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Role Of Life Insurance Companies

Role Of Life Insurance Companies

Functions Of Life Insurance Companies

Life Insurance Companies in India have a big role to play. It is the life insurance Companies which collects the savings of a person and converts into the wealth. The functions and role of Life Insurance Company may be understood as:

[Post Image Courtesy of PhasinPhoto at FreeDigitalPhotos.net]
1. Saving Institution:

Life insurance companies both promote and mobilises saving in the country. The income tax concession provides further incentive to higher income persons to save through LIC’s policies. The total volume of insurance business has also been growing with the spread of insurance-consciousness in the country.

2. Term Financing Institution:

Life Insurance Companies also functions as a large term financing institution (or a capital market) in the country. The annual net accrual of investible funds from life insurance business (after making all kinds of payments liabilities to the policy holders) and net income from its vast investment are quite large. During 1994-95, LIC's total income was `18,102.92 crore, consisting of premium income of `1152,80 crore investment income of `6336.19 crore, and miscellaneous income of `238.33crore.

3. Investment Institutions:

LIC is a big investor of funds in government securities. Under the law, LIC is required to invest at least 50% of its accruals in the form of premium income in government and other approved securities.

LIC funds are also made available directly to the private sector through investment in shares, debentures, and loans. LIC also plays a significant role in developing the business of underwriting of new issues.

4. Stabiliser in Share Market:

LIC acts as a downward stabiliser in the share market. The continuous inflow of new funds enables LIC to buy shares when the market is weak. However, the LIC does not usually sell shares when the market is overshot. This is partly due to the continuous pressure for investing new funds and partly due to the disincentive of the capital gains tax.

5. Biggest Employers in economy

Life Insurance Companies in India are one of the biggest employers. In addition to direct employment, Lakhs of People are getting the employment as Agents.

Insurance Law And Practice - ICSI

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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