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The name LIC is almost synonyms with insurance in India. Established in 1956 with an objective to spread insurance in India across urban and rural population the LIC – Life Insurance Corporation of India is all set to go for IPO.
To answer your question – LIC is government or private? It is a Government of India undertaking and played a pivotal role in making the market for insurance in India a well-regulated one.
Much of the credit, in this case, needs to be provided to the IRDAI (Insurance Regulatory and Development Authority) of India that is strong in its governance with a hawk eye over the proceedings. Despite that, there are still doubts among common people regarding where they should be buying their insurance from. They worry about trusting the private insurance companies in India with their investments and their lives. We need some time to dispel the myths that have built up over the years in this case.
The Indian government enacted the Life Insurance Corporation of India Act on 19th June 1956 thus nationalizing all the private insurers and forming the LIC on 1st September that year. It was in the 2000-01 fiscal that the national government allowed private entities to enter the insurance market including FDI (foreign direct investment) in the sector.
LIC comparison with other insurance companies, come – let us take a look at how well the LIC and the private insurers in India have performed over the years. The LIC market share is estimated to be at 71.81% of the total market for such products and services in the country. The remaining 28.19% is held by the 23 private companies that are fighting with the LIC and among themselves to gain a bigger foothold in the industry and maintain it.
It must however be acknowledged in this context that LIC’s market share has decreased – even if marginally – in recent years while the opponents of the same are making marginal gains. When you look at the customer base LIC issues around 76% of the policies that are issued each year in India while the remaining 23 companies together issue around 24% of the same. LIC also settles a higher percentage of claims compared to its private counterparts – 98% to 93% approximately. So, now you perhaps know why LIC market share is so much bigger than the companies that are competing with it.
Well, before we answer this question, let us just say that the private life insurance companies in India too are regulated by the IRDAI. This happens with the power vested in it by the Insurance Act, 1938. The authority body looks minutely at all the crucial details in this case. This includes the licensing of the new companies, their solvency ratio, the contracts signed by them, and their overall financial condition. If a company wants to start working as a life insurer it needs to have paid-up capital of 100 crore rupees at least.
When it comes to the solvency ratio, every life insurer in India has to maintain a figure of 150%. This means that their assets must be 1.5 times higher than their debts. IRDAI studies all the products that are brought out by the insurers in India, LIC included, before providing its seal of approval for the same. The private insurance companies in India also need to show that the customers are willing to put their faith in them and that their overall financial position is a good one. This is why the FDI limit, in this case, has been increased to 49% from 26%.
A lot of people believe that the private insurance companies in India would reject their claims no matter what. However, this is once again a myth. It does not matter where you have bought the policy from. Your claim would be rejected if you make mistakes in the same or if you try to be too smart and hoodwink your insurer. This is where Section 45 of the Insurance Act, 1938 comes into play to such an extent.
It makes sure that no insurer – private life insurance companies in India or the LIC – can reject a legitimate and genuine claim without providing a proper reason for the same. Thus it protects policyholders from their claims being rejected on undue and unfair grounds such as providing wrong information. This means that the insurer has to offer the most solid reason for rejecting your claim. It cannot also do so once three years have passed in the policy agreement. In this case, the later date between the risk commencement and policy issuance is used as the main figure.
There are several factors that you need to keep in mind in this context. The first of them is comparison. It does not matter who you are buying from – this is something that you must do to find the plan that offers you the best features in your budget. You should also look for innovative products that would suit you better. It must be acknowledged in this case that the private life insurance companies in India have performed far better than LIC in this particular regard. Online presence is also an important matter in this case.
Also Read: Guide To Surrender LIC Policy Online
The world is exponentially becoming digital right now and the private insurers of India are maximizing it to the hilt. You should also look at the variety that the insurer has in terms of sales channels. Once again LIC is lagging in this area as well as it is still depending on its traditional and time-tested ways to sell its policies – by using the agents. In this case, you must also focus on your needs. LIC vs. term insurance is one dilemma that so many people face in this context. You should always choose one that suits you the best.
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LIC is a Government of India undertaking and played a pivotal role in making the market for insurance in India a well-regulated one.
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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