Objectives & Functions of LIC
The Life Insurance Corporation was founded on January 19, 1956. This was accomplished by the amalgamation of 16 insurance companies and 75 provident societies on that day. The LIC Act was approved by Parliament on June 18, 1956, and took effect on July 1, 1956.
Life Insurance Corporation began its journey as a business entity on September 1, 1956. The whole operation is controlled by the LIC Act.
One of the primary tasks of LIC is investing. It is an investing firm. Its primary role is to collect funds from the public and invest it in various securities and financial markets in India and overseas.
LIC is obligated to invest at least 75% of its money in securities issued by the central and state governments. Thus, LIC is now India’s biggest investment organization.
It collects monies from the public via the issuance of insurance policies and invests them in Indian financial markets. It also offers term loans and bonds to attract capital from the market.
Furthermore, the LIC has grown to become the world’s biggest insurance firm in terms of policy issuance. As of 2019, the overall coverage of insurance, including individual, group, and other social programs, exceeded 13 crores.
Objectives of the LIC of India
Spread life insurance broadly, particularly in rural regions and among the socially and economically deprived strata, with the goal of reaching all insurable people in the nation and providing appropriate financial protection against death at a fair cost.
Increase the mobilization of people’s savings by making insurance-linked savings sufficiently appealing.
Keep in mind, when investing funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds must be deployed to the best advantage of both investors and the community as a whole, while keeping in mind national priorities and obligations of attractive return.
Conduct business with greatest economy and with the full understanding that the money belongs to the policy holders.
Act as trustees for the insured public, both individually and collectively.
Meet the community’s different life insurance requirements as they develop in a changing social and economic context.
Involve all Corporation employees to the best of their abilities in serving the interests of the insured public via efficient and courteous service.
Promote a feeling of involvement, pride, and work satisfaction among all Corporation agents and employees by carrying out their jobs with devotion to achieving the Corporate Objective.
Functions of LIC:
The primary role of LIC is to collect people’s savings via a life insurance policy and invest those funds in different financial markets.
One of the primary tasks of LIC is to invest funds in government securities in order to preserve the capital of those who have contributed to the LIC.
LIC must provide customers with inexpensive insurance policies.
LIC makes direct loans to industries at cheap interest rates. The interest rate is as low as 12% for the full term.
It is a key shareholder in several of the blue-chip businesses on the Indian stock exchange.
It also offers refinancing services via SFCs in various states and localities.
It also invests in numerous corporations via bonds and securities, which indirectly helps business finance.
It also provides loans to numerous national initiatives that are crucial for economic progress.
It gives financial assistance to socially oriented initiatives such as electricity, sewage, and water channelization, etc.
It also offers a house loan at cheap rates.
It is the primary mechanism through which Indians save and invest.
Activities of the LIC
The LIC subscribes to and underwrites the shares, bonds, and debentures of various financial firms and enterprises, as well as provides term loans. It has relationships with other financial institutions like as IDBI, UTI, and IFCI to coordinate its investments.
The LIC has a significant impact on the Indian securities market. It invests in company stock, including preference and equity shares, as well as debentures and bonds. Its ownership is enormous, including the majority of big and medium-sized non-financial enterprises.
It is beyond a doubt that the LIC functions as a form of downward stabilizer of the share market, since the steady infusion of new money allows it to purchase even when the market is sluggish.
Investment Policy
The LIC of India’s investment policy should provide insurance holders with a reasonable return while also ensuring their safety. Because the assets at the disposal of the LIC are trust funds, they should be invested in securities that do not depreciate in value and provide the maximum potential return.
In other words, while investing in insurance funds, you should evaluate the concepts of safety, yield, liquidity, and distribution. The manner in which these monies are invested is very important not just to policymakers but also to the whole economy.