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According to:
Advance Leaners Dictionary , “the research is a careful
investigation or enquiry especially through search for new facts
in any branch of knowledge”
Redman & Mory , “Research is systematic effort to gain new
knowledge.
The research made for this project is by personally
visiting the Life Insurance Companies and their HR Managers.
Whole data for this project was collected from books, magazines and
newspapers.
6
CHAPTER – 2
REVIEW OF LITERATURE
INFORMATION – 1
RECRUITMENT AT LIC
EMPLOYEES
Recruitment at LIC is done by the Central Office at
Mumbai. The recruitment process for Assistant Administrative Officers
(AAO’s) at LIC begins with the placing of advertisemnets in popular
national and regional newpapers across the country.
Candidates applying for the post of AAO’s sholud be
between 21 and 28 years of age. They should hold a graduate/
postgraduate degree in any subject with minimum os 50% marks.
Candidates from certain backgrounds (SC, ST, OBC) are given some
concessions with regard to age and marks.
Short-listed candidatesare asked to appear for an entrance
examination. The entrance examination has two papers – one is of an
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objective type and the other an esay type. The objective type paper tests
intelligence, apptitude, mathematical knowledge, logical reasoning,
general knowledge and awareness of political and cultural events.
After the written test, candidates have to appear for
interviews, which are conducted by LIC offices across the country.
Based on yheir overall performance, candidates are selected.
TRAINING OF THE AGENTS IN LIC
Training is give to become the agents of one and half month
for fiv hours or for twenty five days for seven to eight hours.
By completing this training the agnet is going to get the
license to deal with th e products if Lic and can take the insunace of the
people. People who only try to act as agent of LIC (who are not the
actual agents) can be punished with sum of the penalty of some amount
and any other thing. Strict action are taken against these people.
INFORMATION - 2
PROMOTION POLOCIES IN LIFE INSURANCE COMPANIES
8
In insurance companies employees promoted to higher posts
are placed on probation ranging from 6 months to 1 year depending upon
the class (explained below) to which he belongs. The competent
authorities may use their discretion to extent the probation to a
maximum period of 2 years.
An employee on probation is liable to be reverted to his
earleir position without notice, however the period of probation will be
counted as permanent service for all purposes.
Promotions of the employees are done on the various
classes, which are as follows:
Class 1: This class comprises of officials at the highest ranks in
the organisation. Class 1 includes the chairman, the Managing
Directors, the Executive Directors, the Zonal Managers, Seniors
Divisional Managers, Branch Managers or administrative Officers
to Assistant Branch Managers or Assistant Administrative
Officers.
Class 2: This calss comprises of Development Officers. These
development officers have agents under them who work on
9
commision and not on salary. This class brings in the business for
LIC.
Class 3: This class comprises of all the administrative staff. Tyhey
are Higher-Grade Assistants (HGA), Assistants, Record Clerks
(RC), Cashiers and Machine Operators.
Class 4: This class comprises of the sub-staff. They are the Peons,
Watchmen, Sweepers, Drivers, etc.
INFORMATION – 3
POLICICES REGARDING EMPLOYEE CONDUCT
AND DISCIPLINE
The preparation and upgradation of the Personnel Manual of
LIC is the responsibility of the Personnel and Industrial Relations
Department.
Given here below are some rules and regulation regarding
employee conduct and discipline. Each of these issues are covered in
detail in the manual but have been explained very breifly here:
10
Obligation to maintain secrecy:
An employee should not communicate directly or
indirectly and official documents or information to any employee or
other person to whom he is not authorised to communicate.
Participation in Demonstration:
An officer of LIC is expected not to participate in any
kind of demonstration, resort nor abet to any kind of a strike.
Private trading:
Employees of LIC are not allowed to engage directly
or indirectly in any kind of trade or business. They are not allowed to
be involved in the promotion or managemnet of any other company
registered under the Indian Companies Act.
Partly-time work:
No wemployee is allowed to take any kind of part-
time work for a private or public body.
Acceptance of gift:
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An employee of LIC is not allowed to accept nor
permit his wife or any family member to accept any gift of more than
a trofling value.
INFORMATION - 4
MAX NEW YORK LIFE – NOT PARTNERS FOR LIFE
MAX New York Life’s (MNYL) philosophy is simple:
reard performance. It applies this philosophy diligently (some might
say ruthlessly) to its 900 employees and 4000 agents.
For an agent who does well, Rs 10 lakh as annual
commision income is common. They also get to attend special
offsites, where fun, training and insights are combined in equal
measure. The most successful ones get nominated for the Chairman’s
gold pin or the Million Dollar Roundtable, aworldwide club for
insurance agents who cross the $70,000 (Rs.5 lakh) mark in annual
commision. Similarly, MNYL employes can expect lots of money,
recognition, sprcial and other rewards if they do well.
12
At MAX laggards just don’t survive. There is no place
for poor performers and mediocrity. Targets are stiff – 100% annual
growth is common ai every level. Results are monitored monthly and
discussed publicly. Key Result Areas (KRA’s) of the senior managers
– from Managing Director Anuroop ‘Tony’ Singh downwards – is
placed on the company intranet.
The employee turnover rte is over 25%. This does not
worry Tony Singh who sees it as necessary blood-letting for a high-
performance organisation. However, those employees who siurvive
take great pride in being part of the organisation.
MNYL is not just about the money you make. Tony
Singh makes sure that the rewards fot the high performers go beyond
just soulless cash. He meets every one of the company’s employees
at least twice ayear at presentations organisaed at the 20 offices
across the country in which he discusses the vision and the values of
the company.
(Source: Businessworld, 1 September, 2003.)
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CHAPTER - 3
INTRODUCTION OF INSURANCE AND HUMAN
RESOURCE MANAGEMENT
Introduction of Insurance:
Insurance has come up as a very important finanacial
services is most of the part of the world. The insurance is considered
as one of the important segment in an economy for its growth and
development. This industry provides long term funds that are
essential for the development of basic infrastructure.
The Indian Insurance industry is more than 150 years
old. The industry has witnessed many phases of the working form the
days when there were many private sector companies initially and
they moved to nationalization and again to the private sector.
14
Being one of the segments of financial sector, it has in
the recent past gone through transformation and change including the
passing of IRDA (Insurance Regulatory & Development Authority)
Act, 1999. There have been many reforms in the past in the Banking
& Capital Market segments, which for the first time are being
witnessed after the passage of IRDA Act in the Insurance segment.
Insurance is basically defined as, “a financial agreement
that redistribute cost of Cost of Unexpected losses”. Today stands
both as a service and the industry in its own right.
Introduction of Human Resource Management:
Human resource the invisible, intangible assets, are the
most valuable assets in any industry, more so in case of a service
industry like Insurance. It is now well recognized that Human
Resource Management are an integral part of business strategy
determines the direction which the organization is likely to take in
relation to its environment in over to achieve sustainable competitive
advantage. HRM should ensure that every strategy that the
organization visualize is supported by matching response from its
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employees who in turn to be supported by consistent human
resources policies.
The important and value of human assets were
recognized in the early 1990. When there was a major increase in
employment in the form of service, technology and other knowledge
base sector. In this firm the intangible assets, specially the human
resources, contributed significant by to the building of shareholders
value. The critical success factor for any knowledge base company is
it highly skilled and intellectual work force.
The fundamental truth is that no organization can achieve
anything with out its people. Whether is a matter of capital
equipment, distribution channels or resource allocation or for that
matter marketing? It always comes down to “people” therefore
people are the building block of any organization. This may sound
some what simplistic but the fact is the may organization failed to
seek that link between people and business results. Perhaps, this is
based on the presumption that “business strategy” is more important
than “people”. As a result we do see that in there annual
reports ,companies vociferously declare “our people are our greatest
16
assets” but at the same time hold back when it comes to making the
investment in terms of money and energy in there people.
While business strategy are base on quantitative factors
link growth, competition, position, marketing, profitability etc. HRM
strategies involve most of qualitative factor like commitment,
motivation, and good employee relations. It remains for the HRM
process to help to design system that will help the organization to
have staffed with the requisite skills need to success full implement
its business strategy.
Unprecedented development of science and technology,
knowledge its very discipline is fast multiplying. It is said that in
every sphere of management the techniques are just double in
comparision of the last half decade.
New theories and practices are being adopted very
rapidly which are the result of mechanization and renovated
systemization f human factor. It a great thrust of computerization.
The increasing use of sophisticated information processing
technology has changed the patter of planning, decision making and
controlling almost beyond recognition.
17
DISTINCTIVE FEATURES OF HUMAN RESOURCE:
The human element as a source has certain distinct
features which mark it out from other material resources physical
inputs into the system. It largely influences the methods and
techniques of managing the human elements. These are –
1. The investment in man has a lagged return. The lag varying with
the person the function and the level at which he works.
2. The divisibility factor is constrained by the unit which is the
manager himself, with his essential supporting facilities –
including other men who assist.
3. The investment in men is along term benefit. The logic of hiring
and firing of employees is fast getting obsolete and difficult to
apply. Even if the principle is to work, frequent changes of
employees (especially managers) erode the health of the
organization.
4. The characteristic noted above compels that a manager taken
today is only partly for the task at present that the management
18
foresees for him in the future over a span of fifteen or twenty
years.
5. The cost effectiveness of a material input usually cannot be less
than zero. The measure of a managers contribution to enterprise
goal can conceivably, assumes, negative values. In mathematical
terms the marginal utility of a manger (or an employee) can take
any positive or negative value, in a given position.
6. The sum of the several effectiveness of managers functioning in a
team is not necessarily equal to the effectiveness of the team. The
later can be more or less than the sum of the constituents. This is
the consequences of group dynamics in which the group emerges
as anew unit of effectiveness not by the arithmetical additive
process of the constituents but by a synthetic, organic totality.
This is group characteristic of managerial effectiveness imposes of
HR, recruitment, selection, training and development.
7. Measurement (& verification) of managerial effectiveness is oe
complex & uncertain. This puts an extra burden & new
dimensions to the evaluation, appraisal and control system of the
use and effectiveness of the human resources.
19
8. Finally, since the potential of the man (manager) is almost
admitted the task of manager’s development both as individual
functionary and as a member of the team assumes unusual
significance.
CHAPTER – 4
HISTORY OF HUMAN RESOURCE MANAGEMNET AND LIFE
INSURANCE COMPANY
1. HISTORY OF HRM:
HR comes of age - history of human resource management
Workfoce management has become increasingly complex.
The heritage and growth of the human resource management profession
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is closely linked to people's attitudes about work, the evolution of
employment-related laws and sociological trends. The HR field today
recognizes the dynamic relationship between strategy, people,
technology and the processes that drive organizations. Although this
dynamic relationship appears obvious now, the evolution of the
profession has often been slow.
One could argue that the HR field dates back to the first
working arrangements between master craftspeople and their
apprentices. Before the industrial Revolution, working arrangements
involved close relationships between mentors and apprentices dedicated
to learning a particular trade. Apprentices were often required to live in
the shop or home of the master craftsperson. If an apprentice was injured
or sick, the master's family was responsible for restoring the young
worker's health and welfare. Master and apprentice shared in good times
and bad, in profit and in loss.
The usefulness of this age-old relationship came to an
abrupt end with the advent of the Industrial Age. In one powerful stroke,
the notion of work moved from guilds and home shops to steam-driven
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factories. The introduction of the assembly line brought a need for low-
skilled employees capable of performing repetitive tasks. Management
philosophy at the turn of the century was epitomized by Henry Ford,
who often wondered why workers brought their heads to work when all
he really needed was their hands and feet.
The personnel administration movement:
By the late 1800s, people problems were a very real concern
in the workplace. For the average blue-collar worker, most jobs were
low-paying, monotonous and unsafe. Some industries experienced
difficulty recruiting and retaining employees because of the poor
working conditions workers were exposed to. As the means of
production continued to shift from farmlands and guilds to city factories,
concerns grew about wages, safety, child labor and 12-hour workdays.
Workers began to band together in unions to protect their interests and
improve living standards. Government stepped in to provide basic rights
and protections for workers.
Forward-thinking employers recognized that productivity
was connected to worker satisfaction and involvement and realized they
22
could not meet production schedules with bands of disgruntled
employees. In the late 1800s and early 1900s, the personnel profession
that grew out of concerns about employee absenteeism and high turnover
attempted to solve worker problems with such basic HR management
functions as employee selection, training and compensation.
Although industrial giants were beginning to understand that
they had to do more than just hire and fire if they were going to meet
consumer demands for products, most of the objectives of early
personnel professionals were one-sided. Business leaders still viewed the
work itself as infinitely more important than the people doing it, and
production rates remained the top concern. Because employers believed
employees would accept more rigid standards if they received extra pay
and benefits, most employer-sponsored business solutions were aimed at
making employees more efficient. From this mind-set grew scientific
management approaches based on the work of Frederick W. Taylor and
other experts whose goal was to get people to perform as efficiently as
machines.
23
Of course, such approaches did little to improve worker
morale or improve working environments. To counter the growing
strength of the labor movement, some employers hired strikebreakers or
kept blacklists of union members. Others made workers sign "yellow-
dog" contracts -- agreements that they would not join unions. Still others
attempted to protect their interests by creating company unions to
preempt the influence of outside union activities.
2. HISTORY OF LIFE INSURANCE COMPANY:
The story of insurance is probably as old as the story of
mankind. The same instinct that prompts modern businessmen today to
secure themselves against loss and disaster existed in primitive men also.
They too sought to avert the evil consequences of fire and flood and loss
of life and were willing to make some sort of sacrifice in order to
achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era – past
few centuries – yet its beginnings date back almost 6000 years.
Life Insurance in its modern form came to India from
England in the year 1818. Oriental Life Insurance Company started by
24
Europeans in Calcutta was the first life insurance company on Indian
Soil. All the insurance companies established during that period were
brought up with the purpose of looking after the needs of European
community and Indian natives were not being insured by these
companies. However, later with the efforts of eminent people like Babu
Muttylal Seal, the foreign life insurance companies started insuring
Indian lives. But Indian lives were being treated as sub-standard lives
and heavy extra premiums were being charged on them. Bombay Mutual
Life Assurance Society heralded the birth of first Indian life insurance
company in the year 1870, and covered Indian lives at normal rates.
Starting as Indian enterprise with highly patriotic motives, insurance
companies came into existence to carry the message of insurance and
social security through insurance to various sectors of society. Bharat
Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more
insurance companies. The United India in Madras, National Indian and
National Insurance in Calcutta and the Co-operative Assurance at Lahore
were established in 1906. In 1907, Hindustan Co-operative Insurance
Company took its birth in one of the rooms of the Jorasanko, house of
25
the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile,
General Assurance and Swadeshi Life (later Bombay Life) were some of
the companies established during the same period. Prior to 1912 India
had no legislation to regulate insurance business. In the year 1912, the
Life Insurance Companies Act, and the Provident Fund Act were passed.
The Life Insurance Companies Act, 1912 made it necessary that the
premium rate tables and periodical valuations of companies should be
certified by an actuary. But the Act discriminated between foreign and
Indian companies on many accounts, putting the Indian companies at a
disadvantage.
The first two decades of the twentieth century saw lot of
growth in insurance business. From 44 companies with total business-in-
force as Rs.22.44 crore, it rose to 176 companies with total business-in-
force as Rs.298 crore in 1938. During the mushrooming of insurance
companies many financially unsound concerns were also floated which
failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide
strict state control over insurance business. The demand for
nationalization of life insurance industry was made repeatedly in the past
26
but it gathered momentum in 1944 when a bill to amend the Life
Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January, 1956, that life
insurance in India was nationalized. About 154 Indian insurance
companies, 16 non-Indian companies and 75 provident were operating in
India at the time of nationalization. Nationalization was accomplished in
two stages; initially the management of the companies was taken over by
means of an Ordinance, and later, the ownership too by means of a
comprehensive bill. The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the Life Insurance
Corporation of India was created on 1st September, 1956, with the
objective of spreading life insurance much more widely and in particular
to the rural areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212
branch offices, apart from its corporate office in the year 1956. Since life
insurance contracts are long term contracts and during the currency of
the policy it requires a variety of services need was felt in the later years
to expand the operations and place a branch office at each district
27
headquarter. Re-organization of LIC took place and large numbers of
new branch offices were opened. As a result of re-organisation servicing
functions were transferred to the branches, and branches were made
accounting units. It worked wonders with the performance of the
corporation. It may be seen that from about 200.00 crores of New
Business in 1957 the corporation crossed 1000.00 crores only in the year
1969-70, and it took another 10 years for LIC to cross 2000.00 crore
mark of new business. But with re-organization happening in the early
eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum
Assured on new policies.
Today LIC functions with 2048 fully computerized branch
offices, 100 divisional offices, 7 zonal offices and the Corporate office.
LIC’s Wide Area Network covers 100 divisional offices and connects all
the branches through a Metro Area Network. LIC has tied up with some
Banks and Service providers to offer on-line premium collection facility
in selected cities. LIC’s ECS and ATM premium payment facility is an
addition to customer convenience. Apart from on-line Kiosks and IVRS,
Info Centres have been commissioned at Mumbai, Ahmedabad,
Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
28
other cities. With a vision of providing easy access to its policyholders,
LIC has launched its SATELLITE SAMPARK offices. The satellite
offices are smaller, leaner and closer to the customer. The digitalized
records of the satellite offices will facilitate anywhere servicing and
many other conveniences in the future.
LIC continues to be the dominant life insurer even in the
liberalized scenario of Indian insurance and is moving fast on a new
growth trajectory surpassing its own past records. LIC has issued over
one crore policies during the current year. It has crossed the milestone of
issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding period of the previous
year.
From then to now, LIC has crossed many milestones and
has set unprecedented performance records in various aspects of life
insurance business. The same motives which inspired our forefathers to
bring insurance into existence in this country inspire us at LIC to take
this message of protection to light the lamps of security in as many
29
homes as possible and to help the people in providing security to their
families.
Some of the important milestones in the life insurance business in
India are:
1818: Oriental Life Insurance Company, the first life insurance company
on Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life
insurance company started its business.
1912: The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance
Act with the objective of protecting the interests of the insuring public.
30
1956: 245 Indian and foreign insurers and provident societies are taken
over by the central government and nationalised. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5
crore from the Government of India.
The General insurance business in India, on the other hand, can trace its
roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 in Calcutta by the British.
CHAPTER – 5
ACTIVITES OF HUMAN RESOURCE MANAGEMENT IN
LIFE INSURANCE COMPANIES
HUMAN RESOURCE MANAGEMENT (HRM) in
Life Insurance Companies is a management function that helps
manager’s recruit, select, train, and develops members for an
organization. Obviously, HRM is concerned with the people’s
dimension in organization.
31
HUMAN RESOURCE MANAGEMENT is also a management function
concerned with hiring, motivating, and maintaining people in an
organization. It focuses on people in organizations.
Development of human capital is important for any
organization especially for organization whose activities resolve
around special human interactions. Alongwith products and services
the new insurers need people with the right set of knowledge, skills
and aptitude for insurance. The persons who are involved in selling
the product and those who are doing the back office work need to
equip themselves with never skills and insights into every aspect of
companies functioning. They have a daunting task of exploiting
potential in the industry and at the same time bring good risks to the
company for providing insurance coverage. They have to retain the
existing customers for which they need to have better understanding
of products and services by creating healthy internal environment
with group harmony. Existing companies will have to frame their
human resources policies to retain the competent and motivated staff
since new entrants will be eying them by offering lucrative salaries.
The scope of human resource management is very vast.
It is connected with all major activities in the working life of a
32
worker. HRM is connected with every other department as human
resources are the requirements of all departments in the life insurance
organizations. HRM in Life Insurance Companies covers the
following:
Human resource planning
Job analysis and design
Recruitment and selection
Orientation and placement
Training and development
Performance appraisal
Compensation management
Career planning, promotions and transfers
Motivation and communication
Employees Welfare
HRIS – Human Resource Information System
33
Employee safety and health
Industrial relation etc………..
HRM involves a large numbers of functions or activites.
This number varies according ti the size and needs of the organiation.
The activites or funnctions of HRM affect the organisation internally.
However, the extenal environment affects HRM functions. The major
activites of HRM in Life Insurance Companies areas depicted below:
1. HUMAN RESOURCE PLANNING:
HRP is the processs of assessing the organisation’s
human resources needs in the light of organisational goals and
chaning cinditions and making plans to ensure that a competent,
motivated workforce is employed. HRP is very important in these
mordern times where everything is fluid and chages are occuring at
great speed.
Importance of HRP:
Future personnel needs
Parts of strategic planning
34
Creating highly talented personnels
Intrenational strategies
Foundations for personnel functions
Incresing investment in human resources
Resistence to change and move
2. ORGANISATIONAL AND JOB DESIGN:
An important activity of HRM is developing an
organisation which caters for all the activites required, groups them
together in way which encourages integration, cooperation, and
provides for effective communication and decision making.
Job design is concerned with deciding on the content and
accountabilities of jobs in order to motivate employees and maximise
job satisfaction.
3. JOB ANALYSIS:
35
Job analysis is the process of cleecting job related
information. Such information helps in the preparation of job
description and job specification. It is defined as ………. ‘Job
analysis is the procss of studyong and collecting information relating
to the operations and responsibilities of a specific job. The immediate
products of this analysis are job descriptions and job specifications.’
Specifically, job analysis involves the following steps:
Collecting and recording job information
Checking the job information for accuracy
Writing job descriptions based on the information
Using the information ti determine the skills, abilities and
knowledge that are required on yhr job.
Updating the information from time to time
4. STAFFING:
36
Staffing or aqusition of human resources is another
activity of human resource management. Staffing activites detemine
the composition of an organisation human resources.
Staffing activites include: attracting qualifiued people to
the organisation, selecting from among candidates, reassigning
employees through transfer, promotion, or demotion and ultimately
managing the employee esparation through resignation, discharge or
retirement.
5. TRAINING AND DEVELOPMENT:
This activity of HRM focuses on improving the
performance of individuals and groups within the organisation.
Theses activittes aim to help employees learn new skills or refine
exixting skills.
HR managers must decide which skills or knowledge
areas need development and which methods are most effective for
helping employees acquire skills and knowledge.
37
A formal definition of training and development is ……
‘it is any attempt to improve current or future employee performance
by increasing an employees ability to perform through learning
usually by changing the employees attitude or increasing his or her
skills and knowledge. The need for training and development is
determined by the employees performance deficiency, computed as
follows:
Training and development need = Standard performance –
Actual performance
5. PERFORMANCE APPRAISAL:
Performance appraisal and review is ongoing evaluation
of individual and group contributors to the organisation and the
communication of those evaluations to the npersons involved. This
HRM function is carried out for a number of purposes: to provide
feedback about performance, to detemine the need for training, to
make decisions about promotions, pay increases and so on.
It has comprehensive definition which is as follows:
38
“Performance appraisal is a formal, structure system of measuring
and evaluating an emploees job related behavior and outcomes to
discover how and why the employee is presently performing on the
job and how the employee can perform more effectivly in the future
so that the employee, organisation and society all benefit.”
Objectives of Performance Appraisal
Data relating to performance assessment of employees
are recordede, stored and used for several purposes. The main
purposes of employee assessment are:
To effect promotions based on competence and performance
To confirm the services of probationary employees upon their
completing the probationary period satisfactorily
To asses the training and development needs of employees
To decide upon a pay rais where regular pay scales have not
been fixed etc………..
6. COMPENSATION AND REWARD:
39
Organisations compensate employees through wages and
salaries, bonueses and benefits, such as health insurance, vacation
time, and pension programs. The presence or absence of rewards and
recognition is important to employee morale and performance.
Compensation decisions include determining: ensuring
fair and equitable pay differences among employees, designing a pay
pakagese relative to that of its competitiors, forms of compensation
and so on.
1. MAINTAINING EFFECTIVE EMPLOYER-EMPLOYEE
RELATIONSHIP:
An important function of HRM is to promote
harmonious relationships between the management and employees.
The aim of HRM is to increase cooperation, trust and to provide to
involve employees actively in the companys affairs. This function of
HRM includes addressing employees grievances and taking suitable
steps towards solving them.
2. HEALTH AND SAFETY MANAGEMENT:
40
This function of HRM includes activites and events that
serve to protect organisation members from illness and physical
dangers in the workplace and to assist them with their physical and
emotional health. For many organisations, protecting the health and
safety of humana resouyrces is aprime social responsibility. This
HRM functions serves to preserve the human resources of the
organisation.
3. EMPLOYEE PARTICIPATION:
This is a relatively new function of HRM. Employee
participation focus on giving employees a voice, sharing information
with them and consulting them on matters of mutual interest.
Employee participation is an impoartent step in establishing industrial
democracy.
4. ORGANISATION IMPROVEMENT:
Organisations must constantly improve themselves due
to the emergence of new ideas regarding productivity, rapidly
changing technology and competitionfrom the organisations.
41
5. HR AUDIT:
An HR audit is a tool for evaluating the personnel
activites of an organsation. The audit may include one division or an
entire company. It gives feedback about the HR functions to
operating managers amd HR specialists. It also provides feed back
about how wll managers are meeting their HR duties. In short, the
audit is an overall quality control check on HR activites in a division
or company and an evaluation of how these activittes support the
organisations strategy.specifically, an HR audirt covers the following
areas:
Audit of human resource function,
Audit of maangerial compliance,
Audit of thuman resource climate,
Audit of corporate strategy.
The fuction of human resources manager is to ensure the
flow of events through which people ijn the organisation improve the
organisations effectiveness. He has to constantly lookout for ways to
42
improve the organisation through employee training, implementing
work redesign programs and so on.
CHAPTER – 6
HUMAN RESOURCE IN LIC
“To be identified as an epitome of customer care and concern
into the entire service industry – globally, we would need
individual excellence wovem intoa fabric of team spirit, where the
enterprise of leadership would transcend organisational
43
hierarchy and geographical boundaries leaving a trajectory of
history with untold success stories”.
----- www.licindia.com.
LIC has had many problems relating to the efficient use
of its HR since the time it was set-up. Many of these problems related
to the fact that it was a public sector organisation. The corporation
managers were too bureaucratic. The work culture in the organisation
was sloppy.
Strong trade unions made it difficult for managers to get
the work done. The corporations development officers focused on
their own earnings and incentives, rather than on customer
satisfaction. Govt. interference also had an adverse effect on the
functioning of the organisation.
In 1994, the Malhotra Committee was set-up by the
Govt. of India for submiting its recommendations on allowing private
companies into Indian Insuarnce market Govt. of India had to face
44
severe opposition from all the insurance mployee unions against the
opening-up of sector.
After the liberalisation of the insurance industry, LIC had
an evaluation of its organiusational structure by consulting firm Booz
Allen & Hamilton. The report by the consultants suggested that there
was a need for organisational structuring, as some of LIC’s
department did not add value to the organisation. In 2002, initiatives
for organisational change have been inititaed – “We will set-up high
level cross functional teams to speed up decision- making”. Said
Mr.Bajpai, Chairman LIC in reponse to the report.
Although Lic had an excessively large workforce
(1,25,000 employees), it decided not to after them a voluntary
retirement scheme (VRS). LIC planned to adopt a growth path to use
its employes strength fully rather than offering VRS. A productivity
linked lump-sum incentive of upto 6% based on the corporations
performance was started in 2001, N.M. Sundarm, General Secretary,
All India Insurance. Employees Association said, “The management
hasn’t spent out in detail its intentions on the staff re-deployment.
45
Taking into account the emerging market and the customer
expectations, we have suggested new value-added jobs to the
management and also simplfications of claim procedures”. LIC
intended to re-deploy its personnel into revenue generating activites
to reduce cost by 2003.
In 2002, the corporation said it has the full support of its
unions in meeting the competition. The Unions accptance of the new
direction for LIC was stated by B.S. Rawat, Joint Secretary and All-
India LIC Employees Federation (AILICEF), “This is a part of a joint
effort of the mnaagement of the unions to improve the functioning
and the profitability of ythe corporation. The unions have decided to
lend whatever support they could to professionals LIC”.
A year earlier, in 2001, Lic faced the problems of a
major brain-drain of top executives from LIC to positions in new
private insurance omapnies. P.C. Gupta, former LIC Executive
Director, Acturial, left the organisation. For HDFC Standard Life just
a few months after he was denied to the top post at LIC. Others who
left includede P.S. Pritam joined as an advisor to Allianz;
46
V.Rajagopalam, Chief in-charge of investment; who signed up with
ICICI Prudential; and Vrinda Kini, Senior Branch for pension
business.
The drain occurred not only at the top level management, but
also at the middle management level of LIC.
LIC has established extensive training facilities at all levels. At the
apex, it had Management Development Institute, seven zonal training
centres and 35 sales training centres. At the industry level, along with
the Govt. and the GIC, it established the National Institute Academy.
In 2002, LIC signed a MOU with IIT (Indian Institute of
Technology), Chennai, for training. LIC in the areas of IT, systems
management & IT enables services management. LIC announced that
it would develop its Zonal training centre in Chennai into an apex IT-
training centre with the help IIT Chennai.
CHAPTER - 7
47
RECENT DEVELOPMENT IN INSURANCE INDUSTRY IN
INDIA
INTRODUCTION:
The Government of India in 1993 and set-up a high
powered committee by R.N. Malhotra, former Governor, RBI, ti
examine the structure of the insurnace industry and recommend
changes to make it more efficient and competitive. Keeping in view
structural changes in other parts of the finacial system of the
economy.
Major Recommendations of Malhotra Committee:
The committee submitted its report in January 1994
recommending that Private insureres by allowed to co-exist along
with Government company’s like LIC & GIC companies. This
recommendations had been prompted by several factors such as need
for greater and deeper insurance coverage in the economy and much
greater scale of insurance sector is at least partly driven by fiscal
48
necessity of tapping the big reserve of savings in the economy.
Committees recommendations were as follows:
1. Raising the capital base of LIC and GIC upto Rs. 200 crores, half
retained by the Govt. and rest sold to the public at large with
suitable reservations for employees.
2. Private sector be granted permission to enter insurance industry
with a minimum paid capitaln of Rs.100 crores.
3. Foreign insurance companies be allowed to enter by floating an
Indian company preferably joint venture with Indian partners.
4. Steps to be initiated to set-up a strong and effective insurance
regulatory in the form of statutory autonomous board on the lines
of SEBI.
5. Limited number of private companies to be allowed in th esector,
but no firm be allowed to operate in both lines of insurance (life or
non-life).
49
6. Traiff Advisory Committees (TAC) is delinked from GIC to
function as separate statutory body under necessary supervision
by the insurance regulatory authority.
7. all insurance comapanies be treated on equal footing and governed
by the provisions of the insurance act. No special dispensation is
given to Govt. companies.
8. Setting up of a strong and effective regulatory boby with
independent source for financing before allowing private
companies into sector.
50
CHAPTER – 8
CASE STUDIES IN INSURANCE
I. “THE IMPORTANCE OF HR PLANNING AN INSURANCE
ORGANISATION”.
________________________________________________________________________
The case focuses on the development and utilization of the human resources of
insurance organisation through proper planning a management. It emphasizes the
need for the organisation to shift frm their current manpower situation to their
desired manpower position through HR planning. It also examines the problems
faced by companies that failed to recognise their aniticipated future needs in terms
of employee skills and training. The case throws light on the need for motivationg
sales personnel so that they perform to the best of their abilities.
51
____________________________________________________________________
____
Ram Narayan (Narayan) began his career as amangement trainee in a
private organisation. His special interest in studying human behavior and
his bacground in psychology often made him analyse the emotional
reactions and behavioral patterns of people around im. It was his
ambition to become a human resource consultant in a reputed company.
Therefore, after his graduation, he took a diploma course in human
resource management.
However, when he came across an opportunity to enter the insurance
industry, he joined an insurance company as a junior manager. Later on,
he worked in different caapcities in the HR department of four other
insurance comapanies before working as the human resource manager of
LMH Insurance Company. Within a short time, he gained cosiderable
reputation at LMH. Some crucial decisions he had taken related to the
employee compensation and reward systems in the company paid off
rich dividends in due course of time. He was hence considered a key
number in the organisation.
52
As part of the human resource policy. Narayan wanted to develop a lean
structure for the organisation. LMH was in an expansionmode during
those days. Narayan felt that having a lean organisational structure
during the expansion period would help th ecomapny become more
flexible in adapting to change. He believed that a fast growing
organisation should have a limited number of personnel. But Narayan
was against employee retrenchment and layoffs. His policies worked
well, and he became an instant success with both the employer and
employees in the organisation.
Over the year, however, the business environment changed and the
organisatiop expandede in size because of diversification. Narayan,
therefore, advise the top managemnt at LMH to change its HR policy
and develop a strategic human reosrce plan that would take care of the
future needs of the organisation. However, the top management ignorned
his advice and continued with existing HR policy since this involved
lesser costs.
The consequences did not favor the company in the last three years. The
company had to struggle to manintain its existence in the business during
53
the last three years. One of the basc reasons was that the organisational
structure was too lean. The company’s HR policy actually led to a
shortage of manpower.
The company’s cagerness to increse its profits rapidly made th
emanagemnt decide to make a temporary arrangemnet of recruiting
people on an emergency basis and provide them with fast-track trianing.
Owing to space constraints, the comapny was forced to move to a bigger
office, and its monthly expenses and cash requirements incresed. The top
management decided that things could improve only if the company sold
more polocies and expandeed its clent base. It pushed its employees to
work for extra hours, often with no overtime allowancw. Due to such
presure on the employees, their productivity declined.
There were other problems too. When the company came up with an
innovative product, there was always the threat of big players following
its corse by releasing a similar product. In addition, such competition
added to the burden on the already overstressed personnel and other
resrces. The situation deteriorated fast as people started to quit in droves.
Those who stayed felt insecurs. Total confusion prevailed in the entire
54
organisation and the employees started losing confidence in the
management.
A meeting was convened to resolve the problem. Narayan too, attended
the meeting. He brooded over the problems. While talking about the
changes requird to solve these problems, he advised the top managemnt
to formulate a strtegic HR plan. For the time being, he suggested tactical
human resource palnning. He convinced the management that once the
present problems are solved, the company would have to implement the
strategic HR plan.
Questions for discussions:
1. Describe the HR problems that LMH Insurance Company faced. What
were the reasons for hese problems? Could the company have avoidede
these problems? If so, then how?
Solution:
A. HR problems that LMH Insurance Company faced:
The company was struggling to maintain its existence.
The organisational sturcture was too lean.
55
HR policy led to shortage of manpower.
Because of the over-loaded work, employees productivity
declined.
Competition in the market added more burden to the
employees.
Employees started losing the confidence in the management
because of the confusion prevailed in the entire
organisationand that confusion was about the work,
competition, overtime etc.
B. Reasons for the problems:
The stucture of organisation was made too lean.
The work was more given to the employees and no
overtime allowance was given in return.
The confusion was there.
The organisational personnel were overstresed because of
the burden.
56
C. Company did not avoided the problems:
The problems faced by the LMH Insurance Company decided
to solve the problems, for that purpose meeting was held by the
management where all the problems were brooded by Mr. Ram
Narayan, HR Manager of LMH Insurance company. He
adviced the top management to formulate –
Strategic HR Plan
Tactical HR planning
II. “HR CHALLENGES IN THE INSURANCE INDUSTRY”
The cases focus on the challenges facing the HR department in the
growing insurance industry in India. Prob;lems caused by the lack of
57
skilled personnel and the increasing demend for skilled emplyees are
also discussed in the case. In addition, challenges regarding the
recuitment and retention of employees are examined. The case throws
light on various measures taken by HR depatments in insurance
organisations to improve the work environment and the productivity of
employees.
“The real challenge for human resource professionals. Espaecially in the
insurance sector, will begin in the new millennium,” said Karrupu Vasu
(Vasu), Senior Manager (Human Resource) at Bombay Life Insuarnce.
What kind of challenge will we face? As of now, the sailing is smooth
for HR professionals as compared to the marketing professionals. As
competition is severe in the insurance sector. It requires a lot of skill to
sell a policy. Even finance professionals face difficulties as the interest
rates have been on a downward spiral. They now face the challenges of
identifying the best investment opportunities,” said Chenchull Reddy
(Reddy), another manager at Bonny Life Insurance.
“The honeymoon is over. It is time to pll up our socks. After
the liberalisation of the insurance sector, private and foreign players in
58
India have become active. Though therer is lot of scope for growth in the
sector, the availability of human rsource with skills suited for the
insurance industry is meager. Therefore, it is difficult to find skilled
people,” replied Vasu.
Both Vasu and Reddy had several years of experience of
working in managerial positions for different service organisations
before they joined Bonny. Vasu was happy with previous job, when the
offer from Bonny came to him. Though, he was initially reluctant to
switch from the orgnaisation to bonny, the pay packet offered by the
Bonny finally wooed him. Soon after joining Bonny, Vasu was assigned
the responsibility of recuiting people to various positions in the
organisations.
“Recruiting the right people has become a key issue now.
Identifying people with proper skill sets is very important,” said Vasu.
“But statistics reveal a high unemploment rate is country,”
pointed out Reddy.
59
“Yes, I agree that the unemployment rate is growing. But
the typr of employees being sought now s different. The industry now
requires employees who are more skilled or better educated than those in
the past,” said Vasu.
Coincidentally, on the very next day, Diwakar Nambiar
(Nambiar), the Generl Manager of the company, called Vasu and Reddy
fo r a startegic business discussion. While discussing about the strategies
that the company needed to implenment, Vasu informed Nambiar about
the difficulties they were facinf in recruiting people for the organisation.
Nambiar replied, “This was expected, since growth for any
company comes at a certain cost. In the current competitive scenario, the
success or fialure of any organisation depends upon the kind of emplyees
it recruits”.
They then discussed about the kind of employees they
needed and other strategic matters related to human resource
management.
60
While talking about h ecurrent requirements of the
company, Nambiar said, “We need underwriters, computer support
specialists, database administrators and sales personnel”.
“But before we go in for staffing, we need to conduct job
analysis,” pointed out Vasu.
Nambiar accepted Vasu’s suggestion, and stressed on the
need for the HR department to decide its priorities. After giving is a
serious thought, Vasu replied, “There is aneed to create an environment
which would attract people and make them loyal to the organisation.”
“But with the overall industry trend being the way it is, how
can this be acheieved?” asked Nambiar.
Vasu replied, “We need to pay high salaries to highly
effeicient employees. Instead of havinf a rigid policy regharding the
work hours, the HR department should provide employees with flexi-
time options”.
The meeting ended with the decision to adopt employee-
friendly HR practices in the company. It was felt that with the
61
implementation of innovative HR practices, the company would soon
become an employer of choice. The productivity of the employees and
the output of the firm were also expected to significantly increse due o
the flexi-time arrangements. However, before adopting the new
practices, it was essential that the HR department sorted out matters
pertaining to teamwork, synergy, building up employee morale and
strengthening their interperssonel relationships. Taking into
consideration the diversity of the workforce, this was a huge task for the
HR managers.
Questions for discussion:
1. Nambiar called both Vasu and Reddy to discuss the rewcruitning
process that the company must follow. What are the startegic issues
involved in the recruiting process of Bonny Life Insurance Company?
Solution:
The strategic issues involved in the recuiting process of
Bonny Life Insurance Company are –
62
Certain kind of employees they needed are underwriters, computer
support specilists, daatbase administrators and sales personnel.
They have to create such an environment which would attract
people and make them loyal to the organisation.
Pay high salaries to highly efficient employees.
Instead of having a rigid policy regarding the work hours the HR
department should provide employees with flexi-time options.
Employee – friendly HR practices will be adopted.
2. Vasu suggested the need to conduct organisation and job analysis
before staffing . discuss the need for Bonny Life Insurance company to
conduct organisation.
Solution:
Yes, there is a need to conduct organisation because the
productivity of the employees and the output of theform were expected
to significantly increase due to the flexi – time arrangement. However,
before adopting the new practices, it was essential that the HR
63
department sorted out matters pertaining to teamwork, synergy, building
up employee orale and strengthening their interpersonnel relationships.
CHAPTER – 9
DATA COLLECTION
The data about the project was collected in the form of
Primary and Secondary data. The information was collected through
personal visting the Life Insurance companies and getting the
quesstionnaire filled by the HR managers of the companies.The
collected information is depicted below:
64
I. PRIMARY DATA:
1. What is your policy as HR manager of Life Insurance?
Ans. Most of the HR Managers are dealing their work
with more effective and efficient manner. This leads them to make
the employees also active towards their tasks. These HR maangers
use the various plans to keep the employees satisfy by giving
some of the incentive, better salary, good commission, apparaisal
of the performance and many more.
In general the motto of the HR Managers are “to
make the employee satisfied with his work by placing him on
the right job.
2. What are the different types of work did you handle?
Ans. Activities handled by the HR Manager are as
follows:
HR Planning
Job analysis and design
65
Recruitment and selection
Orientation and placement
Performnac appraisal
Job evaluation
Remuneration
Incentives payment
Employees benefit
Welfare of the employees
Promotions and tranfers
HR Audit & record
Training and development etc……...
3. what are your HR duties and responsibilities?
Ans. Duties and Reponsibilites:
66
To make the employee satisfied with their work
To make the true and fair view about the top level
mangement
To decide the different types of activites provided to the
employees, prior permission of the top level management
To seek the problems of the employees
To have proper attention to the work of the employee
To place the employees at the right where they are needed
more
To trained and develop the employees to faces the
challenges ahead
To take care of their (employees) needs in the organisation
4. How do you appraise the performance of the employees?
Ans. The employees performance is depend on-
Efficiency to work
67
Efficient to deal with work
Better understanding about his work
If lead the followers to achieve the goals
Feedback to the organisation by the employees
Interview of th eemployee
Weaknesses or deficiencies in knowledge, skills, and
abilities of the employees
5. How would you keep your employees satisfied?
Ans.Different strategies are followed to keep the employees
satisfied-
Motivating them through the bonus or incentives
Different types of trainings
Attractive commissions
Attractive pay – scale
68
Open discussions with the employees for their problems
By rewarding the efficiency of an employee
CHPATER – 10
FINDINGS AND CONCLUSIONS
1. HR Managers try to satisfy the needs of the employee as well as
the job satisfaction.
2. They handle more than two to three activites under their task and
are able to complete their work as soon as possible.
3. They are well aware of their duties and reponsibilities towards
their work and take it as a challenge for them.
69
4. They are mostly concerns with the employees performance
appraisal, as it defines the strength and the weakness in detail of
employee.
5. They handle the different types of problems of the employees and
sole by making the open discussion with them.
6. They decide the different types of commission and pay-scale
which they make in such a manner that the employees are
attracted towards it and more give their involvement to achieve
their desored goals. Bonuses and incentives are the another factor
of motivating the employees.
7. They reward them in such a greatful manner that they work with
more efficiency.
8. They work after the welfare of the employees and give the
attention to their basic needs also.
9. They provide different types of training ti their employees which
will help them to faces the challenges ahead.
70
10. Promotions and transfers are also the part of motivating the
employees. These are given when the employees does their work
in more efficient manner and give the efficient results to the
organissation.
Conclusions:
The organisation and HR managers make all the possible
efforts to keep the employee satisfied with his work and should give
the good results in returns to the organisation. They keep their
emloyees happy by giving them different types of incentives plans,
transfers, promotions, commission, better pay scale and may be the
participation to speak in the top level management and much more.
CHAPTER – 11
SUGGESTIONS AND RECOMMENDATIONS
1. As they are more concern about the satisfaction of the
employees they can’t concentrate on the individual employees
71
bacause there are many, so they should try to concentrate on
the individual also.
2. HR managers should disclose the material facts of their job as
human resource management is especially for the welfare and
the satisfaction of the employee.
3. They should solve the problems of the employees as soon as
possible.
4. HR managers should consult with the employees in the certain
cases or should include them to make certain level of decisions
of their own.
@@@@ BIBLIOGRAPHY @@@@
72
BOOK AUTHOR EDITION YEAR
1. HUMAN
RESOURCE
MANAGEMENT
GARY
DESSLER
10TH
EDITION
2005
2. HUMAN
RESOURCE
AND
PERSONNEL
MANAGEMENT
K.
ASWATHAPPA,
Dean faculty of
commerce and
manangemnt
and Director,
canara Bank
School of
Managemnt
studies, Banglore
University.
4th EDITION 2005
3. CASE
STUDIES IN
ICFAI - MARCH -
2005
73
INSURANCE
4.
INSURANCE
HRD
PRACTICE
DR. MAMTA
JAIN
1ST EDITION 2007
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