LIC POLICY SERVICE INFORMATION: Do you Know ?

Tuesday, May 25, 2021

Do you Know ?

LIC formed merging 245 insurance companies

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.

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.

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.

LIC Shares 95% of the Profit to Policyholder

LIC is a profitable institution. Because of its reputation, the corporation can charge the maximum premium. Do you know that the 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.

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%.

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 Endowmend 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.