Evaluating Financial Performance: A Comparative Analysis of Earnings and Profitability between LIC and Selected Private Life Insurers in India

Abstract

Insurance plays a crucial role in mitigating risks for individuals and businesses. It provides a sense of security and helps them in facing life's uncertainties with confidence. The Life Insurers in India play a vital role as intermediaries in our economy, facilitating risk transfer, stimulating private investment, creating jobs, and supporting development projects. Life insurance has been a vital tool in managing risk for centuries. Even today many generations rely on life insurance products and this will also be the case in the future. The life insurance sector, marked by its diversity of products and services, has witnessed significant growth in recent years. However, these companies still face challenges such as intense competition, customer acquisition and retention, and sustaining profitable growth. The life insurance companies are struggling to sustain the profitable growth. To thrive in a competitive global market, these companies must remain profitable. Profitability is essential to attract external capital and achieve their long-term goals. An understanding of the performance of the life insurers is necessary for different stakeholders for taking key decisions. This study aids marketers, academicians, and policymakers in evaluating the performance of life insurers for taking critical decisions.

This study is primarily focused on measuring the performance in earnings and profitability of the selected private life insurers and the sole public company LIC over a period of ten years, from 2013 to 2022. Key factors considered include operating and commission expenses to net premium ratio, investment income to investment assets ratio, return on equity ratio (ROE), and return on assets ratio (ROA). Simple statistical tools like mean, standard deviation, and Mann Whitney U test were employed. The analysis highlights that the performance of the LIC has been superior to that of private life insurers in the expense-to-net premium ratio and ROE. On the other hand, private life insurers outperform the LIC in the investment income to investment assets ratio and ROA ratio.