Bonuses are declared per thousand Sum Assured annually at the end of
each financial year.
Once declared, they form part of the guaranteed benefits of the plan. Bonuses will be added
during the selected term or till death, if it occurs earlier.
Final (Additional) Bonus may also be payable provided the policy has run for certain
minimum period.

New Janaraksha Plan

27

Product summary:
This is an Endowment Assurance plan that provides financial protection against death
throughout the term of plan. It pays the maturity amount on survival to the end of the term.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions, as
opted by you, throughout the term of the policy or earlier death. After at least two full years
premiums have been paid, full insurance cover is available even when premiums are not paid
for up to three years.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary Bonuses
are declared per thousand Sum Assured annually at the end of each financial year. Once
declared, they form part of the guaranteed benefits of the plan. Final (Additional) Bonus may
also be payable provided a policy has run for certain minimum period.

JeevanAmrit

Product summary:
Some people, particularly the younger ones, want to have high cover at a low cost. Further,
many of them do not want commitment to pay premiums for a longer duration. LIC's
JeevanAmrit is most suitable for such persons. Under this plan premium payment is limited
to 3 or 4 or 5 years and the premium payable during the first year is higher than the premiums
payable in subsequent years.
Options:
You may choose Sum Assured (S.A.), Premium Paying Term, Policy Term and Mode of
premium payment.

29

Payment of Premiums :
You may pay premiums yearly or half-yearly during the premium paying term of 3 or 4 or 5
years.

PLANS FOR HIGH WORTH INDIVIDUALS

Jeevan Shree - 1

Product summary:
This is an Endowment Assurance plan offering the choice of many convenient premium
paying terms. It provides financial protection against death throughout the term of plan with
the payment of maturity amount on survival to the end of the policy term.
Premiums:
Premiums are payable yearly, half-yearly, quarterly or through Salary deductions, as opted by
you, throughout the premium paying term or till earlier death. Alternatively premium may be
paid in one lump sum (Single premium).
Guaranteed Additions:
The policy provides for the Guaranteed Additions at the rate of Rs. 50/- per thousand Sum
Assured for each completed year for first five years of the policy. The Guaranteed Additions
are payable along with the Basic Sum Assured at the time of claim.
Bonuses:
The policy participates in the profits of the Corporations life insurance business from the 6th
year onwards. It will get a share of the profits in the form of bonuses. Simple Reversionary
Bonuses will be declared per thousand Basic Sum Assured annually at the end of each
financial year. Once declared, they will form part of the guaranteed benefits of the plan.

31

MONEY BACK PLANS

Money Back Policy

Features:
Unlike ordinary endowment insurance plans where the survival benefits are payable only at
the end of the endowment period, this scheme provides for periodic payments of partial
survival benefits as follows during the term of the policy, of course so long as the policy
holder is alive.
In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes
payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus become
payable at the 20th year.
For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes payable
each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus become
payable at the 25th year.
An important feature of this type of policies is that in the event of death at any time within
the policy term, the death claim comprises full sum assured without deducting any of the
survival benefit amounts, which have already been paid. Similarly, the bonus is also
calculated on the full sum assured.

33

JeevanSurabhi
JeevanSurabhi plan is similar to other money back plans. However main differences in
regular money back plans and JeevanSurabhi are as under:1.

Maturity term is more than premium paying term.

2. Early and higher rate of survival benefit payment.

3. Risk cover increases every five years.
The actual term and the premium paying term for these plans are as under.
Plan
no.

Policy Term Premium Paying Term

106

15 years

12 years

107

20 years

15 years

108

25 years

18 years

Full sum assured is paid back as survival benefit by the end of premium paying term.
However, the risk cover and additional risk cover continue and the policy participates in
profits

till

the

end

of

policy

term.

Accident Benefit is restricted to the premium paying period and to the overall limit of Rs.5
lakhs on a single life.

Suitable For:
This plan holds special interest to people who besides wishing to provide for their old age and
family feel the need for lump sum benefits at periodical intervals.

35

BimaBachat

What is BimaBachat?
LICs BimaBachat is a money-back policy which offers financial security and assurance to
the policy holder and his family. BimaBachat requires the policy holder to pay only one
premium. The amount paid for the premium depends on the duration of the policy taken and
life insurance is available till the date of maturity.

What other benefits do I receive during the specified duration of the policy?

For a term of 9 years: The policy holder will receive 15% of the sum assured at the end of
every 3rd and 6th policy year.

For a term 12 years: The policy holder will receive 15% of the sum assured at the end of
every 3rd, 6th and 9th policy year.
37

For a term 15 years: The policy holder will receive15% of the sum assured at the endof every
3rd, 6th, 9th and 12th policy year.

What additional benefits do I get upon maturity?

If the policy holder outlives the duration of the policy, at the time of maturity, a single
premium payment (excluding extra premium) is made along with loyalty additions, if any.
How much insurance do I get?
The policy holder is insured for an amount equal to the sum assured.
What about the installment received already?
The insurance cover is irrespective of the installments received.
When am I eligible for the guaranteed surrender value?
The guaranteed surrender value is available only after completion of at least one policy year.
This value is equal to 90 % of the single premium paid (excluding extra premium)
What other benefits does this insurance cover offer?
BimaBachat is the only money-back policy that offers a loan facility. The rate of interest for
this will be determined from time to time by the corporation. Presently the rate of interest is
9% p.a. payable half-yearly.
It also offers other benefits like the 15 day cooling off period, grace period and revival.
Who is eligible for the policy? Are there other conditions or restrictions?
39

The following are the requirements that one needs to be aware of before applying forthis
policy:

The person applying for the policy should have completed 15 years and should not be
older than 66 years.

The policy will mature when the person is 75 years old.

There is a choice of three terms to choose from (9, 12 and 15 years) for the policy
depending on the age and requirement of the applicant.

The minimum sum that needs to be assured is Rs 20,000/- and there is no limit on the
amount that can be assured.

It is important to note that the sum assured should be in multiples of Rs 5000/- only.

requires the holder to pay a single premium.

41

The policy

WHOLE LIFE PLANS

The Whole Life Policy

This plan is mainly devised to create an estate for the heirs of the policyholder as the plan
basically provides for payment of sum assured plus bonuses on the death of the policyholder.
However, considering the increased longevity of the Indian population, the Corporation has
amended the above provision, thereby providing for payment of sum assured plus bonuses in
the form of maturity claim on completion of age 80 years or on expiry of term of 40 years
from date of commencement of the policy whichever is later.
The premiums under the policy are payable up to age 80 years of the policyholder or for a
term of 35 years whichever is later.
If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum
assured will be automatically secured provided the reduced sum assured exclusive of any
attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to
participate in the bonus declared thereafter but the bonuses already declared on the policy
will remain attach, provided the policy is converted in to a paid-up policy after the premiums
are paid for 5 years.

Suitable For:
This policy is suitable for people of all ages who wish to protect their families from financial
crises that may occur owing to the policyholders premature death.

43

The Whole Life Policy Limited Payment

This is the best form of life assurance for family provision since it enables the Life Assured to
pay all the premiums during the ordinarily vigorous and most productive years of life. He
need not pay any premium in the later stages of life if and when his conditions might become
adverse.
With Profits Limited Payments Policies do not cease to participate in profits after completion
of the premium paying period but continue to share in the periodical Bonus Distribution until
the death of the Life Assured. The Without-Profit option is available under Table no. 3.
If the policyholder pays at least 3 years' premiums and then discontinues paying any more
premium, a reduced paid-up assurance policy comes into force.
Such a reduced paid-up Policy will not be entitled to participate in the profits declared
thereafter, but such Bonus as has already been declared on the Policy will remain attached
thereto. The premium paying term under this plan is five years minimum and 55 years
maximum.

JeevanAnand

Product summary:
This plan is a combination of Endowment Assurance and Whole Life plans. It provides
financial protection against death throughout the lifetime of the life assured with the
provision of payment of a lump sum at the end of the selected term in case of his survival.
45

Premium:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions as
opted by you throughout the selected term of the policy or till earlier death.
Bonuses:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary Bonuses
are declared per thousand Sum Assured annually at the end of each financial year. Once
declared, they form part of the guaranteed benefits of the plan. Bonuses will be added during
the selected term or till death, if it occurs earlier. Final (Additional) Bonus may also be
payable provided the policy has run for certain minimum period.

JeevanTarang
Introduction:
This is a with-profits whole of life plan which provides for annual survival benefit at a rate of
5 % of the Sum Assured after the chosen Accumulation Period. The vested bonuses in a
lump sum are payable on survival to the end of the Accumulation Period or on earlier death.
Further, the Sum Assured, along with Loyalty Additions, if any, is payable on survival to age
100 years or on earlier death.
Accumulation Period :
The plan offers three Accumulation periods 10, 15 and 20 years. A proposer may choose
any of them.
Payment of Premium:

47

Premiums can be paid regularly at yearly, half-yearly, quarterly or monthly intervals or

through salary deductions over the Accumulation Period. Alternatively, a Single Premium can
be paid on commencement of a policy.
Sample Premium Rates:
The tables below provide tabular premiums for various age-term combinations for Rs. 1000/Sum Assured.

Age
Up to 40 years
41 to 45 years
46 to 50 years
51 to 55 years
56 to 60 years

Age
Up to 46 years
47 years
48 years
49 years
50 years
51 to 55 years
56 to 60 years
Participation in Profits:

Regular premiums
Accumulation period
10 years
15 years
109.10
71.40
109.10
71.40
109.10
73.80
111.80
77.90
116.60
-

Single premiums
Accumulation period
10 years
756.00
756.00
756.00
756.00
756.00
756.00
756.00

15 years
644.00
644.00
644.00
644.00
644.00
644.00
-

20 years
51.50
53.40
56.60
-

20 years
548.00
549.00
552.00
555.20
558.90
-

Policies under this plan shall participate in profits of the Corporation. During the
accumulation period policies shall be entitled to receive simple reversionary bonuses which
will be payable on survival to the end of the accumulation period or on earlier death. After the
accumulation period, policies will be entitled to receive a Loyalty Addition payable on
maturity or earlier death. The amount of simple reversionary bonus and Loyalty Addition will
depend on the experience of the Corporation.

49

TERM ASSURANCE PLANS

Two Year Temporary Assurance Policy

Features:

The Two Year Temporary Assurance policy is designed for the insuring public who
requires risk cover for a maximum of two years.

Under the Two Year Temporary Assurance policy a single premium is required to be
paid at the outset of the policy to cover the entire period of term.

The proposer is required to pay the medical examination fee. The proof of age must
also accompany the proposal.

The policy issued will be only under the 'Without Profits' plan.

The policy is not entitled to any surrender value.

No loan will be granted against the Two Year Temporary Assurance policy.

Suitable For:
The Two Year Temporary Assurance policy caters to the individuals who specifically
require insurance cover against risk for a short period of two years, for instance persons
who are required to go on tours for instance for a year or so.

51

The Convertible Term Assurance Policy

This plan of assurance is designed to meet the needs of those who are initially unable to pay
the larger premium required for a Whole Life or Endowment Assurance Policy, but hope to
be able to pay for such a policy in the near future.
This plan would be found useful also in cases where it is desired to leave the final decision
as to the plan to a later date when, perhaps a better choice could be made.
Policy holders get an option of converting an policy into endowment assurance or limited
payment whole life assurance.

Suitable For:
For all people with earned income under Category I and unearned incomes under Category
II, basically Standard and sub-Standard lives attracting EMR classes I and II.

53

JOINT LIFE PLAN

JeevanSaathi

Product summary:
This is an Endowment Assurance Plan issued on the lives of husband and wife. The plan
provides financial protection against death of both the lives. It pays the maturity amount on
survival of one or both the lives to the end of the policy term.

Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions as
opted by you throughout the term of the policy or till the first death of the lives covered,
whichever is earlier.

Bonuses:
This is a with-profit plan and participates in the profits of the Corporations life insurance
business. It gets a share of the profits in the form of bonuses. Simple Reversionary Bonuses
are declared per thousand Sum Assured annually at the end of each financial year. Once
declared, they form part of the guaranteed benefits of the plan. Such bonuses are to be added

55

till date of maturity or the second death of the lives covered, whichever is earlier. Final
(Additional) Bonus may also be payable provided policy has run for certain minimum period.

ULIPS
4 REASONS WHY ULIPS GET THE THUMBS UP
Ask any individual who has purchased a life insurance policy in the past year or so and
chances are high that the policy will be a unit linked insurance plan (ULIP). ULIPs have been
selling like proverbial `hot cakes' in the recent past and they are likely to continue to outsell
their plain vanilla counterparts going ahead. So what is it that makes ULIPs so attractive to
the individual? Here, we have explored some reasons, which have made ULIPs so irresistible.
1. Insurance cover plus savings:
To begin with, ULIPs serve the purpose of providing life insurance combined with
savings at market-linked returns. To that extent, ULIPs can be termed as a two-in-one
plan in terms of giving an individual the twin benefits of life insurance plus savings.
This is unlike comparable instruments like a mutual fund for instance, which does not
offer a life cover.
2. Multiple investment options:
ULIPs offer a lot more variety than traditional life insurance plans. So there are
multiple options at the individual's disposal. ULIPs generally come in three broad
variants:

Aggressive ULIPs (which can typically invest 80%-100% in equities, balance in debt)

Balanced ULIPs (can typically invest around 40%-60% in equities)

Conservative ULIPs (can typically invest up to 20% in equities)

57

Although this is how the ULIP options are generally designed, the exact debt/equity
allocations may vary across insurance companies. Individuals can opt for a variant
based on their risk profile. For example, a 30-Yr old individual looking at buying a
life insurance plan that also helps him build a corpus for retirement can consider
investing in the Balanced or even the Aggressive ULIP. Likewise, a risk-averse
individual who is not comfortable with a high equity allocation can opt for the
Conservative ULIP.
3. Flexibility:
Individuals may well ask how ULIPs are any different from mutual funds. After all,
mutual funds also offer hybrid/balanced schemes that allow an individual to select a
plan according to his risk profile. The difference lies in the flexibility that ULIPs
afford the individual. Individuals can switch between the ULIP variants outlined
above to capitalize on investment opportunities across the equity and debt markets.
Some insurance companies allow a certain number of `free' switches. This is an
important feature that allows the informed individual/investor to benefit from the
vagaries of stock/debt markets. For instance, when stock markets were on the brink of
7,000 points (Sensex), the informed investor could have shifted his assets from an
Aggressive ULIP to a low-risk Conservative ULIP.
4. Works like an SIP
Rupee cost-averaging is another important benefit associated with ULIPs. Individuals
have probably already heard of the Systematic Investment Plan (SIP) which is
increasingly being advocated by the mutual fund industry. With an SIP, individuals
invest their monies regularly over time intervals of a month/quarter and don't have to
worry about `timing' the stock markets. These are not benefits peculiar to mutual
funds. Not many realize that ULIPs also tend to do the same, albeit on a
quarterly/half-yearly basis. As a matter of fact, even the annual premium in a ULIP
works on the rupee cost-averaging principle. An added benefit with ULIPs is that
individuals can also invest a one-time amount in the ULIP either to benefit from
opportunities in the stock markets or if they have an investible surplus in a particular
year that they wish to put aside for the future.

59

ULIPs vs. Mutual Funds: Who's better?

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds
in terms of their structure and functioning. As is the case with mutual funds investors in
ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared
for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to the
ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt
funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with
an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs.

How ULIPs can make you RICH!

Despite the seemingly comparable structures there are various factors wherein the two differ.
In this article we evaluate the two avenues on certain common parameters and find out how
they measure up.
1. Mode of investment/ investment amounts
Mutual fund investors have the option of either making lump sum investments or
investing using the systematic investment plan (SIP) route which entails commitments
over longer time horizons. The minimum investment amounts are laid out by the fund
house.
ULIP investors also have the choice of investing in a lump sum (single premium) or
using the conventional route, i.e. making premium payments on an annual, half-yearly,
61

quarterly or monthly basis. In ULIPs, determining the premium paid is often the
starting point for the investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the
starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the
policy's tenure. For example an individual with access to surplus funds can enhance
the contribution thereby ensuring that his surplus funds are gainfully invested;
conversely an individual faced with a liquidity crunch has the option of paying a lower
amount (the difference being adjusted in the accumulated value of his ULIP). The
freedom to modify premium payments at one's convenience clearly gives ULIP
investors an edge over their mutual fund counterparts.
2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to predetermined upper limits as prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per
annum on a recurring basis for all their expenses; any expense above the prescribed
limit is borne by the fund house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most cases, either is
applicable). Entry loads are charged at the timing of making an investment while the
exit load is charged at the time of sale.
Insurance companies have a free hand in levying expenses on their ULIP products with
no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
Development Authority. This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that insurers are required to
notify the regulator of all the expenses that will be charged on their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher expenses
translate into lower amounts being invested and a smaller corpus being accumulated.
ULIP-related expenses have been dealt with in detail in the article "Understanding
ULIP expenses".
3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly
basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity
to see where their monies are being invested and how they have been managed by
studying the portfolio.

63

There is lack of consensus on whether ULIPs are required to disclose their portfolios.
During our interactions with leading insurers we came across divergent views on this
issue.
While one school of thought believes that disclosing portfolios on a quarterly basis is
mandatory, the other believes that there is no legal obligation to do so and that insurers
are required to disclose their portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis.
However the lack of transparency in ULIP investments could be a cause for concern
considering that the amount invested in insurance policies is essentially meant to
provide for contingencies and for long-term needs like retirement; regular portfolio
disclosures on the other hand can enable investors to make timely investment
decisions.

ULIPs vs. Mutual Funds

ULIPs

Mutual Funds

Investment

Determined

by Minimum

amounts

the investor and investment

can be modified amounts
as well

are

determined by the
65

fund house
No upper limits, Upper limits for
expenses
determined
the
Expenses

expenses
by chargeable

to

insurance investors have been

company

set by the regulator

Quarterly

Portfolio
disclosure

disclosures

are

Not mandatory* mandatory

Generally
permitted for free Entry/exit

Modifying
allocation

loads

asset or at a nominal have to be borne by

cost

the investor

Section

80C Section

80C

benefits

are benefits

are

available on all available only on

Tax benefits

ULIP

investments in tax-

investments

saving funds

* There is lack of consensus on whether ULIPs are required to disclose their portfolios. While
some insurers claim that disclosing portfolios on a quarterly basis is mandatory, others state
that there is no legal obligation to do so.

1. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment
are largely comparable. For example plans that invest their entire corpus in equities
(diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced

67

funds) and those investing only in debt instruments (debt funds) can be found in both
ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a
debt from the same fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift
investments across various plans/asset classes either at a nominal or no cost (usually, a
couple of switches are allowed free of charge every year and a cost has to be borne for
additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per
his convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the
ULIP investor's equity component has appreciated, he can book profits by simply
transferring the requisite amount to a debt-oriented plan.
2. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act.
This holds good, irrespective of the nature of the plan chosen by the investor. On the
other hand in the mutual funds domain, only investments in tax-saving funds (also
referred to as equity-linked savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for
example diversified equity funds, balanced funds), if the investments are held for a
period over 12 months, the gains are tax free; conversely investments sold within a
12-month period attract short-term capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a
short-term capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have
their unique set of advantages to offer. As always, it is vital for investors to be aware
of the nuances in both offerings and make informed decisions.

69

3. Data Analysis and Interpretation

MARKETING STRATEGIES OF LIC

71

LIC made a debut in the top 50 at No.39 in 2003 and rose to No. 18 in 2004 and in 2005,
made it to the top 10 to No.6. Interestingly its rating has shot up. The following strategies
have made LIC No1 in the entire service industry and No.6 in the overall brand rating

LICs proactive approach to settlement has earned it a lot of goodwill. During the
tsunami, LIC was the only one to set up a camp at the affected areas along with the
list of policy holders and settled the claims immediately. It had earned LIC
recognition in the Manila based Asia Insurance Review.

Emphasis on market conduct and business ethics has contributed a lot to its success.

The most critical area is quick claim settlement- The benchmark is that the policy
holders ought to get post- dated checks before the date of maturity. In case of death
claims , the time lag has been brought down from 90 days to 60 days, and in the near
future it is recommended to be brought down to just 45 days.

It has targeted both the urban and rural segments.50% of LICs agents are based in
rural areas.

With the help of the social security fund, LIC has covered even those families who are
marginally above poverty line.

It has increased the emphasis on value- added services through its online portal and
allowed for premium collection through ATM machines and ECS.

It has given due consideration to its internal structure and has been streamlined,
besides this, the company ensures that it gets feedback from its agents, Customer
Relationship Management (CRM) and planning managers.

What really help LIC retain an edge over its competitors are its agents. It is paying
more attention towards its agents than before and is offering a pretty good package.

On the communication front, LIC has focused a lot on corporate advertisements

commemorating with LICs golden jubilee and many others wiz reminding people
who want a concession for taxation.

73

MARKETING

STRATEGIES

OF

PROMINENT

INSURANCE PLAYERS- A COMPARATIVE STUDY

LIFE INSURANCE CORPORATION OF INDIA:

LIC is the leader in the insurance sector with around 83% market share.

LIC has tied up with Corporation Bank and Vijaya Bank for distribution of its product.

LIC has computerized and linked all 2048 branches.

LIC was the first to introduce online premium payment facilities.

LIC is focusing on rural market because of its established brand name.

ICICI PRUDENTIAL LIFE:

ICICI [Link] the major competitor of LIC. It has the maximum market share among private
players.

Companies using tools like workstations marketing, corporate marketing, road shows
and stalls in trade fair, loading, etc.

Its strategy is to achieve scale in premium income and distribution force in shortest time.

Focus is more on direct selling apart from communication and building personal
relationships.

Company is marketing at worksite and for corporate customers has adopted a

multichannel distribution model.

Company is selling its products as long-term investment plans.

75

MAX NEW YORK LIFE (MNYL):

Max New York Life is operating with 2500 agents spread in activities in India.

It is using individual agents as its primary source of distribution.

It offers flexible products with many options and riders.

The company is using various methods like media advertising, event sponsorship, etc.
and tools like direct marketing relationship building to generate awareness and build
customer base.

MET LIFE:
Met Life is a global leader in the financial services and it has tied up with GeojetInfolin
Technologies for marketing and distribution of its products in India.

It has followed the strategy of phase-wise introduction of products in the market.

It has bundle method of offering products which includes investment options ranging
from insurance, equities, derivatives, mutual funds and TPOs

The market segment on which MetLife is focusing is South India and J&K.

TATA- AIG:
The company is following mass marketing to cover as many as lives as possible in the initial
years of its operation. It has expertise in assessing the risk covered.
.

BAJAJ- ALLIANZ:
It is giving competition to public sector general insurance companies.

Its main focus is on automobile.

Its advertisements are appearing in local newspaper, television and hording.

BIRLA- SUN LIFE:

It is focusing mainly on high net worth people so that higher sum assured can be taken up.

77

SBI STANDARD LIFE

Its products are simple

It is doing branch wise segmentation.

Average size of the policies is smaller.

HDFC STANDARD LIFE:

HDFC is the leader in housing finance in India and Standard Life is the UK market leader.
The company is using direct marketing tactics to build HDFC brand and convincing the
customer insurance as a protection tool.

79

WORKING RESULTS OF LIC

LIC today services its customers through 8 Zonal offices, 113 Divisional Offices, 2048
Branches, 1202 Satellite Offices, more than 1.19 lakh employees and 12.78 lakh agents.
Besides life insurance, through its various subsidiaries, it is involved in providing various
financial services. Today, a public giant LIC is facing direct competition with the rest 23
private life insurers. As a result of product innovation by private players, LICs market share
has gradually reduced in the post-liberalization period. Despite that, the Life Insurance
Corporation of India continues to remain the largest player in the Indian Life Insurance
market with a market share of 71.30% in FY 2011-12. Life Insurance Corporation of India
operates in 13 countries abroad through its various branches and Joint Venture Companies/
Wholly Owned Subsidiaries. Branch Offices in the U.K., Mauritius & Fiji and operate
through Joint Venture Companies in Bahrain, Qatar, Kuwait, U.A.E., Oman, Kenya, Saudi
Arabia, and Nepal & Sri Lanka. A wholly owned subsidiary LifeInsurance Corporation
(Singapore) Pte. Ltd. has been incorporated in Singapore.
The Financial Year (FY) 2011-12 has been very challenging in managing growth. Global
uncertaintiesand domestic cyclical and structural factors lowered the growth to below seven
per cent in [Link] also slowed down in emerging and developing economies
reflecting the combined impact ofmonetary tightening and slowdown in global growth.
Economic growth decelerated last year, droppingfrom 8.4 per cent in 2010-11 to 5.3 per cent
in the fourth quarter of 2011-12. Growth in the servicessector held up relatively well. The
Index of Industrial Production (IIP) growth has even moved intonegative territory in some of
the months of FY 2011-12. IIP growth for FY 2011-12 was 2.8% as comparedto 8.3% last
year.
Inflation remained persistently high during the most part of FY 2011-12 due to increased
crude &commodity prices. This has put risk to growth as interest rates were kept at higher
band for controllinginflation. The headline WPI inflation, which remained above 9 per cent
during April-November 2011,moderated to 6.9 per cent by end-March 2012. This was
reflected in the policy rates hikes by RBI during2011-12. The repo rate was 6.75% in the
beginning of the year which increased to 8.5% as on 31 stMarch 2012. The high interest rate
regime has moderated the credit demand in the economy therebyresulting into reduced credit
off-take.
81

Analysis of Income
SUMMARISED RESULTS (contd.)
INCOME

2011-2012

2010-2011

(Rs. in crore)

(Rs. in crore)

First Year Premium

28681.37

21756.38

Percentage Increase over Previous Year

31.83

14.91

Renewal Premium

104184.74

97480.56

Single Premium & Consideration for Annuities Granted

8709.36

3040.69

First Year Premium

205.47

70.30

Renewal Premium

1011.44

1121.91

Consideration for Annuities Granted

1110.10

1406.48

Group Insurance Premium

18135.93

24338.82

Group Superannuation Premium

25875.42

14962.64

Linked Business Premium

14889.07

39180.27

Total Premium Income

202802.90

203358.05

Percentage Increase over Previous Year

-0.27%

9.34%

Income from Investments

90266.87

77666.69

Miscellaneous

15330.04

16155.94

Total Income

308399.81

297180.68

Variation due to change in Fair Value of Linked Business (unit fund)

-21084.43

2091.95

Net Total Income

287315.38

299272.63

Individual Assurance

Individual Pension Schemes

Group Schemes

83

Analysis of Income(Rs. in crore)

Individual Assurance
Individual Pension Schemes
Group Schemes

2011-12
2010-11

Linked Business Premium

Income from Investments
Miscellaneous
Variation due to change in Fair Value of Linked Business (unit fund)
-100000 0

100000200000

Settlement of Claims
Settlement of claims is a very important service to the policyholders. LIC has laid emphasis
onexpeditious settlement of maturity as well as death claims. During the year 2011-12,
theCorporation has settled 1.91Crore claims for ` 71,493.17Crore (Including Micro Insurance
andPension & Group Schemes) compared to 1.90Crore claims for ` 57,490.29Crore in the
previousyear. The percentage of claims outstanding at the end of the year to the claims
payable during theyear is 0.53% as on 31st March, 2012 compared to 0.40% last year.
During 2011-12, 93.19% ofMaturity claims under Individual insurance were settled on or
before the date of maturity.

85

INVESTMENTS AS AT 31ST MARCH, 2012

Rs. in crore
Investment in India
I Loan

88379.64

II Securities

1202321.95

III Other Investments

56859.70

TOTAL (in India)

1347561.29

Investment out of India

I Loan

134.19

II Securities

1769.92

III House Property

66.51

TOTAL (out of India)

1970.62

GRAND TOTAL (in India & Out of India) [GROSS]

1349531.91

TOTAL INVESTMENTS AS AT 31ST MARCH, 2012

OTHER; 4% LOANS; 7%

SECURITIES; 89%

87

[Link]

89

CONCLUSION:
On the basis of my study of the subject, I would like to summarize the whole report by giving
the following conclusions:
1. LIC still remains to be at the top by having a hold over 71% market share in the Indian
market.
2. In terms of its products, LIC has introduced many new policies under various plans such
as endowment plans, policies for women, whole life plans and many more.
3. LIC made the biggest achievement by introducing Unit Linked Insurance Plans (ULIPS)
in the insurance market. Currently ULIPS are the most demanding policies of LIC.
4. LIC has brought a shift in its marketing strategies such as; it is now advertising all its new
policies on various Medias.
5. LIC has made a step ahead and has made significant achievements in the rural sector.
6. LIC has always worked for providing security to all and with the coming up of Pension
Plans in the recent years, LIC has been able to secure the future of the service class
people in a better manner.
7. If we talk in terms of growth and progress then, LIC remains to be at No.1 position in the
Indian Market and at No.6 in the world.

BIBLIOGRAPHY
91

BOOKS:

1. Mishra M.N; Principles of Insurance; Sultan Chand and Sons; 2007

2. Gupta P.K; Insurance and Risk Management; Himalaya Publishing House., 2004
3. Mittal Alka and Dr. [Link]; Principles of Insurance and Risk Management; Sultan
Chand and Sons.,2007

JOURNAL:
1. Insurance Chronicle August 2007

WEBSITES:
1. [Link]
2. [Link]

93