Performance appraisal of indian life insurance companies through caramel approach

Life insurance is man's continuous search for protection and find out the ways and means of restructuring the privation arising out of misfortune. The New Economic Policy 1991 took a departure from the regulated planned economic tradition to that of LPG movement. 23 companies have been established in the private sector and competition arose in the sector. In view of this the performance of the insurance sector should be analysed time to time to find out the drawbacks and make necessary corrections, and also to develop trust among the stakeholders and policy holders that their money is safe. The present study is to assess the financial performance of three Indian life insurance companies namely LIC of India, SBI Life and ICICI Pru Life through CARAMEL approach using ratios and One Way ANOVA. The study is based on secondary data collected from the annual reports of the respective companies for a period of ten years from 2008–09 and 2017–18. There was significant difference for CARAMEL indicators during the period of study at 5% level of significance. The companies have to maintain a reasonable proprietary ratio so that it would not become burden to the share holders. Low ratio of Equity Share Capital to Total Assets indicates low usage of permanent capital for purchase of fixed assets, investments and working capital. The underwriting risk cannot be avoided by the insurance company but the risk can be minimized by reinsurance, broadening the scope of insurance and stabilizing aspects of large size of business. Increase in expenses with improving business is common but these can be controlled by going for digitization. The growth in the benefits paid was satisfactory in all the three companies and this indicates the companies’ promptness in customer services. Earnings of the share holders on their net worth of all the three companies were better. As the insurance business needs more working capital and cash balances for various purposes so having a high current ratio or absolute ratio is better. The companies maintained the required solvency ratio through the study period.