The day we never forget
On the night of January 19, 1956, the then Union Finance Minister, C.D. Deshmukh, announced the nationalisation of the life insurance business, and said that the nationalisation of life insurance was a step further towards the effective mobilisation of people's savings.
– Jawaharlal Nehru.
LIC – a perfect jewel
“ What an extraordinary and marvelous organization LIC is…like no other – a perfect jewel ! – These were the glowing tributes paid by Prof. Noel Machado while concluding his research paper on LIC.
Prof. Noel, a visiting Professor associated with Tata Institute of Social Sciences and other reputed institutions in not the first person to recognize the greatness of our institution. Nor, we are sure, he would be the last. Even the former Union Finance Minister P.Chidambaram had to acknowledge that LIC is a jewel in the crown. But what distinguishes prof.Noel from others is his unhesitating acknowledgement that LIC today is a marvelous organization because of the unimaginable commitment and hard work of its employees.
It is a matter of pride to all of us that today LIC has emerged as one of the premier financial institutions of the country. From 1956 till now, LIC has invested a whopping Rs.6,49,808 crores in nation building activities. While it contributed Rs. 184 crore to the 2nd Five Year Plan (1956-61), its contribution to 10th Five Year Plan (2002-2007) is Rs.3, 94,779 Crores and in the first two years of 11th Five Year Plan (2007-2009) up till now it has contributed Rs.2,18,510 Crores. On its initial investment of Rs.5 crores in the year 1956 the Union Govt. has received Rs.1031 Crore as its share of the valuation surplus for the year ending 31st March 2010. The total accretion to the Govt.’s kitty on this score alone adds up to Rs.8,957.40 Crore since inception. Even after one decade of opening up of the insurance sector, LIC remains the undisputed market leader holding on to a market share of 73.02 percent in number of policies and 70.12 percent in new business premium. The LIC has also an impressive share of 87.4% in the total assets under management. Insurance is a promise which needs to be fulfilled on the happening of eventuality. LIC settles 99.86% of the claims which is a world record. The track record of the private insurance companies on settlement of claims is abysmally low. The Compounded Annual Growth Rate (CAGR) of LIC during the last ten years has jumped to 30.24% from 15.23% since inception. LIC’s total policies have risen from 10.12 Crores to 32 Crores. LIC’s Life fund has grown from 1.54 lakh crore to 9.99 lakh crore. LIC’s asset base has grown from 1.60 lac crore to 12 lakh crore by September 2010. The new business premium which was Rs.5930 Crore in 2000 had reached Rs. 70891 Crore. Our Total Premium Income which was Rs.27489 Crore in 2000 has reached 1, 85,986 Crore. Thus, through this amazing performance, LIC has retained it’s domination over the market.
On the other hand, the performance of private insurance companies is far from satisfaction. Out of the 21 private insurance companies, 14 have reported operating losses and majority of them are yet to break even. More than 90% of the policies sold by private companies are ULIPs in which the risk is borne by the policy holder and the insurance companies earn their income through charges without undertaking any risk. The Economic Survey 2010 notes that in the infrastructure investment made by insurance companies as at the end of 2007-08, the public sector had a share of 94.3%. During the period 2005-2009, the public sector invested Rs.51252.9 crore and the private sector Rs.5850.5 crore in infrastructure sector. During this period, the private sector had a market share of around 30-35% in the new premium incomes while their share of investments in infrastructure was just around 10 percent. Commenting on this, the Economic Survey notes that “the private sector insurance companies are yet to make large scale investments in the infrastructure sector”.
The insurance employees organized under the banner of AIIEA are committed to strengthen the public sector insurance industry and to the cause of 34 crore policyholders of LIC of India. AIIEA demands the Government of India to drop the moves to increase the FDI cap in insurance industry and also to increase the capital base of LIC from 5 Crore to 100 Crore (which paves way for disinvestment of LIC). AIIEA also demands the Government of India to take all the steps to further strengthen the Public Sector LIC.
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The LIC continues its amazing domination with a market share of 72.01% in new premium and 73.45% in number of policies as on 30.11.2010.
In this scenario and also in spite of the sterling performance of the Life Insurance Corporation of India, the government, under pressure from the international finance capital, is making attempts to weaken the public sector. The two legislations that are pending in the parliament, the Insurance Laws (amendment) bill 2008 which seeks to increase the FDI cap in insurance from 26% to 49% and the LIC Act (amendment) Bill 2009 which seeks to increase the capital base of LIC from Rs. 5 Crores to 100 crores are steps to weaken public sector LIC.
The nationalisation of life insurance is an important step in our march towards a socialist society. Its objective will be to serve the individual as well as the state. We require life insurance to spread rapidly all over the country and to bring a measure of security to our people.
“ The Nationalisation of Life Insurance will be another mile stone on the road of Country has chosen in order to reach its goal of a socialistic pattern of society. In the implementation of the Second Five Year Plan, it is found to give material assistance. In to the lives of millions in the rural areas, it will introduce a new sense of awareness of building for the future in the spirit of calm confidence which Insurance can alone give. It is a measure conceived in a genuine spirit of service to the people. It will be for the people to respond, confound the doubters and make it a resounding success”