Magazine article Journal of Services Research

An Analytical Study on Asset under Management of Life Insurance Companies in India

Magazine article Journal of Services Research

An Analytical Study on Asset under Management of Life Insurance Companies in India

Article excerpt


The Insurance Act 1938, defines life insurance business as the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any event insured by the contract. In other words, a life insurance contract is a contract in which the insurer agrees to pay to the assured an agreed sum of money in consideration of a certain premium (either in lump sum or any other periodical payment), on the death of the insured or on the expiry of a specified period of time, whichever is earlier. Life insurance contracts are contingent contracts as in case of life insurance the payment is certain. The event insured against is sure to happen, though the time of its occurrence is uncertain. Thus, under a whole life assurance, the policy money is payable at the death of the assured and under an endowment policy, the money is payable on the maturity of the policy or on his death, in case if that occurs earlier.

Insurance is thus defined as a co-operative device to spread the loss over a number of persons who are exposed to it and agree to ensure themselves against that risk. Risk is uncertainty of a financial loss. It is collective bearing of risk as it involves pooling of risk. Insurance is a social device which provides compensation for adverse conditions, the payment for which is made from the accumulated contributions of all the parties.

Fund wise Investment of Life Insurers:

Insurance companies come to the market with a variety of plans having different objectives to take care of varied financial needs of the policyholders. Therefore, investment objectives, strategies and composition of funds differ from the basic objectives of life insurance plans. Accordingly, investment of life insurance companies has been classified by Insurance Regulatory Development Authority of India (IRDA) as investment of Life Funds, Pension and General Annuity Funds, Group excluding Group Pension and Annuity Fund and Unit Linked Fund.

Life fund has been invested in Central Govt. Securities other than the approved securities investment subject to exposure norms, and other than approved investments (OTAI). It can be observed from the above table that in 2003, Rs. 229648.52 crore was invested in life fund which increased to Rs. 841075.00 crore in 2011. Investment in life funds by LIC is much more as compared to private sector and is increasing rapidly as well but percentage share of LIC in total investment in life funds is decreasing continuously. This indicates the rapid growth of private sector life insurance companies.

Investments in Pension and General annuity and Group fund increased to Rs 189928.00 crore in 2011 from Rs 30638.05 crore in 2003. This may be due to increased sales of pension products and mobilization of savings since opening up of life insurance to private companies. Most of the life insurance companies including LIC have launched pension and retirement plans which boasted of pension sales and enhanced investible funds. Further, contribution made by LIC in total investment of Pension and General and Group annuity fund is larger than that of private sector life insurance companies. In total Pension and General annuity and Group fund investment of life insurance industry, major contribution was made by LIC which was 99.53 percent; 99.28 percent; 98.90 percent in years 2003, 2004, 2005 and so on. The reason for this declining percentage in successive years may be the entry of new private sector companies in life insurance industry.

Significant development has taken place in Unit Linked segment in terms of growth in sales leading to increase in investible funds, favorable macro economic environment, high growth in GDP and the boom in stock market strangely supported the growth in unit linked segment, which has been reflected in growth of investment. Total, Unit Linked funds in 2003-04 increased from Rs 265. …

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