Impact of Product Diversification on Insurance Business


Product diversification of life insurance business yielded considerable results. People are attracted to purchase new policies of insurance which met their demands of children’s education, marriage of daughter, their risk coverage, pension benefit to spouse and self, periodical monetary requirements and risk coverage.

Different policies as discussed above have added more business as is clear from the foregoing tables. Had these policies not been issued, the insurance business would not have expanded so high.

Being encouraged with the result of new schemes of life insurance, the LIC has introduced a very important scheme known as Jeevan Suraksha in 1998 and many other schemes are in pipe-lines. Jeevan Suraksha is available in three types to suit individual needs of person with life cover, pension without life cover and pension with endowment type.


The sum assured increased upto the level of Rs. 4, 08,171 crore in 1996-97 under 1021.47 lakh policy/member. The business increased very firstly after 1985-86 on account of diversified business.

The percentage of population covered increased from 1.35 percent in 1957 to 8.30 percent in 1996-97 under individual business and from 1.35 percent to 10.91 percent under total insurance business.

The percentage of policy number to total population was merely 4.79 percent in 1985-86 which rose to 7.47 per cent in 1990-91 due to product diversification scheme introduced in 1990.

The role of group insurance and superannuation schemes was not very significant in expanding business per population as the percentage of the member number ranged between 2.68 to 1.06 during 1985-86 to 1996-97. Similarly, superannuation did not increase significantly.


It is only individual business which contributes to insurance expansion. Only individual business has introduced new schemes of insurance. Group insurance and superannuation insurance continued on traditional scheme. Then the contribution to new insurance product is significant in business expansion.

The Life Insurance carrying capacity is increased as the percentage share of insurance business in force to net national product increased. The life insurance carrying capacity in India increased from 12.06 in 1957 to 40.98 in 1996-97.

The insurance carrying capacity was 18.25 in 1985-86 which rose to 35,79 in 1990-91 due to introduction of several new insurance schemes in 1990. Since then the life insurance carrying capacity is gradually increasing. It is on account of diversification of individual insurance business.

Group insurance and Superannuation have not been diversified. The per capita insurance increased rapidly in context to individual insurance from Rs. 33.68 in 1957 to Rs. 538.72 in 1985-86 and again to Rs. 3,664.72 in 1998-97.


Thus population in India is insured on an average of Rs. 3,664.72 in 1996-97 although there are a large number of uninsured populations still left out. Only 8.30 percent of the population is insured if policy number is taken only one by a policyholder. But policyholder has more than one policy.

It is established fact that not more than 8.00 percent is insured in India. If group insurance and superannuation are taken together, it has not crossed 10 percent. The 10 percent of population who are insured have given average insurance of Rs, 4,360.80 under all schemes.

The government of India has insured a[l the weaker sections of the society to the range of Rs. 5000 to Rs. 10,000 to provide social benefits. It is free of cost in the sense that the beneficiaries are not required to pay the premium. The government bears the premium amount. It is unique scheme in India which is not present probably in other countries.

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