Modules for Beginners
All about insurance
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Have you heard of LIC?
In India, LIC is synonymous with life insurance. So, of course you’ve heard of LIC. You may have heard about it from a friend, a family member, or a colleague. Or you may even have heard about it in the context of the big LIC IPO that is due to launch in 2022. Whatever context may have introduced you to LIC, you may perhaps be wondering - what is the full form of LIC anyway?
Well, LIC stands for the Life Insurance Corporation of India. And it is the biggest life insurance company in the country as of February 2022. But beyond this, what is LIC? What is its history? And what does its future look like? Let’s delve into all the details below.
What is the LIC?
The LIC or the Life Insurance Corporation of India is the leading life insurance provider in India. It is a state owned corporation, meaning that it is fully owned by the government of India (as of February 2022). Its origins, however, can be traced back to over 60 years ago, when the Indian Parliament passed the Life Insurance Corporation Act on June 19, 1956.
And then, on September 1, 1956, the Life Insurance Corporation of India was created. Its primary objective at the time was to spread the word about life insurance widely across India and to make it easier for people in the rural areas of the country to obtain life covers at reasonable rates.
Here are some tidbits and trivia about the Life Insurance Corporation of India.
- When the LIC was first founded, it had 5 zonal offices, 33 divisional offices and 212 branch offices.
- Later, the LIC was reorganized and a number of branch officers were opened across the country.
- In 1957, the new business brought in by the life insurance giant was around Rs. 200 crore.
- In 1969-70, the new business crossed the Rs. 1,000 crore mark. And only 10 years later did the new business of LIC cross the Rs. 2,000 crore mark.
- The reorganization of the LIC in the early 1980s upped the pace of the corporation’s growth, taking the business on new policies up to Rs. 7,000 crores.
- Currently, the LIC boasts of 2048 fully computerized branch offices, 113 divisional offices, 8 zonal offices, and 1381 satellite offices.
What is an LIC policy?
An LIC policy is simply a life insurance policy issued by the Life Insurance Corporation of India. The LIC offers a wide array of products such as endowment plans, whole life insurance plans, term insurance plans, pension plans and more. Check out a preview of some of the kinds of life insurance plans that the Life Insurance Corporation of India offers today.
Here are the top kinds of LIC policies available in the market.
- Endowment plans
- Term insurance plans
- Money back plans
- Whole life insurance plans
- Pension plans
- Unit Linked Insurance Plans (ULIPs)
- Micro insurance plans
- Health plans
- Life insurance riders
Back in the day, the primary mode of buying an LIC policy was via an insurance agent. But buying an LIC policy today is quite similar to buying a life cover from any other insurance provider today. With the integration of technology into the insurance sector, the Life Insurance Corporation of India has also made it possible for interested buyers to apply for a life cover online.
Aside from making LIC policies available for purchase online, there are also several other online services that the insurance giant offers today. Some of these are listed below.
- Mobile helpline
- Online policy guidelines
- Online insurance premium calculator
- Information about bonuses
- Online claim forms
- Online payment options
- NRI helpline center
- Tax benefit guidelines
- Pensioner’s support page
Benefits of LIC
The Life Insurance Corporation plays a pivotal role in the insurance sector in India. It is the oldest surviving life insurance company in the country, and it continues to be one of the most preferred choices for people buying an insurance plan for the first time. Here is a closer look at some of the benefits of LIC.
- Improving the penetration of life insurance in India, particularly in the rural areas of the country
- Mobilizing the savings of people by ensuring that insurance-based savings and investments are financially attractive
- Ensuring that the life insurance needs of the people in the country are met, particularly in the face of the changing socio-economic climate across the world
- Providing different kinds of life insurance plans to meet the distinct needs of customers across the country, such as protection, savings, income and investments
The future of LIC
The LIC has steadily made the transition from manual to digital processes. Along with this major transition, another major change has also been underway in recent years. And that is the launch of the LIC IPO. The future of the insurance giant appears to be part government-owned and partly listed on the stock exchanges.
Wondering why the LIC is due to launch an Initial Public Offer? To understand this, we’ll need to rewind a little and go over the pandemic years of 2020 and 2021. These years saw stringent lockdowns and a massive slowdown in economic activity across the world. In India too, the situation was no different. These setbacks, coupled with the government’s efforts to curb the spread of the pandemic, saw a widening budget deficit.
So, the government of India launched a privatization drive, which the LIC IPO is a part of. In FY 2021-22, as of February 2022, the government raised over Rs. 120 billion by selling various state-owned enterprises. However, there is still a deficit, since the government’s target is Rs. Rs. 780 billion.
The IPO of the Life Insurance Corporation of India is expected to help the government meet its requirement to a large extent. It is expected that the government will sell around 5% of its ownership in the LIC. This is, by itself, expected to generate around Rs. 75,ooo crore (or Rs. 750 billion).
There has been a lot of buzz around the LIC IPO. And the insurance giant is also expected to reserve a specified percentage of the issue at discounted prices for individuals who hold an LIC policy. With the IPO in store, the future of LIC is exciting and dynamic. It remains to be seen what new heights this life insurance giant will scale in the near (and far) future.
Now that you know all about LIC, you may have another question on your mind - Is insurance an investment? If you are not sure about the answer, why don’t you head on over to the next chapter in this module? It has all the details you are looking for.
A quick recap
- In India, LIC is synonymous with life insurance.
- The LIC or the Life Insurance Corporation of India is the leading life insurance provider in India. It is a state owned corporation, meaning that it is fully owned by the government of India (as of February 2022).
- Its origins can be traced back to over 60 years ago, when the Indian Parliament passed the Life Insurance Corporation Act on June 19, 1956.
- The LIC offers a wide array of products such as endowment plans, whole life insurance plans, term insurance plans, pension plans and more.
- The LIC IPO is due to be launched later in 2022.
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