INTRODUCTION OF INSURANCE:

Insurance is a means of protection from financial loss. It is a form of risk management,

primarily used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance

carrier or underwriter. A person or entity who buys insurance is known as an insured or as
a policyholder. The insurance transaction involves the insured assuming a guaranteed and
known relatively small loss in the form of payment to the insurer in exchange for the
insurer's promise to compensate the insured in the event of a covered loss. The loss may
or may not be financial, but it must be reducible to financial terms, and usually involves
something in which the insured has an insurable interest established by ownership,
possession, or preexisting relationship.

The insured receives a contract, called the insurance policy, which details the conditions
and circumstances under which the insurer will compensate the insured. The amount of
money charged by the insurer to the insured for the coverage set forth in the insurance
policy is called the premium. If the insured experiences a loss which is potentially
covered by the insurance policy, the insured submits a claim to the insurer for processing
by a claims adjuster. The insurer may hedge its own risk by taking out reinsurance,
whereby another insurance company agrees to carry some of the risk, especially if the
primary insurer deems the risk too large for it to carry.
DEFINITION OF INSURANCE:

Insurance has been defined to be that in, which a sum of money as a premium is
paid by the insured in consideration of the insurer’s bearings the risk of paying a large
sum upon a given contingency. The insurance thus is a contract whereby:

a. Certain sum, termed as premium, is charged in consideration,

b. Against the said consideration, a large amount is guaranteed to be paid by
the insurer who received the premium,
c. The compensation will be made in certain definite sum, i.e., the loss or the
policy amount which ever may be, and
d. The payment is made only upon a contingency

More specifically, insurance may be defined as a contact between two parties, wherein
one party (the insurer) agrees to pay to the other party (the insured) or the beneficiary, a
certain sum upon a given contingency (the risk) against which insurance is required.
EVOLUTION OF INSURANCE IN INDIA

The marine insurance is the oldest form of insurance. If we trace Indian history
there are evidence that marine insurance was practiced here about three thousand years
ago. The code of Manu indicates that there was the practice of marine insurance carried
out by the traders in India with those of Srilanka , Egypt and Greece .it is wonderful to
see that Indians had even anticipated the doctrine of average and contribution. Fright was
fixed according to season and was then very much at the mercy of the wind and other
elements. Travelers by sea and land were very much exposed to the risk of losing their
vessels and merchandise because of piracy on open seas and highway robbery of
caravans was very common. The practice of insurance was very common during the rule
of Akbar to Aurangzeb, but the nature and coverage of the insurance in this period is not
well known. It was the British insurer who introduced general insurance in India in the
modern form. The Britishers opened general insurance in India around the year 1700 .the
first company known as the sun insurance office was set up in Calcutta in the year 1710.
This was followed by several insurance companies like London assurance and royal
exchange assurance (1720), Phoenix Assurance Company (1782). Etc. General insurance
business in the country was nationalized with effect from 1st January 1973 by the
General Insurance Business (Nationalization) Act, 1972. More than 100 non-life
insurance companies including branches of foreign companies operating within the
country were amalgamated and grouped into four companies, viz., the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company
Ltd., and the United India Insurance Company Ltd. with head offices at Calcutta,
Bombay, New Delhi and Madras, respectively.

Life insurance in the current form came in India from united kingdom
with the establishment of a British firm, oriental life assurance company in 1818 followed
by Bombay life assurance company in 1823, the madras equitable life insurance society
in 1829 and oriental life assurance company in 1874.prior to 1871, Indian lives were
treated as sub standard and charged an extra premium of 15% to 20%. Bombay mutual
life assurance society, an Indian insurer that came in to existence in 1871, was the first to
cover Indian lives at normal rates.
 The Indian insurance company Act 1923 was enacted inter alia, to enable
the government to collect statistical information about life and non-life insurance
business transacted in India by Indian and foreign insurer, including the provident
insurance societies.

The first half of the 20th century marked by two world war, the adverse affects
of the World War I and World War II on the economy of India, and in between them the
period of world wide economic crises triggered by the Great depression. The first half of
the 20th century was also marked by struggles for India’s independence. The aggregate
effect of these events led to a high rate of bankruptcies and liquidation of life insurance
companies in India.

This had adversely affected the faith of the general public in the utility of
obtaining life cover .In this background, the Parliament of India passed the Life Insurance
of India Act on 19th June 1956, and the Life Insurance Corporation of India was created
on 1st September, 1956, by consolidating the life insurance business of 245 private life
insurers and other entities offering life insurance services.

Since 1972, the insurance sector has been totally under the control of
government of India through LIC and GIC and its subsidiaries. As a result, revenue of
both of them increased in the last years .the amount of savings pooled by LIC increased
from Rs.2704 crores in 1974 to Rs .57670 in 1994 with an annual growth rate of
16.53%.similarly premium underwritten by GIC rose from 280 crores in 193 to 7647
crores in 1998 showing an annual growth rate of 25.18%.

Despite increase in premium collected by both LIC and GIC their were
inefficiency and red tapeisum creeped in to the insurance sector. Apart from that a major
policy shift by the Narasimha Rau government during 1990’s.the Indian economy opened
for foreign competition,
 .In this background The government of India in 1993 had set-up a high
powered committee by R.N Malhothra ,former governor reserve bank of India, to
examine the structure of Indian insurance sector and recommended changes to make it
more efficient and competitive keeping in view structural changes in other part of the
financial system of the country.Insurance sector has been opened up for competition from
Indian private insurance companies with the enactment of Insurance Regulatory and
Development Authority Act, 1999 (IRDA Act).

As per the provisions of IRDA Act, 1999, Insurance Regulatory and

Development Authority (IRDA) was established on 19th April 2000 to protect the
interests of holder of insurance policy and to regulate, promote and ensure orderly growth
of the insurance industry. IRDA Act 1999 paved the way for the entry of private players
into the insurance market, which was hitherto the exclusive privilege of public sector
insurance companies/ corporations.
 THE IMPORTANCE OF INSURANCE:

1. Provide safety and security:

Insurance provide financial support and reduce uncertainties in business and human
life. It provides safety and security against particular event. There is always a fear of
sudden loss. Insurance provides a cover against any sudden loss. For example, in case
of life insurance financial assistance is provided to the family of the insured on his
death. In case of other insurance security is provided against the loss due to fire,
marine, accidents etc.

2. Generates financial resources:

Insurance generate funds by collecting premium. These funds are invested in
government securities and stock. These funds are gainfully employed in industrial
development of a country for generating more funds and utilised for the economic
development of the country. Employment opportunities are increased by big
investments leading to capital formation.

3. Life insurance encourages savings:

Insurance does not only protect against risks and uncertainties, but also provides an
investment channel too. Life insurance enables systematic savings due to payment of
regular premium. Life insurance provides a mode of investment. It develops a habit of
saving money by paying premium. The insured get the lump sum amount at the
maturity of the contract. Thus life insurance encourages savings.

4. Promotes economic growth:

Insurance generates significant impact on the economy by mobilizing domestic
savings. Insurance turn accumulated capital into productive investments. Insurance
enables to mitigate loss, financial stability and promotes trade and commerce
activities those results into economic growth and development. Thus, insurance plays
a crucial role in sustainable growth of an economy.

5. Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a
victim of critical illness unexpectedly. And rising medical expense is of great concern.
Medical Insurance is one of the insurance policies that cater for different type of
health risks. The insured gets a medical support in case of medical insurance policy.

6. Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic
principle of insurance is to spread risk among a large number of people. A large
number of persons get insurance policies and pay premium to the insurer. Whenever a
loss occurs, it is compensated out of funds of the insurer.

7. Source of collecting funds:

Large funds are collected by the way of premium. These funds are utilised in the
industrial development of a country, which accelerates the economic growth.
Employment opportunities are increased by such big investments. Thus, insurance has
become an important source of capital formation.
FEATURES OF INSURANCE:

1. It is a contract for compensating losses.

2. Premium is charged for Insurance Contract.

3. The payment of Insured as per terms of agreement in the event of loss.

4. It is a contract of good faith.

5. It is a contract for mutual benefit.

6. It is a future contract for compensating losses.

7. It is an instrument of distributing the loss of few among many.

8. The occurrence of the loss must be accidental.

9. Insurance must be consistent with public policy.

NATURE OF INSURANCE:

1. By nature insurance is a devise of sharing risk by large number of people among

the few who are exposed to risk by one or the other reason.

2. If a large number of subscribers to insurance serve the purpose of compensation to

few among them exposed to uncertain risks appears as a co-operative look.

3. Valuation of risk is determined as per predefined terms and conditions of the

insurance policies.

4. Insurance provides facility of financial help in case of contingency.

5. However it depends on the value of insurance for which payment is made in case of
contingency. This provides basis of the amount to be paid.

6. Insurance is a policy regulated under laws and therefore the amount of insurance
can neither be paid as gambling nor as charity.
PRINCIPALS OF INSURANCE

1. Principal of utmost good faith:

Under this insurance contract both the parties should have faith over each other. As a
client it is the duty of the insured to disclose all the facts to the insurance company.
Any fraud or misrepresentation of facts can result into cancellation of the contract.

2. Principle of Insurable interest:

Under this principle of insurance, the insured must have interest in the subject matter
of the insurance. Absence of insurance makes the contract null and void. If there is no
insurable interest, an insurance company will not issue a policy .An insurable interest
must exist at the time of the purchase of the insurance. For example, a creditor has an
insurable interest in the life of a debtor, A person is considered to have an unlimited
interest in the life of their spouse etc.
3. Principle of indemnity:
Indemnity means security or compensation against loss or damage. The principle of
indemnity is such principle of insurance stating that an insured may not be
compensated by the insurance company in an amount exceeding the insured’s
economic loss. In type of insurance the insured would be compensation with the
amount equivalent to the actual loss and not the amount exceeding the loss. This is a
regulatory principal. This principle is observed more strictly in property insurance
than in life insurance. The purpose of this principle is to set back the insured to the
same financial position that existed before the loss or damage occurred.

4. Principal of subrogation:
The principle of subrogation enables the insured to claim the amount from the third
party responsible for the loss. It allows the insurer to pursue legal methods to recover
the amount of loss, For example, if you get injured in a road accident, due to reckless
driving of a third party, the insurance company will compensate your loss and will
also sue the third party to recover the money paid as claim.

5. Principle of proximate cause:

Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is
applicable when the loss is the result of two or more causes. The proximate cause
means; the most dominant and most effective cause of loss is considered. This
principle is applicable when there are series of causes of damage or loss.

6. Double insurance:
Double insurance denotes insurance of same subject matter with two different
companies or with the same company under two different policies. Insurance is
possible in case of indemnity contract like fire, marine and property insurance.
TYPES OF INSURANCE:

There are 2 type of insurance.

1. General Insurance
2. Life Insurance

1. GENERAL INSURANCE-A general insurance is a contract that offers

financial compensation on any loss other than death. It insures everything
apart from life. A general insurance compensates you for financial loss due
to liabilities related to your house, car, bike, health, travel, etc. The
insurance company promises to pay you a sum assured to cover damages
to your vehicle, medical treatments to cure health problems, losses due to
theft or fire, or even financial problems during travel.

2. LIFE INSURANCE- Life Insurance is an arrangement between the Insurance

company/Government which guarantees of compensation for loss of life in
return for payment of a specified premium. In Life Insurance, the beneficiary
whose name has been mentioned in the contract receives the specified sum,
from the insurer in case of happening of the event i.e. Loss of Life.

INTRODUCTION OF LIFE INSURANCE

Life insurance is a contract between an insurance policy holder and an insurer or
assurer, where the insurer promises to pay a designated beneficiary a sum of money
(the benefit) in exchange for a premium, upon the death of an insured person (often
the policy holder). Depending on the contract, other events such as terminal
illness or critical illness can also trigger payment. The policy holder typically pays a
premium, either regularly or as one lump sum. Other expenses, such as funeral
expenses, can also be included in the benefits.

Life policies are legal contracts and the terms of the contract describe the limitations
of the insured events. Specific exclusions are often written into the contract to limit
the liability of the insurer; common examples are claims relating to suicide, fraud,
war, riot, and civil commotion.

Modern life insurance bears some similarity to the asset management industry[1] and
life insurers have diversified their products into retirement products such as annuities.
[2]

Life-based contracts tend to fall into two major categories:

 Protection policies – designed to provide a benefit, typically a lump sum

payment, in the event of a specified occurrence. A common form—more common
in years past—of a protection policy design is term insurance.

 Investment policies – the main objective of these policies is to facilitate the

growth of capital by regular or single premiums. Common forms (in the U.S.)
are whole life, universal life, and variable life policies.
LIFE INSURANCE CORPORATION OF INDIA:
INTRODUCTION OF LIFE INSURANCE CORPORATION OF
INDIA:

Life Insurance Corporation of India (LIC) is an Indian state-owned insurance

group and investment company headquartered in Mumbai. It is the largest insurance
company in India with an estimated asset value of ₹2,529,390 crore (US$350 billion)
(2016).[2] As of 2013 it had total life fund of ₹1,433,103.14 crore and total number of
policies sold coming in at ₹367.82 lakh that year (2012-13).

The Life Insurance Corporation of India was founded in 1956 when the Parliament of
India passed the Life Insurance of India Act that nationalised the private insurance
industry in India. Over 245 insurance companies and provident societies were merged
to create the state owned Life Insurance Corporation.
HISTORY OF LIFE INSURANCE CORPORATION OF INDIA:

Life Insurance the Corporation of India was founded in 1956 when the Parliament of
India passed the Life Insurance of India Act that nationalized the private insurance
industry in India. Over 245 insurance companies and provident societies were
merged to create the state owned Life Insurance Corporation.
The Oriental Life Insurance Company, the first company in India offering life
insurance coverage, was established in Calcutta in 1818 by Anita Bhavsar and
others. Its primary target market was the Europeans based in India, and it charged
Indians heftier premiums. Surendranath Tagore (son of Satyendranath Tagore) had
founded Hindustan Insurance Society, which later became Life Insurance
Corporation.
The Bombay Mutual Life Assurance Society, formed in 1870, was the first
native insurance provider. Other insurance companies established in the pre-
independence era included

 Postal Life Insurance (PLI) was introduced on 1 February 1884

 Bharat Insurance Company (1896)

 United India (1906)

 National Indian (1906)

 National Insurance (1906)

 Co-operative Assurance (1906)

 Hindustan Co-operatives (1907)

 Indian Mercantile

 General Assurance

 Swadeshi Life (later Bombay Life)

 Sahyadri Insurance (Merged into LIC, 1986)

The first 150 years were marked mostly by turbulent economic conditions. It
witnessed, India's First War of Independence, adverse effects of the World War I
and World War II on
the economy of India, and in between them the period of worldwide economic crises
triggered by the Great depression. The first half of the 20th century also saw a
heightened struggle for India's independence. The aggregate effect of these events led
to a high rate of and liquidation of life insurance companies in India. This had
adversely affected the faith of the general public in the utility of obtaining life cover.
LIC is the most trusted company enjoying more than 60 years of trust, faith and
confidence of people. Revenue is $ 88.400 billion and Profit is $ 9.257 billion.
WHY LIC:

 Highest Bonus rates in the industry. LIC : 3.5% to 5.2% Other : 1.2% to
2.8%
 Stress-Free Claims: LIC : 99.92% Others : 89.4%
 Assured returns. Your investment in LIC is backed by Sovereign
Guarantee of Govt. of India.
 Easy access to service. 113 Divisional Offices 2,048 branches 1,381
satellite offices Number of employees 114773 13 lakh+ agents 54 customer
zones 25 metro-area service hubs
 LIC has settled 208.85 lakh claims amounting to Rs 85,519.96 crore in
2015-16.
 LIC is known as “Pension Provider” of the country.
 Every year LIC invest money for People’s Welfare
 At any time the “Return” of your money is more important than the
“Returns” on your money.
 The Economic Times Brand Equity Survey 2012 rated LIC as the No. 6
Most Trusted Service Brand of India.
 From the year 2006, LIC has been continuously winning the Readers’
Digest Trusted brand award.
 Voted India’s Most Trusted brand in the BFSI category according to the
Brand Trust Report for 4 continuous years – 2011-2014 according to the
Brand Trust Report.
RESEARCH METHODOLOGY

METHOD OF DATA COLLECTION :

This research methodology is based on primary data and secondary data.

1. Primary Data-

The primary sources of data refer to the first hand Information. Primary data is
collected during the survey with the help of Questionnaires.
In primary data collection, you collect the data yourself using methods such as
interviews and questionnaires. The key point here is that the data you collect is unique
to you and your research and, until you publish, no one else has access to it.

There are many methods of collecting primary data and the main methods include:

 questionnaires

 interviews

 focus group interviews

 observation

 case-studies

 diaries

 critical incidents

 Portfolios.
 2. Secondary Data-

Secondary data means data that are already available i.e. they refer to the data
which have been collected and analyzed by someone and can save both money
and time of the researcher. Secondary data may be available in the form of
company records, trade publications, libraries etc. Secondary data sources are
as follows:
Company Reports
Daily Newspaper
Standard Textbook
Various Websites
OBJECTIVES OF THE STUDY:

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.

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

7. 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.
 8. 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.

SCOPE OF THE STUDY:

Insurance is the most dynamic and growing sector in today’s 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 one’s life at various stages because of the
various benefits it offers.
This report presents of how LIC came into existence and how it became as one of the
top insurance players of India.
SIGNIFICANCE OF THE STUDY:

1. LIC sets a benchmark; others work hard to reach near to it!

2. LIC gives guarantee; others shows dream.

3. LIC is the back bone of your family, others can become break bone of
your family!

4. LIC do not have back up of government; government has the biggest

back up of LIC!!!

5. If you are taking life insurance from private sector, you are building their
business while if you are taking LIC policy then Congratulations, you are
contributing in the development of our great nation! (Meaning: LIC gives
crores of loans to Government of India for Railway, Infrastructure,
Roads, Telecom etc.)

6. For me LIC simply means “LIFE IS COMFORTABLE”.

7. LIC is father because it is the oldest life insurance company in India

while others are grand children who are still struggling to give claims to
their customers.

8. Where there is LIC there is TRUST!

9. Customers are the backbone of LIC while customers are the backbone of
income for others.
 10. Last but not the least… LIC Hai To Fir Kahin Aur Kyun Jaana…???
“ZINDAGI KE SAATH BHI, ZINDAGI KE BAAD BHI!”

LIMITATION OF THE STUDY:

People buy insurance when they have no need for example an old woman buying life
insurance. Also the example of buying life insurance for a very long time period till
you are 80 years old. At that age you have no need since you would have no
dependents and earning power as well.
Millions of people every year buy insurance products without understanding it. Most
of the complex products give suboptimal returns and have no suitability for the
buyers. Agents frequently give bad advice to get more commissions. Companies also
make more money by selling complex products which people don’t understand.
People have little clue and don’t compare life insurance products even from the same
provider. Sometimes they buy insurance policies which are far too expensive leading
to heavy burden which is unnecessary.