In India when we think about the insurance, the LIC comes first in our mind. It is not only the biggest insurance company but bigger than all other life insurance companies together. You may know about the LIC policies and LIC agent. But, Today I would tell you 10 interesting fact about the Life Insurance Corporation.
1. Formed By merging 245 insurance companies
There were many insurance companies even before the independence. These companies were loosely regulated and conducting business in specific location and sector. In 1956, the government of India nationalised these companies. It merged all the 245 insurers and formed Life insurance corporation. This consisted of 154 life insurance companies, 16 foreign companies and 75 provident companies.
2. No Competition For 44 Years
After the nationalization of Insurance companies, the government restricted insurance business only to the government companies. The LIC was the only company for the life insurance business. From 1956 to 2000, the LIC did not face any competition. Thus, It launched limited insurance product. Even, it did not promote the term insurance. In 2000 the government permitted private life insurance companies. With this permission, the monopoly of LIC ended. Since then, You can see many new insurance products in the market.
3. The Government Guarantees Your Claim Amount
The LIC is 100% government-owned company. Therefore the government has given a guarantee to give the claim amount in case LIC defaults. This guarantee is given in the law. You can see it in the LIC act.
“The sums assured by all policies issued by the Corporation including any bonuses declared in respect thereof and, subject to the provisions contained in section 14 the amounts assured by all policies issued by any insurer the liabilities under which have vested in the Corporation under this Act, and all bonuses declared in respect thereof, whether before or after the appointed day, shall be guaranteed as to payment in cash by the Central Government.”
Because of this guarantee, Common people often prefer LIC over the private companies. However, LIC policies are costlier than the private insurer’s policies.
4. LIC Shares 95% of the Profit
LIC is a profitable institution. Because of its reputation, the corporation can charge the maximum premium. Do you know that the LIC term plan premium is costliest?
LIC invests most of the premium in government and corporate bond. A small amount also goes to the share market. From this investment, LIC also earns the profit. From this profit, 95% goes to the policyholder in the form of bonuses and loyalty additions. It is given to ‘with profit’ policies.
Remaining 5% goes to its owner, the Government of India. The payment to government is justified as it is the promoter of the LIC and also gives a guarantee of the claims.
5. Biggest Institutional Investor in India
LIC is the biggest institutional investor of Indian Share market. It invests about 50,000 crores every year in the share market. The total value of the LIC share investment is more than ₹5.11 trillion (₹5,110,000,000). The data is taken on 31 March 2017.
This investment in the share market is the small part of the total LIC investment. 80% of the LIC’s money is invested in the government bonds. The value of this investment was 23 trillion on 31 March 2017. The equity investment was 19%.
In the year 2016-17, the LIC achieved 7.78% return on its investment.
6. LIC Has 15% stake in ITC and L&T
ITC and L&T are the two big companies of India. The LIC owns more than 15% of these companies. It also owns about 10% of the Reliance and State bank of India. LIC is the big owner of the many public sector banks. It also owns a big chunk of Tata Steel, ICICI Bank, Axis Bank, PNB and other financial companies.
LIC is the promoter of NSE, NCDEX, LIC Mutual fund, Stockholding corporation, national insurance academy, Insurance Institute of India.
7. It sold more than 2 Crore Policies in 2016-17
LIC has 71% market share of Indian Life Insurance industry in terms of value. But in terms of the number of policies, it commands 76% of the share. In the year 2016-17, the corporation has sold more than 2 crore policies. As of now 29 crore individual LIC policies are active. 11 crore group policies are also in force.
It received total 1.24 lakh Crore rupees as the first year premium of new policies. 60% of this amount came only from the single premium policy Jeevan Akshay.
8. More than Half policyholders Stop Paying After 3 years
The LIC is very poor in retaining its customers. According to IRDA data, 37% of its policyholders stop paying just after the first year. Only 63% policies continue beyond the first year. Whereas ICICI Prudential retains 79% policies after the first year.
After the 5 years, LIC loses 62% of its policyholders. Only 38% policies continue after 61 months. The poor persistency ratio shows that LIC agents hard sell policies just to earn a commission. The reluctant policyholders skip payment after few years. Some people pay up to 5 years as most of the policies achieve surrender value after that period.
9. LIC Spends 5.5% of its premium as Agent Commission
LIC gives good commission to its agent. The first year commission can go up to 35% of the premium. The agents get a big part of the premium in the initial 3 years. After 3 years, the commission goes down. Overall, LIC gives 5.5% of the premium amount as commission. The Endowment and moneyback policies give the highest commission to LIC agents.
Do you know, there are 11.31 lakh LIC agents in India? LIC also employes more than 1 lakh people. It spends 15% premium as management expense.
10. Present in Many Countries
LIC is present in 14 countries other than India. In some countries it has collaboration. You can find LIC in following countries.
- Sri Lanka
- New Zealand
Among these countries, LIC is the market leader in Fiji, Bahrain and Nepal.
These were the 10 interesting Fact about the LIC. You can also learn more about its policies at planMoneyTax.com. I have covered many plans. Top 5 list is given below.