Operational Efficiency of Life Insurance Corporation of India

Notwithstanding the phenomenal growth of Life Insurance Corporation of India (LIC), the state monolith has come under close scrutiny with regard to its operational efficiency. Against this backdrop, this paper seeks to evaluate the operational efficiency of the LIC, in physical and financial terms. Insurance, being essentially a service industry, a distinct set of criteria (both, physical and financial) have been developed to evaluate its overall efficiency.

There has been a significant improvement in the physical performance of the LIC. But, the financial performance in terms of profitability has not been up to the expected level. However, given the constraints of statutory regulations and government control coupled with a highly cost-prone rural business, the financial performance may be considered as satisfactory although there is a considerable scope for improvement. The LIC should vigorously try to improve its operational efficiency in terms of both the above, to benefit the policy holders and to compete in a liberalised environment.