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ANNUAL REPORT 2007-08

The major expense heads for the private insurers were employee expenses at 39.08 per cent (37.93 per cent in 2006-

  • 07)

    ; advertisement and publicity at 8.92 per cent (8.89 in 2006-

  • 07)

    ; training expenses (including agents’ training and seminars)

at 5.96 per cent (6.92 per cent in 2006-07). Employee remuneration and welfare benefits accounted for 60.75 per cent of the operating expenses of LIC in 2007-08 as against 57.49 per cent in the previous year.

As the private insurers have leaner organizational structures compared to LIC their average worked out to 47.93 per cent as against 48.11 per cent in 2006-07. Advertisement and publicity expenses of LIC accounted for 2.44 per cent of the total operating expenses (3.03 per cent in 2006-07). Training expenses in the case of LIC accounted for 1.73 per cent of the operating expenses (1.93 per cent in 2006-07).

TABLE 11

LIC

16.03

17.01

Private Sector

17.68

15.56

Total

16.59

16.25

LIC

1.57

1.49

Private Sector

1.08

1.00

Total

1.51

1.43

TABLE 10 COMMISSION EXPENSES RATIOS (in per cent)

Single Premium

First Year

Insurer

2006-07

Regular

2007-08

INSURER

2006-07

2007-08

LIC

7085.84

8309.32

Private Sector

6500.01

12032.46

TOTAL

13585.85

20341.78

OPERATING EXPENSES OF LIFE INSURERS (Rs. Crore)

Operating expenses as a per cent of gross premium underwritten for the private insurers worked out to 23.34 more or less at the same level as in 2006-07. In the case of LIC, operating expenses constituted 5.55 per cent of the gross premium underwritten in 2007-08 same as in 2006-07.

TABLE 12 OPERATING EXPENSES RATIOS

9.26 14.30 10.55

Renewal

8.27 13.38 10.11

5.54 3.48 5.32

Total

5.18 3.24 4.86

7.18 10.92 7.85

6.42 9.87 7.30

LIC Private Sector Total

LIC Private Sector Total

LIC Private Sector Total

Note: Commission expenses ratio is the ratio between commission expenses and the premium underwritten by life insurers

INSURER

2006-07

2007-08

LIC

5.54

5.55

Private Sector

23.01

23.34

TOTAL

8.70

10.10

(in per cent)

Note: Operating expenses ratio is the ratio between operating expenses and the premium underwritten by the life insurers

The average for the life insurance companies worked to 10.10 per cent in 2007-08 as against 8.70 per cent in 2006-07. However, given that the industry is expanding and companies have sought permission to widen their office network, it may be expected that there could be a strain on the expense in the current year 2008-09; this would particularly affect the new entrants to the industry.

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