Life Insurance

Life Insurance Corporation of India (LIC)

Life Insurance Business in India was nationalized with effect from January 19, 1956. On the date, the Indian business of 16 non-Indian insurers operating in India and 75 Provident Societies were taken over by Government of India. Life Insurance Corporation of India, Act was passed by the Parliament on June 18, 1956, and came into effect from July 1, 1956. Life Insurance Corporation of India commenced its functioning as a corporate body from September 1, 1956. Its working is governed by the LIC Act. The LIC is a corporate having perpetual succession and a common seal with a power to acquire hold and dispose of property and can by its name sue and be sued.

Role and Functions of LIC

• It collects the savings of the people through life policies and invests the fund in a variety of investments.
• It invests the funds in profitable investments so as to get a good return. Hence the policyholders get benefits in the form of lower rates of premium and increased bonus. In short, LIC is answerable to the policyholders.
• It subscribes to the shares of companies and corporations. It is a major shareholder in a large number of blue-chip companies.
• It provides direct loans to industries at a lower rate of interest. It is giving loans to industrial enterprises to the extent of 12% of its total commitment.
• It provides refinancing activities through SFCs in different states and other industrial loan giving institutions.
• It has provided indirect support to industry through subscriptions to shares and bonds of financial institutions such as IDBI, IFCI, ICICI, SFCs etc. at the time when they required initial capital. It also directly subscribed to the shares of Agricultural Refinance Corporation and SBI.
• It gives loans to those projects which are important for national economic welfare. The socially oriented projects such as electrification, sewage and water channelizing are given priority by the LIC.
• It nominates directors on the boards of companies in which it makes its investments.
• It gives housing loans at reasonable rates of interest.
• It acts as a link between the saving and the investing process. It generates the savings of the small savers, the middle-income group and the rich through several schemes.

Formerly LIC has played a major role in the Indian capital market. To stabilize the capital market it has underwritten capital issues. But recently it has moved to other avenues of financing. Now it has become very selective in it's under