Disinvestment in India

LIC

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Opening of insurance sector in India

Mains level : Paper 3- LIC and insurance sector in India

Context

LIC is now at a transformational moment. Its listing on the bourses should lift LIC to be a part of the elite corporate community in India.

Insurance sector in India

  • Opening of the insurance sector: A milestone in the history of India’s insurance industry was the opening of the sector for private participation in the year 2000 and this caused widespread concern that LIC will find the competition tough and could very well be marginalised.
  • Today, there are 24 private players in the life insurance space and many of them have foreign collaborations.
  • LIC has steadily grown in the past six decades and today with over 290 million policyholders and an asset value of ₹38 lakh crore ($520 billion), it ranks as one of the largest insurance companies in the world.
  • Yet, LIC remains a colossus capturing 75% of the life insurance business in the country.
  • Its claim settlement at 99.87% is far above the industry average of 84%.

Role of LIC in skilling and women’s employment

  • LIC created large scale employment for women right from its inception in 1956. 
  • Thousands of women became LIC agents in the 1950s and 60s, when job opportunities were scarce.
  • There was no entry barrier in terms of age or fixed time for work.
  • Education requirement was a mere high school pass.
  • Many of these women were housewives who could earn an extra income by selling LIC policies.
  • This was a period before the arrival of digital technologies and mobile phones.
  • Skill development program: LIC’s training programme with its mix of online education and real-life case studies offer the best model for India’s skill development programmes.
  •  LIC’s relevance comes from its track record of creating vast number of employment opportunities for ordinary Indians, male and female, urban and rural.

Policies focused on savings

  • In a country of vast poverty and low income, LIC recognised from the beginning that it cannot sell insurance as a risk cover on premature death.
  • It, therefore, devised policies focussing on savings and the need for children’s education and daughter’s marriage which are fundamentals to family values in India.
  • These policies also ensured that a part of the premium paid was returned at regular intervals before the maturity period, providing liquidity for emergencies.
  • They simultaneously covered risk caused by death.
  • People-centric approach: While the private players concentrated on technology-driven marketing, LIC’s approach was significantly people-centric.
  • When Pradhan Mantri Jan Dhan Yojana was launched for financial inclusion of over 300 million of the rural population on August 15, 2014, LIC was already there with its policies covering a rural population of 200 million.

Conclusion

The nation must not forget the fact that LIC was built on sweat and tears, pain and sacrifice of ordinary Indians. It is these democratic credentials that remain LIC’s most valuable asset.

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