Will the LIC, the largest Insurance Company of India shut down?

In these days, we are getting the news about LIC (Life Insurance Corporation of India). Our main tension or worry is mainly about on News “Does LIC is going to Shut Down?“

# Firstly,

we have to know, What is the news ? In Economic times, this article is published as…

The Congress on Wednesday accused the Modi government of “sacrificing” public money by investing in loss-making public sector units and said it was using the LIC as an instrument to meet its ends.

Senior Congress spokesperson Ajay Maken cited an RBI report and claimed that the Life Insurance Corporation of India (LIC) has doubled its investment in “risky” public sector undertakings in the last five years from Rs 11.94 lakh crore to Rs 22.64 lakh crore.

# Second,

We have to Know what is LIC?

The Life Insurance Corporation of India (LIC) was founded by the Life Insurance of India Act 1956 passed by the Parliament of India. This rule nationalized the private insurance industry in India. As a result, more than 245 insurance companies spanning across the geography of Indian territory were merged to a single, state owned Life Insurance Corporation.

So in effect Life Insurance Corporation of India (LIC) is a 100% government of India owned insurance group and company. No one person operated institution. So condition 1 above is no longer going to affect LIC.

Life Insurance Corporation of India (LIC) is a 100% government of India owned insurance group and company

Why suddenly negative news about LIC is circulating?

Did you wonder as to why suddenly media is discussing about loss in stock market investments of LIC and giving staggering figures which are scary despite the fact that the value of equity investments which were Rs.3.6 lac Crore has gone up to Rs.6 lac crore in the three year period between June 2016 to June 2019.

LIC issues policies for long term and the average term is 15 years. Like banks or mutual funds LIC do not have redemption pressure and hence investments are made for long term as enjoined in Sec.27 A of Insurance Act. You will find that 75% of the investments are to be made in Central and State Government securities and are made in them.

Besides, LIC enjoys sovereign guarantee under Sec.37 of LIC Act 1956, meaning all the policy monies including bonus are guaranteed to be paid in Cash by Central Government. Only LIC enjoys this sovereign guarantee in India.

LIC investment in equity is around Rs.5 trillion. One trillion is equal to 1,00,000 Crore. It is 1000000000000. One followed by 12 zeros. Rs.5 trillion is Rs.5000000000000. Since the corporation is a long term investor LIC always make profits in equity markets. SEBI and AMFI says, “..if you stay invested in equity market for long we always make profit..”. LIC is investing in equity market since 1956. How can LIC make loses? Moreover only when the corporation exit their investments from a share, we can book profit or loss? Since LIC have not sold any of their investments mentioned by media, where from this concept of loss arouse?

Finally, Life Insurance Corporation of India (LIC) Announces:

#Life Insurance Corporation of India (LIC) #LIC

References:

• Economic Times
• coverliving
• siasat.com