Capital Adequacy of Private and Public Life Insurance Companies in India: An Empirical Analysis

Abstract

After 1999 private players are allowed to enter into the life insurance market. Foreign direct investment in the Life Insurance sector has been increased from 49 % to 74%. LICI the only public life insurer is going towards an initial public offering. Given the aforementioned conditions, the effectiveness and capital sufficiency of Indian life insurance companies must be evaluated.

This study examine the comparative efficiency of capital adequacy of life insurance companies in India.

To judge the efficiency of capital adequacy of life insurance companies in India, 2 methods are followed. One is the traditional method i.e. CARAMEL model and another one is the modern method i.e. Data Envelopment analysis.

Levene’s test is used to judge the equality of variance. An equality of variance test is required to know whether we used a parametric or non-parametric test. Levene’s test shows that there is no homogeneity of variance so the Mann-Whitney U test is used to judge the statistical significance.

According to the study, public and private life insurers' mean capital adequacy differs significantly, with LICI managing capital the most effectively.