Description
This document talks about Industry Trends of insurance industry, PEST Analysis of insurance Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about LIC, it's Finance performance, SWOT analysis of LIC and Various Strategies employed by LIC.
COMPANY ANALYSIS Life Insurance Corporation of India (LIC)
Industry analysis:
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Industry trends: Global and Indian perspectives, recent trends.
Insurance is a system of spreading the risk of one onto the shoulders of many. While it becomes impossible for a man to bear by himself 100% loss to his company, insurance is a method which distributes the burden of loss. The basic human trait is the idea of aversion risk taking. Insurance, whether life or non-life, provides a reasonable degree of security and assurance, that they will be protected in any event of calamity or failure of any sort. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingency upon these may be insured against at a premium commensurate with the risk involved. As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the U.S., the Gramm-Leach-Bliley Act of 1999 legislated that banks, brokerages, insurance firms and other types of financial institutions can join together to offer their customers a more complete range of services. In the insurance business, this has led to a flurry of merger and acquisition activity. In fact, a majority of the liability insurance underwritten in the U.S. has been through big firms, which have also been scooping up other insurance names. With the de-regulation in Indian Insurance industry, the monopoly of public sector companies in life insurance and general insurance has come to an end. Growth in the interactive technology such as internet has further created a wave of excitement in the insurance market. Indian economy and Indian Insurance sector is committed to a double digit growth. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Since 2001 Insurance is growing at the rate of 15-20 % annually. The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8 in 2006. Together with banking services, it adds about 7% to the country’s GDP. Emerging Trend - To gear up for competition, public sector companies are releasing a spate of new products, including for the first time, a savings-type business package called ereturn-linked insurance schemes. Public sector companies are also examining products relating to finance, credit risks and software (product liability). A crucial issue for foreign investors is to ensure that their Indian partners are capable and willing to invest additional funds over the next few years. The existing players are trying their best to improve service and bridge the gap between them and the technologically savvy new players by implementing computerization at a faster pace. However, there are some issues faced by insurers, old and new alike, such as convergence of banking and insurance, emergence of new distribution channels, changing customer perceptions, evolving regulations, bank assurance, e-
Banking & insurance, emergence of new finance linked products such as derivatives and catastrophe bonds.
? PEST Analysis for the Insurance sector:
Political: • • • • • • • • Government policies for regulating the industry. Government stake in the insurance Companies. Policies for private Companies to enter the industry. In India, companies with a minimum paid up capital of Rs.1bn are allowed. Laws pertaining to allowance of foreign companies to enter in the sector. In India, foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance allowance to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. Norms pertaining to Consumer protection law Terrorist attacks or wars
Economical • GDP of developed countries. Though the potential market in India for the Insurance business is large, yet the products offered and penetration achieved is far less compared to international standards. Estimates show that a meager 35-40 million, out of the total Indian population have so far come under the insurance umbrella. In India currently the life insurance premium as a percentage of GDP is 1.3 % against 5.2 % in the U.S More competition: Competition means that players aggressively target potential customers and this will increase the penetration of insurance. A number of concerns are being expressed regarding the opening up of the Insurance sector. The national interest lies in increasing the penetration of insurance products, increasing the retention of premium in India and mobilizing resources for infrastructure needs. Currency fluctuation in case of policies issued in foreign currency. Opening the Insurance Sector: In India, approx. 60% of the total health expenditure comes from self paid category as against government’s contribution of 25-30 %. A majority of private hospitals are expensive for a normal middle class family. The opening up of the insurance sector to private players is expected to give a shot in the arms of the healthcare industry. Health Insurance will make healthcare affordable to a large number of people. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance.
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Social • Population Mix: India has an amorphous middle-class of about 250-300 million people who can afford to buy insurance products. Out of this only 22 percent have insurance and that too covers only 25 percent of their needs and financial capacity. The remaining 80 percent have no insurance cover. The life insurance market of India, therefore, is practically untapped. • Job opportunities in the insurance sector: The Insurance sector is a service industry and international companies will help build local professionals with world class expertise by introducing the best global practices. Competition will also develop a better understanding of consumer requirements leading to more customized products apt for the market place. Hence competitive Insurance will not result in shrinkage of local jobs. • Urban rural mix: Having a blend of products for both urban and rural population. Rural insurance
should be looked upon as an opportunity. A smaller bundle of innovative products in sync with rural needs and perception and an efficient delivery system are the two aspects that have to be developed in order to penetrate the rural markets Technological • Online services: Services enabling policyholders to receive immediate policy status report and prompt acceptance of their premium and get Revival Quotation, Loan Quotation on demand. Incorporating change of address can be done online. New payment related Modules pertaining to both ordinary & SSS policies have been added to the Front End Package catering to Loan, Claims and Development Officers’ Appraisal. • Metro and Wide Area Network: A Metropolitan Area Network, connecting many branches to help customers pay their Premium or get their Status Report, Surrender Value Quotation, Loan Quotation etc. from ANY Branch in the city. Connecting Zonal Offices and all the MAN centres through a Wide Area Network (WAN). This will enable a customer to view his policy data and pay premium from any branch of any MAN city. • Interactive Voice Response Systems (IVRS): IVRS has already been made functional all over the country. This would enable customers to ring up LIC and receive information (e.g. next premium due, Status, Loan Amount, and Maturity payment due, Accumulated Bonus etc.) about their policies on the telephone. This information could also be faxed on demand to the customer. • Payment of Premium and Policy Status on Internet: Providing customers with the facility to pay premiums through Internet absolutely free and also view their policy details on Internet premium payments. • Information Kiosks: Interactive Touch screen based Multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. These KIOSKS provide policy details and accept premium payments. • Info Centres: Setting up call centres, manned by skilled employees to provide you with information about our Products, Policy Services, Branch addresses and other organizational information.
? Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company
Sol: ICICI Prudential Life insurance ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's capital stands at Rs. 4,780 crores (as of September 30, 2010) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. ICICI Prudential Life Insurance’s has posted its maiden profit of Rs 258-crore for the financial year 2010. They have had huge profitability in this year due to cost cutting (of about Rs 350-crore) and launch of various low charging products while last year company had recorded a loss of Rs 780-crore. Their target is to achieve 10% market share by this year through innovative concepts and products. They even plan to open new branches to facilitate their growth. The ICICI Prudential Life Insurance chief highlighted the introduction of new products last year as a major growth-driver. The solvency ratio according to the regulatory requirement is to be of 150% whereas ICICI Pru’s is 290%. Major ICICI Prudential Products: • ICICI Prudential Life Insurance has a variety of plans to suit your financial requirements and give you complete security against unforeseen circumstances.
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ICICI Prudential Health Care Plans are designed to help you avail the best of medical facilities in times of crisis. • ICICI Prudential Retirement Solutions and Pension Plans are innovative schemes to give you complete peace of mind after retirement from work. • ICICI Prudential Asset Management helps you manage your funds in the most professional manner. • ICICI Prudential Life time gold investment • ICICI Prudential Tax saving plan is meant to provide you the benefits of tax savings and also to invest in long-term equity. • ICICI Prudential Mutual funds like ICICI Prudential Discovery Fund, Infrastructure Fund, Equity Fund, ELSS The company has a network of over 1,500 offices and over 1,60,000 advisors, as on September 30, 2010. The company has assets held over Rs. 65,000 crores as on September 30, 2010. It has one of the largest distribution networks amongst private life insurers in India. It has a strong presence across India with 1960 branches (including 1096 micro-offices) and an advisor base of over 230,000. The company has 6 banc assurance partners having tie-ups with ICICI bank, Jalgaon People's Coop Bank, Ratnagiri District Central Co-op Bank, Ballia Kshetriya Co-op Bank, Renuka Nagrik Sahakari Bank and Bhandara Urban Co-op Bank.
? SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Strengths: o Good market share o Increasing premium rates and commissions o Increasing variety of insurance products o IT bringing new dimensions into this industry o Extensive distribution network making insurance products easily available Weakness: o Risk factor: Equity performance o Failure to adapt to market changes. o Cumbersome policy buying processes Opportunities: o Untapped rural sectors o Inclusion of mobile technology for processes o Customizable policies to meet busy schedules of the clients/insurers. Threats: o Increasing commodity rates o Increasing expenses and lower profit margins may hit small insurance firms o High interest rates o New substitutes by competitors o Regulatory changes by govt. For issuance of health care insurance.
Life Insurance Corporation of India
? Brief description:
Life Insurance Corporation (LIC) of India is the only public sector Life Insurance Company in India. The company was formed in September 1956. LIC is the largest life insurance company in India with a huge presence in both urban and rural markets. Its distribution is unmatched and has a strong agent force which reaches out to every small town in India ensuring that their products are being offered to one and all in the country. The insurance products of LIC are often the most simple and consumer friendly and it is displayed by the enormous response it gets to the launch of any new product. LIC has an insurance product for almost any need - from protection, savings and investments, micro-insurance plans to special plans for women and even for handicapped individuals. The insurance agents of LIC have been the backbone of the company for long and their agent network keeps getting bigger by the day. Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the corporate office. LIC’s Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info centers have been commissioned in many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business.
? History
LIC was formed in 1956 with the merger of more than 200 insurance companies and provident societies. Since then they have been among the most trusted brands in India providing insurance solutions to even the remotest corners of India through their huge network of agents and distributors. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It was only in 2001 that the private sector was allowed into the insurance sector in India. LIC has maintained its dominant leadership status even with the presence of 22 other life insurance companies.
In recent time it was awarded “Trusted brand” by Readers’ Digest, ET brand Equity’s most trusted brand, Asian Leadership award, “The most trusted service Brand” in India, by “Economic Times and AC NEILSEN ORG MARG” for the year 2009 for the 5th consecutive year.
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Members On The Board Of The Corporation
Shri Dinesh Kumar Mehrotra, (CHAIRMAN, LIC): Mr. Mehrotra took over from Rakesh Singh; additional secretary. Shri T. S. Vijayan, (Managing Director, LIC): Nine months after losing the LIC chairmanship , T S Vijayan is back in the reckoning for the top job at the country's largest financial institution in feb 2012 Shri Thomas Mathew T. (Managing Director, LIC ): A Post-Graduate in Economics, Graduate in Law, Post-Graduate Diploma in Management and an Associate of The Insurance Institute of India. He took over charge as Managing Director of LIC of India on March 24, 2006. Shri Sushobhan Sarker (Managing Director, LIC ) ; Priory he was Executive Director (International Operations) handling LIC's global business in Fiji, Mauritius, Kenya, Nepal, Saudi Arabia, Bahrain (covering GCC counties), the U.K., Sri Lanka and Singapore. Shri R. Gopalan, (Secretary, Department of Economic Affairs, Ministry of Finance, Govt. of India.): An MBA from Harvard University and masters in economics from Boston University, was in ministry of commerce and industry(From November 24, 2009 to December 31, 2009) Shri D.K. Mittal, (Secretary, Department of Financial Services, Ministry of Finance, Govt. of India.) Shri A.K. Roy, (Chairman cum Managing Director, GIC.) Shri M.V. Tanksale, (Chairman & Managing Director, Central Bank of India) Other Board members include Lt. General Arvind Mahajan (Retd.), Shri Anup Prakash Garg, Shri Sanjay Jain, Shri Ashok Singh, Shri K.S. Sampath, Shri Amardeep Singh Cheema
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? LIC market strength
? Business Strategy The LIC of India, being old brand and Govt. owned insurer in the market its market share is large as compared to private players. But consumer’s perception of the insurance is that of an investment rather than as a risk cover. They expect prompt services. The LIC of India has been facing competition pressure, so it has been reorganizing itself in order to perform better and to compete with private players. LIC has been formulating new strategies and plans from time to time. No doubt, experience generally improves performance; the LIC has experience of more than fifty years. Even IRDA also aims at innovative and progressive development of insurance sector. LIC has been taken following steps to increase its market competitiveness and retains its dominant position in the insurance market. 1. Product development: Life Insurance Corporation introduced traditional insurance schemes. To cater consumer needs about protection against risk factor, provision for future, old age provision, by launching whole life plans, Endowment plans, Term insurance plans and pensions plans over a period. Every year by taking market review it introduces new innovative plans and also withdraws those plans which have less market response. Now, LIC of India has been changed its products to meet the varied need of the customer. It has been caused due to following reasons.
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Competitive pressure Changing behavior of consumer.
In the competitive market there is a greater need to provide insurance products that meet the needs of the customers. Therefore, LIC offers wide variety of products which fulfills the needs of different segments of the society. Health insurance plans: LIC has observed that there is a top potential for the health insurances business. 2. Marketing Activities: In marketing of insurance products effectively, field personnel play pivotal role. The corporation has been developed alternative distribution channels along with channels to increase its business volume. ? Agents: In LIC of India, the Agent is a pioneer field force, in procurement of the LIC’s business. LIC has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public. The corporation has launched scheme of Urban Career Agents and Rural Career Agents. To promote them the corporation also gives stipends at the start of their career and to enable them to settle down the profession. ? Micro Insurance Plan: The LIC of India not only concentrates on celebrity marketing and rich class segment but also launched insurance plan under a separate business vertical to extend security to the less privileged section of the society. ? Banca Assurance and Alternate channels: LIC also tied up with the banks in urban and with Regional Rural Banks (RRB) to spread its business. The percentage share of Alternate channel business to total business went up from 2.01% to 2.40% in policies and from 1.84% to 3.05% in first premium income. Out of total business of alternate channels, banks (under corporate agency mode) contributed 67.29% of number of policies and 63.70%. ? Foreign Branches: The Corporation directly operates through its branch offices in Mauritius at Port Louis, Fiji at Surva and Lautoka and United Kingdom at Werobley. 3. Foreign Joint Venture Companies: • Life Insurance Corporation (International)B.S.C.(C),Bahrain: LIC(International)B.S.C.(C) Bahrain was established in Bahrain in 1989 as a joint venture company which caters to the life insurance needs of Non-Resident Indians (NRIs) and local population in the Gulf by issuing policies in US Dollars. The company operates in 5 GCC countries of Bahrain, Kuwait, UAE, Qatar and Oman. For the year ended 31.12.2010, the company recorded a Net Premium of about `503 crore. • Life Insurance Corporation (Nepal) Ltd: LIC(Nepal) Ltd., a joint venture company between LIC of India and M/s Vishal Group of companies in the Republic of Nepal was established on 3rd December 2001. It is a listed company whose shares are traded on the Nepal Stock Exchange. For the Financial year ending 15.07.2010, the company recorded a Net Premium of about `97 crore. • Life Insurance Corporation (Lanka)Ltd.: LIC(Lanka) Ltd., a joint venture company between LIC of India and M/s Bartleet Transcapital Ltd. was established on 01.03.2003. For the year ended December’ 2010, the company recorded a Net Premium of about `10 crore. • Kenindia Assurance Co. Ltd.: Kenindia Assurance Co. Ltd., a joint venture company between LIC of India, General Insurance Corporation of India and others was established on 06.12.1978 in Kenya. The company transacts both life and non-life business. For the year ended 31.12.2010, the company recorded a Net Premium of about `141 crore. • Saudi Indian Company for Co-operative Insurance: Saudi Indian Company for Cooperative Insurance (SICCI) is a joint venture company between LIC of India, LIC(International) B.S.C.(c),Bahrain, New India Assurance Company Limited, Al- Hokair Group and public from Saudi Arabia where LIC of India & LIC (International) hold 10.2% share each.
? Diversified Activities:
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LIC Housing Finance Limited: LIC Housing Finance Limited with its Corporate Office in Mumbai has 7 Regional Offices, 13 Back Offices, 183 Marketing Offices and 1 Customer Service Point in the country. It also has representative offices at Dubai and Kuwait. The Company’s shares are listed on the Bombay Stock Exchange and the National Stock Exchange and its Global Depository Shares (GDS) listed on the Luxembourg Stock Exchange. The Company is rated ‘AAA’ by CRISIL & CARE. The Company’s Fixed Deposit Program has been rated as ‘FAAA’ by CRISIL indicating the highest degree of safety. LIC Nomura Mutual Fund Asset Management Company Ltd: Set up by the Life Insurance Corporation of India on 20th April 1989 to engage in the business of Mutual Fund, LIC Mutual Fund finalized its Joint Venture with Nomura Asset Management Strategic Investments Pte. Ltd. on 18/01/2011 and thus becoming LIC NOMURA Mutual Fund with its investment manager, renamed as LIC Nomura Mutual Fund Asset Management Ltd. (AMC) and trustee as LIC NOMURA Mutual Fund Trustee Company Pvt. Ltd., wherein Nomura acquired 35% stake. LIC Pension Fund Ltd: LIC Pension Fund Ltd. has been sponsored by LIC of India with a specific purpose of managing pension funds under New Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA) for the employees of Central Government, who have joined services w.e.f. 1st January, 2004. For State Govt. employees, this scheme is applicable as per above as and when it is adopted by the respective State Government. LIC Pension Fund Ltd. is a fund management company. LIC Pension Fund Ltd. is the first company of its kind in India to manage pension funds under New Pension System. LIC Cards Services Ltd: LIC Cards Services Limited, a wholly owned company of LIC of India was incorporated on 11th November, 2008 with an objective to provide access to LIC Card customers, the payment products through strategic alliance/s. During the financial year 2010-2011, the company distributed gold and silver cards in tie up with Corporation Bank and distributed 11813 credit cards.
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List of major LIC products:
• • • • Lic Jeevan anand: It is a good whole life plan. It has the wonderful returns and extremely helpful plan. Entire Life Plan + Endowment guaranteed Plan. Lic Jeevan saral: LIC's New Jeevan Saral Monthly Recurring Scheme Jeevan Saral ATM Plan Table No 165. Jeevan saral policy by Lic of India which is also called ATM plan. Jeevan Saral offers insurance with money liquidity and tax saving. Lic new bima gold Policy: It is a plan where premiums paid over the term of plan are paid back during the policy term in installments and life insurance cover is available not only during the term but also during the extended term of the plan. LIC Jeevan Tarang: This is a with-profits whole of life plan which provides for annual survival benefit at a rate of 5½ % 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. Jeevan Mitra(Triple Cover Endowment Plan): This is an Endowment Assurance plan that provides greater financial protection against death throughout the term of plan. It pays the maturity amount on survival to the end of the policy term. Jeevan Shree-I: 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.
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Lic Endowment Plus: This is a unit linked Endowment plan which offers investment cum insurance cover during the term of the policy. You can choose the level of insurance cover within the limits, which will depend on the mode and level of premium you agree to pay. Lic Pension Plan Jeevan Nidhi: LIC's JEEVAN NIDHI is a with profits Deferred Annuity (Pension) plan. Lic Pension Plan Jeevan Akshay VI: It is an Immediate Annuity plan, which can be purchased by paying a lump sum amount. The plan provides for annuity payments of a stated amount throughout the life time of the annuitant. Various options are available for the type and mode of payment of annuities. Lic Pension Plan New Jeevan Dhara-I: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term. Lic Pension Plan New Jeevan Suraksha-I: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term. Lic Children plans Child Career Plan: This plan is specially designed to meet the increasing educational and other needs of growing children. Lic Children plans Child Future Plan: This plan is specially designed to meet the increasing educational, marriage and other needs of growing children. Lic Children plans Jeevan Kishore: This is an Endowment Assurance Plan available for children of less than 12 years of age. The policy may be purchased by any of the parent/grandparent. Lic Children plans Jeevan Anurag: Jeevan ANURAG is a with profit plan specifically designed to take care of the educational needs of children. Lic Children plans Jeevan Chhaya: This is an Endowment Assurance plan that provides financial protection against death throughout the term of the plan.
? Financial performance as of last fiscal year
Life Insurance funds grew to Rs. 2,52,919 crore in 2010-11 compared to Rs. 2,24,487 crore. As percentage of Gross Financial Savings, the share grew from 22.6% in 2009-10 to 24.2% in 2010-11. The share of life funds of LIC and Private Insurers rose to 23.8% of Gross Financial Savings in 201011 as against 22% in 2009-10. At current prices, the amounts were Rs. 2,47,993 crore in 2010-11 compared to ,17,973 crore in 2009-10. Life insurance funds were 3.7% of GDP at factor cost in 200910. This was an improvement over 2008-09 when the percentage was 3.3%. Total First Year Premium of life insurers including Group Business grew by 15.1% in 2010-11 to Rs. 1,25,826 crore from Rs. 1,09,290 crore in 2009-10. From 59.3% in the first half of the year, the growth moderated sharply in the second half of the year. There was negative variation of 9.5% in the number of new insurance policies sold by life insurers in 2010-11 as compared to 2009-10. The number of new life insurance policies sold by life insurers in 2010-11 came down to 4,81,51,884 from 5,32,24,435 in 2009-10. The market share of Life Insurance Corporation of India improved to 68.7% in 2010-11 from 64.9% in 2009-10 in First Year Premium. On the basis of policies too, the market share improved to 76.9% in 2010-11 from 73% in 2009-10. CAPITAL REDEMPTION AND ANNUITY CERTAIN BUSINESS As on March 31, 2011, Annuity Certain Policies numbering 2,437 were in force for an amount of annuity per annum of Rs.795.72 lakh. There were 17,233 Capital Redemption policies in force for a sum assured of Rs. 30,496.20 lakh NEW BUSINESS for the year INDIVIDUAL ASSURANCE Sum Assured / NCO a) Assurances b) Annuities* c) Pension* d) Linked No. of Policies (in lakh) a) Assurances b) Annuities c) Pension d) Linked GROUP SCHEMES Sum Assured (incl Linked Business) Annuities per annum 91861.17 1332.03 84576.95 520.38 314.59 0.35 0.23 55.09 305.91 0.23 0.19 82.18 444031.90 44.18 509.58 29403.47 397157.64 21.35 645.18 36951.06 2010-2011 (in crore) 2009-2010 (in crore)
No. of Schemes: Group Insurance(incl Linked Business) Social Security Group Schemes Group Superannuation No. of lives (in lakh) Group Insurance (incl Linked Business) Social Security Group Schemes Group Superannuation BUSINESS IN FORCE At the end of the year : INDIVIDUAL INSURANCE Sum Assured & Bonus/APA a) Assurances b) Annuities** c) Pension** d) Linked No. of Policies (in lakh) a) Assurances b) Annuities c) Pension d) Linked GROUP SCHEMES Sum Assured Annuities per annum No. of schemes: Group Insurance Group Superannuation No of lives (in lakh) Group Insurance Group Superannuation 898.46 81.35 764.22 70.00 127321 7875 125019 5974 551718.13 7023.08 457918.61 5197.96 2404.84 9.75 17.75 428.06 2261.59 9.62 18.18 494.34 2721857.07 1549.56 2000.45 191014.82 2422714.40 1569.84 2381.20 223154.84 212.12 132.75 11.73 186.40 149.76 51.17 18073 5446 1990 18305 5190 268
*NCO - Notional Cash Option, **APA - Annuity Per Annum, (10 lakh = 1 million & 100 lakh = 1 crore; 100 crore = 1 billion)
? SWOT Analysis of LIC India
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Strength: Largest state-owned life insurance company in India, and also the country's largest investor Has over 2000 branches across all parts of India and more than 10,00,000 agents. With Largest fund base it is the biggest investor in India Involves over 115,000 employees across India According to The Brand Trust Report, LIC is the 8th most trusted brand of India LIC has subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited, LIC Nomura Mutual Fund, LIC(Nepal)Ltd, LIC(Lanka)Ltd, LIC(International)BSC(C) Weakness o It has an image of a Government agency and hence lacks innovation o Being a Government agency, red tape and bureaucracy cause problems o Managing a huge workforce during economic crisis meant overburdened due to salaries o Discord amongst employees o o o o o o Opportunity o Use of Technology to provide effective services to cater to urban population. o Government Schemes implementation o Exploring pension market o Large Real estate portfolio Threats o Economic crisis o Entry of new NBFCs in the sector o Varying Govt. policies
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? Various strategies employed by LIC in the course of conducting business • Stakes in Infosys INC on 14 July, 2012: LIC raised its stake in Infosys to 6.3 per cent, with purchase of shares worth an estimated Rs 2,000 crore in the first quarter of the current financial year. LIC, also one of the biggest investors in the Indian stock market, saw its holding in the information technology (IT) major rise from 4.9 per cent earlier. LIC is the largest non-promoter shareholder of the company Tie with Axis Bank in June 2011: Life Insurance Corporation (LIC) of India announced a tie-up with Axis Bank to offer co-branded credit cards to its policyholders and employees. Axis Bank would manage the card business and it would be available in three different platforms like gold and titanium. The Visa branded credit card would have a photo of the cardholder and a signature digitally imprinted on it. Valid internationally, the credit card will facilitate policyholders to pay premiums from other places, thus saving on the bank charges. LIC launched the Jeevan Samridhi Plus Plan in March 2011: LIC’s Samridhi Plus is a unit linked plan that safeguards your investment from market fluctuations, so that your investments are protected in financially volatile times. It is a product which combines both insurance and investment. Samridhi plus features at glance: Highest NAV of first 100 Months or NAV at maturity, whichever is higher, Guaranteed by LIC Jeevan Samridhi Plus. o Partial Withdrawals allowed after 5 years. Surrender without any Charges after 5 years. Within 5 years also allowed by converting it into Fund Account but Payable after 5 years with minimum guaranteed interest @ 3.5 % per Annum.
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Death benefit: Sum assured or Fund Value, whichever is higher is paid in case Of unfortunate death. Accident Benefit Option also available. (Jeevan Samridhi Plus Latest Policy Tax ). o The benefits payable when the Jeevan Samridhi Review Plus Policy holder exercises the option for complete Withdrawal or does not exercise any Option During the Notice. o If Jeevan Samridhi policy holder exercises the option for complete withdrawal from the Policy OR does not exercise the Option Within t he period of 30 days of receipt of notice. o Then the Samridhi policy shall be compulsorily terminated. The Lic policy holder’s Fund Value As on the date of discontinuance of policy after deducting the Discontinuance LIC Jeevan Vaibhav in May, 2012: It is a non-linked one time premium endowment assurance policy. It is a guaranteed return plan. Being a non-linked plan share market risk is Nil. LIC Jeevan Vaibhav is a close ended plan. It will be available for sale from 21st may, 2012 for a maximum period of 120 days. Other features include: o Minimum Entry Age: 8 years (completed) o Maximum Entry Age: 65 years (nearest birthday) o Mode of Premium Payment: Single premium o Policy Term: 10 years o Minimum Sum Assured: Rs.2 lakh o Maximum Sum Assured: No Max Limit o The sum assured would be in multiple of Rs.10,000/o Death Benefit: During Policy term, excluding last policy year: Sum Assured shall be payable to nominee. o Maturity Benefit: On maturity date, the sum assured along with loyalty addition, if any, will be payable to the policy holder.
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doc_117859467.doc
This document talks about Industry Trends of insurance industry, PEST Analysis of insurance Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about LIC, it's Finance performance, SWOT analysis of LIC and Various Strategies employed by LIC.
COMPANY ANALYSIS Life Insurance Corporation of India (LIC)
Industry analysis:
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Industry trends: Global and Indian perspectives, recent trends.
Insurance is a system of spreading the risk of one onto the shoulders of many. While it becomes impossible for a man to bear by himself 100% loss to his company, insurance is a method which distributes the burden of loss. The basic human trait is the idea of aversion risk taking. Insurance, whether life or non-life, provides a reasonable degree of security and assurance, that they will be protected in any event of calamity or failure of any sort. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingency upon these may be insured against at a premium commensurate with the risk involved. As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the U.S., the Gramm-Leach-Bliley Act of 1999 legislated that banks, brokerages, insurance firms and other types of financial institutions can join together to offer their customers a more complete range of services. In the insurance business, this has led to a flurry of merger and acquisition activity. In fact, a majority of the liability insurance underwritten in the U.S. has been through big firms, which have also been scooping up other insurance names. With the de-regulation in Indian Insurance industry, the monopoly of public sector companies in life insurance and general insurance has come to an end. Growth in the interactive technology such as internet has further created a wave of excitement in the insurance market. Indian economy and Indian Insurance sector is committed to a double digit growth. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Since 2001 Insurance is growing at the rate of 15-20 % annually. The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8 in 2006. Together with banking services, it adds about 7% to the country’s GDP. Emerging Trend - To gear up for competition, public sector companies are releasing a spate of new products, including for the first time, a savings-type business package called ereturn-linked insurance schemes. Public sector companies are also examining products relating to finance, credit risks and software (product liability). A crucial issue for foreign investors is to ensure that their Indian partners are capable and willing to invest additional funds over the next few years. The existing players are trying their best to improve service and bridge the gap between them and the technologically savvy new players by implementing computerization at a faster pace. However, there are some issues faced by insurers, old and new alike, such as convergence of banking and insurance, emergence of new distribution channels, changing customer perceptions, evolving regulations, bank assurance, e-
Banking & insurance, emergence of new finance linked products such as derivatives and catastrophe bonds.
? PEST Analysis for the Insurance sector:
Political: • • • • • • • • Government policies for regulating the industry. Government stake in the insurance Companies. Policies for private Companies to enter the industry. In India, companies with a minimum paid up capital of Rs.1bn are allowed. Laws pertaining to allowance of foreign companies to enter in the sector. In India, foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance allowance to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. Norms pertaining to Consumer protection law Terrorist attacks or wars
Economical • GDP of developed countries. Though the potential market in India for the Insurance business is large, yet the products offered and penetration achieved is far less compared to international standards. Estimates show that a meager 35-40 million, out of the total Indian population have so far come under the insurance umbrella. In India currently the life insurance premium as a percentage of GDP is 1.3 % against 5.2 % in the U.S More competition: Competition means that players aggressively target potential customers and this will increase the penetration of insurance. A number of concerns are being expressed regarding the opening up of the Insurance sector. The national interest lies in increasing the penetration of insurance products, increasing the retention of premium in India and mobilizing resources for infrastructure needs. Currency fluctuation in case of policies issued in foreign currency. Opening the Insurance Sector: In India, approx. 60% of the total health expenditure comes from self paid category as against government’s contribution of 25-30 %. A majority of private hospitals are expensive for a normal middle class family. The opening up of the insurance sector to private players is expected to give a shot in the arms of the healthcare industry. Health Insurance will make healthcare affordable to a large number of people. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance.
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Social • Population Mix: India has an amorphous middle-class of about 250-300 million people who can afford to buy insurance products. Out of this only 22 percent have insurance and that too covers only 25 percent of their needs and financial capacity. The remaining 80 percent have no insurance cover. The life insurance market of India, therefore, is practically untapped. • Job opportunities in the insurance sector: The Insurance sector is a service industry and international companies will help build local professionals with world class expertise by introducing the best global practices. Competition will also develop a better understanding of consumer requirements leading to more customized products apt for the market place. Hence competitive Insurance will not result in shrinkage of local jobs. • Urban rural mix: Having a blend of products for both urban and rural population. Rural insurance
should be looked upon as an opportunity. A smaller bundle of innovative products in sync with rural needs and perception and an efficient delivery system are the two aspects that have to be developed in order to penetrate the rural markets Technological • Online services: Services enabling policyholders to receive immediate policy status report and prompt acceptance of their premium and get Revival Quotation, Loan Quotation on demand. Incorporating change of address can be done online. New payment related Modules pertaining to both ordinary & SSS policies have been added to the Front End Package catering to Loan, Claims and Development Officers’ Appraisal. • Metro and Wide Area Network: A Metropolitan Area Network, connecting many branches to help customers pay their Premium or get their Status Report, Surrender Value Quotation, Loan Quotation etc. from ANY Branch in the city. Connecting Zonal Offices and all the MAN centres through a Wide Area Network (WAN). This will enable a customer to view his policy data and pay premium from any branch of any MAN city. • Interactive Voice Response Systems (IVRS): IVRS has already been made functional all over the country. This would enable customers to ring up LIC and receive information (e.g. next premium due, Status, Loan Amount, and Maturity payment due, Accumulated Bonus etc.) about their policies on the telephone. This information could also be faxed on demand to the customer. • Payment of Premium and Policy Status on Internet: Providing customers with the facility to pay premiums through Internet absolutely free and also view their policy details on Internet premium payments. • Information Kiosks: Interactive Touch screen based Multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. These KIOSKS provide policy details and accept premium payments. • Info Centres: Setting up call centres, manned by skilled employees to provide you with information about our Products, Policy Services, Branch addresses and other organizational information.
? Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company
Sol: ICICI Prudential Life insurance ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's capital stands at Rs. 4,780 crores (as of September 30, 2010) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. ICICI Prudential Life Insurance’s has posted its maiden profit of Rs 258-crore for the financial year 2010. They have had huge profitability in this year due to cost cutting (of about Rs 350-crore) and launch of various low charging products while last year company had recorded a loss of Rs 780-crore. Their target is to achieve 10% market share by this year through innovative concepts and products. They even plan to open new branches to facilitate their growth. The ICICI Prudential Life Insurance chief highlighted the introduction of new products last year as a major growth-driver. The solvency ratio according to the regulatory requirement is to be of 150% whereas ICICI Pru’s is 290%. Major ICICI Prudential Products: • ICICI Prudential Life Insurance has a variety of plans to suit your financial requirements and give you complete security against unforeseen circumstances.
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ICICI Prudential Health Care Plans are designed to help you avail the best of medical facilities in times of crisis. • ICICI Prudential Retirement Solutions and Pension Plans are innovative schemes to give you complete peace of mind after retirement from work. • ICICI Prudential Asset Management helps you manage your funds in the most professional manner. • ICICI Prudential Life time gold investment • ICICI Prudential Tax saving plan is meant to provide you the benefits of tax savings and also to invest in long-term equity. • ICICI Prudential Mutual funds like ICICI Prudential Discovery Fund, Infrastructure Fund, Equity Fund, ELSS The company has a network of over 1,500 offices and over 1,60,000 advisors, as on September 30, 2010. The company has assets held over Rs. 65,000 crores as on September 30, 2010. It has one of the largest distribution networks amongst private life insurers in India. It has a strong presence across India with 1960 branches (including 1096 micro-offices) and an advisor base of over 230,000. The company has 6 banc assurance partners having tie-ups with ICICI bank, Jalgaon People's Coop Bank, Ratnagiri District Central Co-op Bank, Ballia Kshetriya Co-op Bank, Renuka Nagrik Sahakari Bank and Bhandara Urban Co-op Bank.
? SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Strengths: o Good market share o Increasing premium rates and commissions o Increasing variety of insurance products o IT bringing new dimensions into this industry o Extensive distribution network making insurance products easily available Weakness: o Risk factor: Equity performance o Failure to adapt to market changes. o Cumbersome policy buying processes Opportunities: o Untapped rural sectors o Inclusion of mobile technology for processes o Customizable policies to meet busy schedules of the clients/insurers. Threats: o Increasing commodity rates o Increasing expenses and lower profit margins may hit small insurance firms o High interest rates o New substitutes by competitors o Regulatory changes by govt. For issuance of health care insurance.
Life Insurance Corporation of India
? Brief description:
Life Insurance Corporation (LIC) of India is the only public sector Life Insurance Company in India. The company was formed in September 1956. LIC is the largest life insurance company in India with a huge presence in both urban and rural markets. Its distribution is unmatched and has a strong agent force which reaches out to every small town in India ensuring that their products are being offered to one and all in the country. The insurance products of LIC are often the most simple and consumer friendly and it is displayed by the enormous response it gets to the launch of any new product. LIC has an insurance product for almost any need - from protection, savings and investments, micro-insurance plans to special plans for women and even for handicapped individuals. The insurance agents of LIC have been the backbone of the company for long and their agent network keeps getting bigger by the day. Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the corporate office. LIC’s Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info centers have been commissioned in many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business.
? History
LIC was formed in 1956 with the merger of more than 200 insurance companies and provident societies. Since then they have been among the most trusted brands in India providing insurance solutions to even the remotest corners of India through their huge network of agents and distributors. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It was only in 2001 that the private sector was allowed into the insurance sector in India. LIC has maintained its dominant leadership status even with the presence of 22 other life insurance companies.
In recent time it was awarded “Trusted brand” by Readers’ Digest, ET brand Equity’s most trusted brand, Asian Leadership award, “The most trusted service Brand” in India, by “Economic Times and AC NEILSEN ORG MARG” for the year 2009 for the 5th consecutive year.
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Members On The Board Of The Corporation
Shri Dinesh Kumar Mehrotra, (CHAIRMAN, LIC): Mr. Mehrotra took over from Rakesh Singh; additional secretary. Shri T. S. Vijayan, (Managing Director, LIC): Nine months after losing the LIC chairmanship , T S Vijayan is back in the reckoning for the top job at the country's largest financial institution in feb 2012 Shri Thomas Mathew T. (Managing Director, LIC ): A Post-Graduate in Economics, Graduate in Law, Post-Graduate Diploma in Management and an Associate of The Insurance Institute of India. He took over charge as Managing Director of LIC of India on March 24, 2006. Shri Sushobhan Sarker (Managing Director, LIC ) ; Priory he was Executive Director (International Operations) handling LIC's global business in Fiji, Mauritius, Kenya, Nepal, Saudi Arabia, Bahrain (covering GCC counties), the U.K., Sri Lanka and Singapore. Shri R. Gopalan, (Secretary, Department of Economic Affairs, Ministry of Finance, Govt. of India.): An MBA from Harvard University and masters in economics from Boston University, was in ministry of commerce and industry(From November 24, 2009 to December 31, 2009) Shri D.K. Mittal, (Secretary, Department of Financial Services, Ministry of Finance, Govt. of India.) Shri A.K. Roy, (Chairman cum Managing Director, GIC.) Shri M.V. Tanksale, (Chairman & Managing Director, Central Bank of India) Other Board members include Lt. General Arvind Mahajan (Retd.), Shri Anup Prakash Garg, Shri Sanjay Jain, Shri Ashok Singh, Shri K.S. Sampath, Shri Amardeep Singh Cheema
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? LIC market strength
? Business Strategy The LIC of India, being old brand and Govt. owned insurer in the market its market share is large as compared to private players. But consumer’s perception of the insurance is that of an investment rather than as a risk cover. They expect prompt services. The LIC of India has been facing competition pressure, so it has been reorganizing itself in order to perform better and to compete with private players. LIC has been formulating new strategies and plans from time to time. No doubt, experience generally improves performance; the LIC has experience of more than fifty years. Even IRDA also aims at innovative and progressive development of insurance sector. LIC has been taken following steps to increase its market competitiveness and retains its dominant position in the insurance market. 1. Product development: Life Insurance Corporation introduced traditional insurance schemes. To cater consumer needs about protection against risk factor, provision for future, old age provision, by launching whole life plans, Endowment plans, Term insurance plans and pensions plans over a period. Every year by taking market review it introduces new innovative plans and also withdraws those plans which have less market response. Now, LIC of India has been changed its products to meet the varied need of the customer. It has been caused due to following reasons.
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Competitive pressure Changing behavior of consumer.
In the competitive market there is a greater need to provide insurance products that meet the needs of the customers. Therefore, LIC offers wide variety of products which fulfills the needs of different segments of the society. Health insurance plans: LIC has observed that there is a top potential for the health insurances business. 2. Marketing Activities: In marketing of insurance products effectively, field personnel play pivotal role. The corporation has been developed alternative distribution channels along with channels to increase its business volume. ? Agents: In LIC of India, the Agent is a pioneer field force, in procurement of the LIC’s business. LIC has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public. The corporation has launched scheme of Urban Career Agents and Rural Career Agents. To promote them the corporation also gives stipends at the start of their career and to enable them to settle down the profession. ? Micro Insurance Plan: The LIC of India not only concentrates on celebrity marketing and rich class segment but also launched insurance plan under a separate business vertical to extend security to the less privileged section of the society. ? Banca Assurance and Alternate channels: LIC also tied up with the banks in urban and with Regional Rural Banks (RRB) to spread its business. The percentage share of Alternate channel business to total business went up from 2.01% to 2.40% in policies and from 1.84% to 3.05% in first premium income. Out of total business of alternate channels, banks (under corporate agency mode) contributed 67.29% of number of policies and 63.70%. ? Foreign Branches: The Corporation directly operates through its branch offices in Mauritius at Port Louis, Fiji at Surva and Lautoka and United Kingdom at Werobley. 3. Foreign Joint Venture Companies: • Life Insurance Corporation (International)B.S.C.(C),Bahrain: LIC(International)B.S.C.(C) Bahrain was established in Bahrain in 1989 as a joint venture company which caters to the life insurance needs of Non-Resident Indians (NRIs) and local population in the Gulf by issuing policies in US Dollars. The company operates in 5 GCC countries of Bahrain, Kuwait, UAE, Qatar and Oman. For the year ended 31.12.2010, the company recorded a Net Premium of about `503 crore. • Life Insurance Corporation (Nepal) Ltd: LIC(Nepal) Ltd., a joint venture company between LIC of India and M/s Vishal Group of companies in the Republic of Nepal was established on 3rd December 2001. It is a listed company whose shares are traded on the Nepal Stock Exchange. For the Financial year ending 15.07.2010, the company recorded a Net Premium of about `97 crore. • Life Insurance Corporation (Lanka)Ltd.: LIC(Lanka) Ltd., a joint venture company between LIC of India and M/s Bartleet Transcapital Ltd. was established on 01.03.2003. For the year ended December’ 2010, the company recorded a Net Premium of about `10 crore. • Kenindia Assurance Co. Ltd.: Kenindia Assurance Co. Ltd., a joint venture company between LIC of India, General Insurance Corporation of India and others was established on 06.12.1978 in Kenya. The company transacts both life and non-life business. For the year ended 31.12.2010, the company recorded a Net Premium of about `141 crore. • Saudi Indian Company for Co-operative Insurance: Saudi Indian Company for Cooperative Insurance (SICCI) is a joint venture company between LIC of India, LIC(International) B.S.C.(c),Bahrain, New India Assurance Company Limited, Al- Hokair Group and public from Saudi Arabia where LIC of India & LIC (International) hold 10.2% share each.
? Diversified Activities:
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LIC Housing Finance Limited: LIC Housing Finance Limited with its Corporate Office in Mumbai has 7 Regional Offices, 13 Back Offices, 183 Marketing Offices and 1 Customer Service Point in the country. It also has representative offices at Dubai and Kuwait. The Company’s shares are listed on the Bombay Stock Exchange and the National Stock Exchange and its Global Depository Shares (GDS) listed on the Luxembourg Stock Exchange. The Company is rated ‘AAA’ by CRISIL & CARE. The Company’s Fixed Deposit Program has been rated as ‘FAAA’ by CRISIL indicating the highest degree of safety. LIC Nomura Mutual Fund Asset Management Company Ltd: Set up by the Life Insurance Corporation of India on 20th April 1989 to engage in the business of Mutual Fund, LIC Mutual Fund finalized its Joint Venture with Nomura Asset Management Strategic Investments Pte. Ltd. on 18/01/2011 and thus becoming LIC NOMURA Mutual Fund with its investment manager, renamed as LIC Nomura Mutual Fund Asset Management Ltd. (AMC) and trustee as LIC NOMURA Mutual Fund Trustee Company Pvt. Ltd., wherein Nomura acquired 35% stake. LIC Pension Fund Ltd: LIC Pension Fund Ltd. has been sponsored by LIC of India with a specific purpose of managing pension funds under New Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA) for the employees of Central Government, who have joined services w.e.f. 1st January, 2004. For State Govt. employees, this scheme is applicable as per above as and when it is adopted by the respective State Government. LIC Pension Fund Ltd. is a fund management company. LIC Pension Fund Ltd. is the first company of its kind in India to manage pension funds under New Pension System. LIC Cards Services Ltd: LIC Cards Services Limited, a wholly owned company of LIC of India was incorporated on 11th November, 2008 with an objective to provide access to LIC Card customers, the payment products through strategic alliance/s. During the financial year 2010-2011, the company distributed gold and silver cards in tie up with Corporation Bank and distributed 11813 credit cards.
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List of major LIC products:
• • • • Lic Jeevan anand: It is a good whole life plan. It has the wonderful returns and extremely helpful plan. Entire Life Plan + Endowment guaranteed Plan. Lic Jeevan saral: LIC's New Jeevan Saral Monthly Recurring Scheme Jeevan Saral ATM Plan Table No 165. Jeevan saral policy by Lic of India which is also called ATM plan. Jeevan Saral offers insurance with money liquidity and tax saving. Lic new bima gold Policy: It is a plan where premiums paid over the term of plan are paid back during the policy term in installments and life insurance cover is available not only during the term but also during the extended term of the plan. LIC Jeevan Tarang: This is a with-profits whole of life plan which provides for annual survival benefit at a rate of 5½ % 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. Jeevan Mitra(Triple Cover Endowment Plan): This is an Endowment Assurance plan that provides greater financial protection against death throughout the term of plan. It pays the maturity amount on survival to the end of the policy term. Jeevan Shree-I: 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.
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Lic Endowment Plus: This is a unit linked Endowment plan which offers investment cum insurance cover during the term of the policy. You can choose the level of insurance cover within the limits, which will depend on the mode and level of premium you agree to pay. Lic Pension Plan Jeevan Nidhi: LIC's JEEVAN NIDHI is a with profits Deferred Annuity (Pension) plan. Lic Pension Plan Jeevan Akshay VI: It is an Immediate Annuity plan, which can be purchased by paying a lump sum amount. The plan provides for annuity payments of a stated amount throughout the life time of the annuitant. Various options are available for the type and mode of payment of annuities. Lic Pension Plan New Jeevan Dhara-I: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term. Lic Pension Plan New Jeevan Suraksha-I: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term. Lic Children plans Child Career Plan: This plan is specially designed to meet the increasing educational and other needs of growing children. Lic Children plans Child Future Plan: This plan is specially designed to meet the increasing educational, marriage and other needs of growing children. Lic Children plans Jeevan Kishore: This is an Endowment Assurance Plan available for children of less than 12 years of age. The policy may be purchased by any of the parent/grandparent. Lic Children plans Jeevan Anurag: Jeevan ANURAG is a with profit plan specifically designed to take care of the educational needs of children. Lic Children plans Jeevan Chhaya: This is an Endowment Assurance plan that provides financial protection against death throughout the term of the plan.
? Financial performance as of last fiscal year
Life Insurance funds grew to Rs. 2,52,919 crore in 2010-11 compared to Rs. 2,24,487 crore. As percentage of Gross Financial Savings, the share grew from 22.6% in 2009-10 to 24.2% in 2010-11. The share of life funds of LIC and Private Insurers rose to 23.8% of Gross Financial Savings in 201011 as against 22% in 2009-10. At current prices, the amounts were Rs. 2,47,993 crore in 2010-11 compared to ,17,973 crore in 2009-10. Life insurance funds were 3.7% of GDP at factor cost in 200910. This was an improvement over 2008-09 when the percentage was 3.3%. Total First Year Premium of life insurers including Group Business grew by 15.1% in 2010-11 to Rs. 1,25,826 crore from Rs. 1,09,290 crore in 2009-10. From 59.3% in the first half of the year, the growth moderated sharply in the second half of the year. There was negative variation of 9.5% in the number of new insurance policies sold by life insurers in 2010-11 as compared to 2009-10. The number of new life insurance policies sold by life insurers in 2010-11 came down to 4,81,51,884 from 5,32,24,435 in 2009-10. The market share of Life Insurance Corporation of India improved to 68.7% in 2010-11 from 64.9% in 2009-10 in First Year Premium. On the basis of policies too, the market share improved to 76.9% in 2010-11 from 73% in 2009-10. CAPITAL REDEMPTION AND ANNUITY CERTAIN BUSINESS As on March 31, 2011, Annuity Certain Policies numbering 2,437 were in force for an amount of annuity per annum of Rs.795.72 lakh. There were 17,233 Capital Redemption policies in force for a sum assured of Rs. 30,496.20 lakh NEW BUSINESS for the year INDIVIDUAL ASSURANCE Sum Assured / NCO a) Assurances b) Annuities* c) Pension* d) Linked No. of Policies (in lakh) a) Assurances b) Annuities c) Pension d) Linked GROUP SCHEMES Sum Assured (incl Linked Business) Annuities per annum 91861.17 1332.03 84576.95 520.38 314.59 0.35 0.23 55.09 305.91 0.23 0.19 82.18 444031.90 44.18 509.58 29403.47 397157.64 21.35 645.18 36951.06 2010-2011 (in crore) 2009-2010 (in crore)
No. of Schemes: Group Insurance(incl Linked Business) Social Security Group Schemes Group Superannuation No. of lives (in lakh) Group Insurance (incl Linked Business) Social Security Group Schemes Group Superannuation BUSINESS IN FORCE At the end of the year : INDIVIDUAL INSURANCE Sum Assured & Bonus/APA a) Assurances b) Annuities** c) Pension** d) Linked No. of Policies (in lakh) a) Assurances b) Annuities c) Pension d) Linked GROUP SCHEMES Sum Assured Annuities per annum No. of schemes: Group Insurance Group Superannuation No of lives (in lakh) Group Insurance Group Superannuation 898.46 81.35 764.22 70.00 127321 7875 125019 5974 551718.13 7023.08 457918.61 5197.96 2404.84 9.75 17.75 428.06 2261.59 9.62 18.18 494.34 2721857.07 1549.56 2000.45 191014.82 2422714.40 1569.84 2381.20 223154.84 212.12 132.75 11.73 186.40 149.76 51.17 18073 5446 1990 18305 5190 268
*NCO - Notional Cash Option, **APA - Annuity Per Annum, (10 lakh = 1 million & 100 lakh = 1 crore; 100 crore = 1 billion)
? SWOT Analysis of LIC India
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Strength: Largest state-owned life insurance company in India, and also the country's largest investor Has over 2000 branches across all parts of India and more than 10,00,000 agents. With Largest fund base it is the biggest investor in India Involves over 115,000 employees across India According to The Brand Trust Report, LIC is the 8th most trusted brand of India LIC has subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited, LIC Nomura Mutual Fund, LIC(Nepal)Ltd, LIC(Lanka)Ltd, LIC(International)BSC(C) Weakness o It has an image of a Government agency and hence lacks innovation o Being a Government agency, red tape and bureaucracy cause problems o Managing a huge workforce during economic crisis meant overburdened due to salaries o Discord amongst employees o o o o o o Opportunity o Use of Technology to provide effective services to cater to urban population. o Government Schemes implementation o Exploring pension market o Large Real estate portfolio Threats o Economic crisis o Entry of new NBFCs in the sector o Varying Govt. policies
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? Various strategies employed by LIC in the course of conducting business • Stakes in Infosys INC on 14 July, 2012: LIC raised its stake in Infosys to 6.3 per cent, with purchase of shares worth an estimated Rs 2,000 crore in the first quarter of the current financial year. LIC, also one of the biggest investors in the Indian stock market, saw its holding in the information technology (IT) major rise from 4.9 per cent earlier. LIC is the largest non-promoter shareholder of the company Tie with Axis Bank in June 2011: Life Insurance Corporation (LIC) of India announced a tie-up with Axis Bank to offer co-branded credit cards to its policyholders and employees. Axis Bank would manage the card business and it would be available in three different platforms like gold and titanium. The Visa branded credit card would have a photo of the cardholder and a signature digitally imprinted on it. Valid internationally, the credit card will facilitate policyholders to pay premiums from other places, thus saving on the bank charges. LIC launched the Jeevan Samridhi Plus Plan in March 2011: LIC’s Samridhi Plus is a unit linked plan that safeguards your investment from market fluctuations, so that your investments are protected in financially volatile times. It is a product which combines both insurance and investment. Samridhi plus features at glance: Highest NAV of first 100 Months or NAV at maturity, whichever is higher, Guaranteed by LIC Jeevan Samridhi Plus. o Partial Withdrawals allowed after 5 years. Surrender without any Charges after 5 years. Within 5 years also allowed by converting it into Fund Account but Payable after 5 years with minimum guaranteed interest @ 3.5 % per Annum.
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Death benefit: Sum assured or Fund Value, whichever is higher is paid in case Of unfortunate death. Accident Benefit Option also available. (Jeevan Samridhi Plus Latest Policy Tax ). o The benefits payable when the Jeevan Samridhi Review Plus Policy holder exercises the option for complete Withdrawal or does not exercise any Option During the Notice. o If Jeevan Samridhi policy holder exercises the option for complete withdrawal from the Policy OR does not exercise the Option Within t he period of 30 days of receipt of notice. o Then the Samridhi policy shall be compulsorily terminated. The Lic policy holder’s Fund Value As on the date of discontinuance of policy after deducting the Discontinuance LIC Jeevan Vaibhav in May, 2012: It is a non-linked one time premium endowment assurance policy. It is a guaranteed return plan. Being a non-linked plan share market risk is Nil. LIC Jeevan Vaibhav is a close ended plan. It will be available for sale from 21st may, 2012 for a maximum period of 120 days. Other features include: o Minimum Entry Age: 8 years (completed) o Maximum Entry Age: 65 years (nearest birthday) o Mode of Premium Payment: Single premium o Policy Term: 10 years o Minimum Sum Assured: Rs.2 lakh o Maximum Sum Assured: No Max Limit o The sum assured would be in multiple of Rs.10,000/o Death Benefit: During Policy term, excluding last policy year: Sum Assured shall be payable to nominee. o Maturity Benefit: On maturity date, the sum assured along with loyalty addition, if any, will be payable to the policy holder.
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