hi frnd this a pdf version of my own created file containing the history of insurance in world and in India..moreover there is a brief description of LIC is given.i think it wl b veru useful for u.and kindly mail me if u have ne prob ao if u wanna me to do ne correction..... thanx

1. PROJECT REPORT ON
INSURANCE SECTOR
&
LIFE INSURANCE
CORPORATION OF INDIA
SUBMITTED TO : PROF. B.S.RAO
SUBMITTED BY : PIYUSH KHARE
B2-38

2. INTRODUCTION
Insurance is a term which means a form of agreement or
contract. Its actually a protection against a loss for which we pay
certain amount of money periodically in exchange for a guarantee
that we will be compensated under stipulated conditions for any
specified loss by fire, accident, death, etc. in other words we can
say that a system to make large financial losses more affordable by
pooling the risks of many individuals and business entities and
transferring them to an insurance company or other large group in
return for a premium. When we talk about insurance the first thing
comes in our mind is the loss. So to compensate that loss, we pay a
nominal charge to any institution, which is known as premium and
the guarantee which we receive from that particular institution is
known as insurance. It may be described as a social device to
reduce or eliminate the risk of loss to life and property. Insurance is a
collective bearing of risk. Insurance is a scheme of economic
cooperation by which the members of the community share the
unavoidable risks. The risks which can be insured against include fire,
deaths, accidents and burglary. It can’t prevent the occurrence of
risk but it provides for the losses of risks.
Insurance can be defines as a legal contract between two
parties whereby one party called the insurer undertakes to pay a
fixed amount of money on the happening of a particular event,
which may be certain or uncertain. The party called the insured pays
in exchange a fixed sum known as premium. The document which
embodies the contract is called the policy.
 HISTORY OF INSURANCE

3. In the beginning was . . . insurance? Maybe not. But people
have always yearned for security. Over 4,000 years ago
Hammurabi, King of ancient Babylon, introduced a crude form
of life and robbery insurance. An injured party had merely to
declare his loss before God and the state would make suitable
restitution. God as claims adjuster-who could be fairer?
The Romans used burial clubs as a form of life insurance,
providing funeral expenses for members and later payments to
the survivors. With the growth of towns and trade in Europe, the
medieval guilds undertook to protect their members from loss
by fire and shipwreck, to ransom them from captivity by pirates,
and to provide decent burial and support in sickness and
poverty. By the middle of the 14th cent., as evidenced by the
earliest known insurance contract (Genoa, 1347), marine
insurance was practically universal among the maritime nations
of Europe. In London, Lloyd's Coffee House (1688) was a place
where merchants, shipowners, and underwriters met to transact
business. By the end of the 18th cent. Lloyd's had progressed
into one of the first modern insurance companies. Around 600
A.D., the Greeks and Romans developed their own versions of
health and life insurance by forming groups that cared for the
families and funeral expenses of members upon death. Other
specialized lines of insurance started developing in post-
Renaissance Europe, as London was becoming a major trade
center. With all of the marine explorations and shipping, a more
need developed for a more sophisticated type of insurance.
Lloyd's of London was formed to meet this need, beginning in a
London coffee house frequented by mariners and investors
alike, Now, Lloyd's of London remains the largest insurer in
specialty markets. It should be noted that Lloyd's is not a typical

4. insurance company -- it essentially brokers the risk to its private
investors. That's one of the reasons the company is able to
insure unusual things such as priceless works of art, a musician's
fingers, a model's face, etc.
INSURANCE SECTOR IN INDIA
The history of insurance in India can be traced back to the
Vedas. The Sanskrit term YOGAKSHEMA, the name of Life Insurance
Corporation of India’s corporate headquarters, is found in the Rig
Veda. Some form of ‘community insurance’ was practiced by the
Aryans around 1000 BC. The joint family system prevalent in India was
an important form of social cooperation.
Insurance is a federal subject in India and has a history dating
back to 1818 with the establishment of the Oriental Life Insurance
Company in Calcutta. All the insurance companies established
during that period were brought up with the purpose of looking after
the needs of European community and these companies were not
insuring Indian natives. However, later with the efforts of eminent
people like Babu Muttylal Seal, the foreign life insurance companies
started insuring Indian lives. But Indian lives were being treated as
sub-standard lives and heavy extra premiums were being charged
on them. Bombay Mutual Life Assurance Society, the birth of first

5. Indian life insurance company in the year 1870, and covered Indian
lives at normal rates. Starting as Indian enterprise with highly patriotic
motives, insurance companies came into existence to carry the
message of insurance and social security through insurance to
various sectors of society.
The Swadeshi Movement of 1905-07 and many more
movement of this time led to an increase in number of insurance
companies. In 1912 the first legislation regulating insurance, the Life
Insurance Companies Act, 1912, was promulgated. The Insurance
Act, 1938, the first comprehensive legislation governing both life and
non life branches of insurance was enacted to provide strict state
control over the insurance business. By the mid 1950s, there were 154
Indian insurers, 16 foreign insurers and 75 provident societies carrying
on life insurance business in India. Insurance business flourished and
so did scams, irregularities, and dubious investments practices by
scores of companies. As a result, the govt. decided to nationalize
the life assurance business in India. The Life Insurance Corporation of
India was set up in 1956 to take over 245 companies. The General
Insurance Corporation of India was set up in 1973.
Right now there are several insurance companies in India.
Some of the top companies are:
1. Life Insurance Corporation of India.
2. ICICI
3. Bajaj Allianz Life Insurance Company Limited
4. SBI Life Insurance Company Limited
5. SBI Life Insurance Co Ltd
6. Reliance Life Insurance Company Ltd
7. HDFC Standard Life Insurance Company Limited
8. Birla Sun Life Insurance Company Ltd
9. Max New York Life Insurance Company Ltd

6. MALHOTRA COMMITTEE
The government set up, in 1993, a committee under the
chairmanship of R.N. Malhotra, the former insurance secretary and
the RBI governor to evaluate the Indian insurance industry and
recommend its future direction. The main recommendation of the
Malhotra Committee was as follows:-
i) The government should bring down its stake in the insurance
companies to 50%.
ii) Private companies with a minimum paid-up capital of Rs.100 crore
should be allowed to enter the industry.
iii) Foreign companies may be allowed to enter the industry in
collaboration with domestic companies.
iv)A strong and effective insurance regulatory authority in the form of
a statutory autonomous board on the lines of the SEBI.
v) The mandatory investment of LIC life fund in government securities
need to be reduced from 15% to 50%.
vi) The GIC and its subsidiaries should not hold more than 5% in any
company.
vii) No single company should be allowed to transact business in
both the life and general insurance business.
vii) The number of entrants should be controlled.

7. viii) The state level cooperatives should be allowed to set up
cooperatives societies for transacting life insurance business in the
state.
There are some other recommendations which the committee
had put. According to the recommendation of the Malhotra
Committee an autonomous body was constituted on 19th April 2000,
name Insurance Regulatory and Development Authority (IRDA). The
Act was approved in the parliament in December 1999 and the
insurance sector was thrown open for private licensees on 15th
August 2000.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
The Insurance Regulatory and Development Act of 1999 were set out
as follows. “To provide for the establishment of an Authority to
protect the interests of holders of insurance policies, to regulate,
promote and ensure orderly growth of the insurance industry and for
matters connected therewith or incidental thereto and further to
amend the Insurance Act, 1938, the Life Insurance Corporation Act,
1956 and the General Insurance Business (Nationalization) Act,
1972.”
The Act effectively reinstituted the Insurance Act of 1938 with
(marginal) modifications. Whatever was not explicitly mentioned in
the 1999 Act referred back to the 1938 Act?
(1) It specified the creation and functioning of an Insurance Advisory
Committee that sets out rules and regulation.
(2) It stipulates the role of the “Appointed Actuary”. He/she has to be
a Fellow of the Actuarial Society of India. For life insurers the

8. Appointed Actuary has to be an internal company employee, but
he or she may be an external consultant if the company happens to
be a non-life insurance company. The Appointed Actuary would be
responsible for reporting to the Insurance Regulatory and
Development Authority a detailed account of the company.
(3) Under the “Actuarial Report and Abstract”, pricing of products
have to be given in detail. It also requires details of the basic
assumptions for valuation. There are prescribed forms that have to
be filled out by the Appointed Actuary including specific formulas for
calculating solvency ratios.
(4) It stipulates the requirements for an agent. For example,
insurance agents should have at least a high school diploma along
with training of 100 hours from a recognized institution.
(5) Under “Assets, Liabilities, and Solvency Margin of Insurers”, the
Insurance Regulatory and Development Authority has set up strict
guidelines on asset and liability management of the insurance
companies along with solvency margin requirements. Initial margins
are set high (compared with developed countries). The margins vary
with the lines of business.
Life insurers have to observe the solvency ratio, defined as the ratio
of the amount of available solvency margin to the amount of
required solvency margin: (a) the required solvency margin is based
on mathematical reserves and sum at risk, and the assets of the
policyholders’ fund; (b) the available solvency margin is the excess
of the value of assets over the value of life insurance liabilities and
other liabilities of policyholders’ and shareholders’ funds.
(6) It sets the reinsurance requirement for (general) insurance
business. For all general insurance, a compulsory cession of 20%
regardless of line of business to the General Insurance Corporation,
the designated national reinsurer was stipulated.

9. (7) Under the “Registration of Indian Insurance Companies”, it sets
out details of registration of an insurance company along with
renewal requirements. For renewal, it stipulates a fee of one-fifth of
one percent of total gross premium written direct by an insurer in
India during the financial year preceding the year. It seeks to give
detailed background for each of the following key personnel: Chief
Executive, Chief Marketing Officer, Appointed Actuary, Chief
Investment Officer, Chief of Internal Audit and Chief Finance Officer.
Details of sales force, activities in rural business and projected values
of each line of business are also required.
(8) Under “Insurance Advertisements and Disclosure”, details of
insurance advertisement in physical and electronic media has to be
detailed with the Insurance Regulatory and Development Authority.
The advertisements have to comply with the regulation prescribed in
section 41 of the Insurance Act, 1938. The Act of 1938 says, “No
person shall allow or offer to allow, either directly or indirectly, as an
inducement to any person to take out or renew or continue an
insurance in respect of any kind of risk relating to lives or property in
India, any rebate of the whole or part of the commission payable or
any rebate of the premium shown on the policy, nor shall any person
taking out or renewing or continuing a policy accept any rebate,
except such rebate as may be allowed in accordance with the
published prospectus or tables of the insurer.”
(9) All insurers are required to provide some coverage for the rural
sector. It is called the “Obligations of Insurers to Rural Social Sectors.”
LIFE INSURANCE CORPORATION OF INDIA

10. LIC has been one of the pioneering organizations in India who
introduced the leverage of Information Technology in servicing and
in their business. Data pertaining to almost 10 crore policies is being
held on computers in LIC. LIC have gone in for relevant and
appropriate technology over the years.
1964 saw the introduction of computers in LIC. Unit Record
Machines introduced in late 1950’s were phased out in 1980’s and
replaced by Microprocessors based computers in Branch and
Divisional Offices for Back Office Computerization. Standardization of
Hardware and Software commenced in 1990’s. Standard Computer
Packages were developed and implemented for Ordinary and
Salary Savings Scheme (SSS) Policies. LIC of India is the one and only
public sector life insurance company in India. The LIC has been a
national builder since its formation. True to objectives of
nationalization, the LIC has invested the funds mobilized from policy
holders for the benefit of the community at large.
INTERNATIONAL OPERATIONS / ASSOCIATES OF LIC
INTERNATIONAL OPERATIONS
 LIC Fiji.
 LIC Mauritius.
 LIC United Kingdom.
 LIC (International) B.S.C(C), Bahrain.
 LIC (Nepal) Ltd.
 LIC (Lanka) Ltd.
 Saudi Indian Company for Co-op. Insurance, KSA
 Kenindia Assurance Co. Ltd., Kenya.
 LIC Mauritius Offshore Ltd.
 LIC Co-ordinating Office in India.
ASSOCIATES

11.  LIC Housing Finance Ltd.
Incorporated in 1989, its main objective is to provide long term
finance for construction/purchase of individual houses/flats. It is
the housing finance institution with widest marketing network in
India. These are schemes designed for NRIs, for
repair/renovation of house, for purchase of site, for setting up
their own office in case of professionals.
The company has set up a representative office in Dubai in
2002.
 LICHLF Care Homes Ltd.
A wholly owned subsidiary of LIC HFL, eatablished to built and
operates on commercial basis quot;Assisted Community Living
Centresquot; for senior citizens. First such centre is completed in
Bangalore. The project in Bhubaneshwar (Orissa) is in progress.
 LIC Mutual Fund AMC Ltd.
The LIC Mutual Fund was set up in June 1989 as a separate trust
by LIC of India with a view to providing accessibility of various
investment media including the stock markets to all sections of
investors, particularly the small investors in rural and semi-urban
areas.
A Mutual Fund pools the savings from numerous small
investors(who buy units) and invests them in diversified securities
(shares, debentures, bonds, etc.) in the capital market in order
to optimize the high return, safety, high liquidity trade-off for the
maximum benefit to investors.
For LIC Mutual Fund schemes, Jeevan Bima Sahayog Asset
Management Company Limited (JBS AMC) incorporated on
20Th. April, 1994 acts as Investment Manager.

12. BUSINESS PERFORMANCE OF LIC IN 2007-08
(Rs. In crores)
z
900000
800000
700000
600000
500000
400000
300000 2006-07
200000 2007-08
100000