+91 9983 203 203
Latest articles on Life Insurance, Non-life Insurance, Mutual Funds, Bonds, Small Saving Schemes and Personal Finance to help you make well-informed money decisions.
If one had to ask what is one differentiating factors between LIC and private life insurance companies, the reason could be a myriad but one imposing factor that separates LIC from the rest is that it is backed by the government.
A recent news had created quiet a stir when the government had suddenly decided to withdraw its guarantee cover. What does this government cover mean after all? It basically means a liability borne by the government to pay the sum assured and the bonus should something unexpected happen and the Corporation is not able to sustain its strength. However, realizing that too much would be at stake, the government decided to continue with its guarantee cover for its more than 16 crore policyholders.
Speaking about the origin of LIC, it is the oldest insurer and took off in the year 1956 and the much talked about government cover has existed ever since. Infact, the concept of insurance was conceived after the industrial era and it was the British who had introduced Life Insurance in India in the year 1818 and Oriental Life Insurance Company was the first life insurance company that was set off in India. The Insurance Act, 1938 was the first legal Act that was released which governed both life insurance and non-life insurance. The demand for nationalization of life insurance industry was made time after time but it was only years later that it gained momentum in 1944. A bill was introduced in the Legislative Assembly to amend the Life Insurance Act, 1938. However, it was much later when on the 19th of January 1956, life insurance in India was nationalized. And if there has to be any change in the strategy, functioning in present working structure of LIC, it may call for the amendment of this LIC Act, 1956.
However, if at all for some reason, the government decides to withdraw its guarantee cover, it would be applicable for the future policies and not the existing one. Besides, the corporation will have to infuse a good deal of capital, as the present capital base is just Rs. 5 crore only. On the other hand, the insurance regulator, IRDA had suggested to make changes in the LIC Act for doing away with government guarantees for LIC policies to give a level-playing field to private players.
Under the LIC Act, the Central Government guarantees to clear all the policyholders' dues (sum assured and the bonuses accrued) in cash. This aspect is one of the unique selling propositions of LIC agents. And the private life insurers find this a daunting obstacle to make a place for themselves in the competitive market. The government guarantee is a comforting factor for the policyholders and is one of the strong factors that rules over private insurance companies.
All said and done, from the time it started to the present stage, LIC has crossed many milestones and has set itself as the choice of countless laypeople. LIC was and will continue to be one of the most trusted brands of India.
Follow us on our social media channels:
Copyright © 2024 Design and developed by Fintso. All Rights Reserved
Industry News