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Unit 8: Life Insurance

By the mid–1950s, there were around 170 insurance companies and 80 provident fund societies Notes
in the country’s life insurance scene. However, in the absence of regulatory systems, scams and
irregularities were almost a way of life at most of these companies’ funds.
As a result, the government decided to nationalise the life assurance business in India. The Life
Insurance Corporation of India was set up in 1956 to take over around 250 life assurance companies.
After the RN Malhotra Committee report of 1994 became the first serious document calling for
the re-opening up of the insurance sector to private players – that the sector was finally opened
up to private players in 2001.
Following points will help you understand the role of LIC:
1. Largest Insurance Company in India-55 per cent share in 2009,monpoly for 50 years,
insurance is not an option but necessity in current times,
2. Largest institutional investor,
3. Provides expenses of Central government-24.6 per cent of the expenses of the central
government,
4. Maximum types of schemes which touch every aspect of life-40+ schemes,
5. Covers different economic sections of the society,

6. Largest insurer in rural areas,
7. Help in Channelizing Money of NRI’s through schemes-Currency Policy,
8. One of the biggest employer: It has 8 zonal Offices and 101 divisional offices located in
different parts of India, at least 2048 branches,1.2 million agents,
9. Non-inflationary source of funds for the government,
10. Funds to Private sector,
11. Contribution to national GDP- In 2006, LIC created huge surpluses and contributed 7 per
cent to the national GDP, and
12. Social service with profit.

8.6.1 Objectives of LIC

You need to know about the following objectives of LIC:
1. 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.
2. Maximize mobilization of people’s savings by making insurance-linked savings adequately
attractive.

3. 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.
4. Conduct business with utmost economy and with the full realization that the moneys
belong to the policyholders.

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

LOVELY PROFESSIONAL UNIVERSITY 149