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AARJSH VOLUME 1 ISSUE 5 (NOVEMBER 2012) ISSN : 2278 – 859X

Asian Academic Research Journal of Social Sciences & Humanities

www.asianacademicresearch.org

135

A Peer Reviewed International Journal of Asian

Academic Research Associates

AARJSH ASIAN ACADEMIC RESEARCH

J O U R N A L O F S O C I A L

S C I E N C E & H U M A N I T I E S

MARKETING STRATEGY OF LIC OF INDIA IN THE GLOBAL SCENARIO

DR. G. KARUNANITHI*; DR. S.BANUMATHY**

*Assistant Professor of Commerce,

DDE, Annamalai University,

Annamalai Nagar.

**Associate Professor and Head,

Dept. of Commerce,

V. V. Vanniaperumal College for Women, Virudhunagar

.

ABSTRACT

LIC today services its customers through 8 Zonal offices, 113 Divisional Offices, 2048 Branches,

1202 Satellite Offices, more than 1.19 lakh employees and 12.78 lakh agents. Besides life

insurance, through its various subsidiaries, it is involved in providing various financial services.

Today, a public giant LIC is facing direct competition with the rest 23 private life insurers. As a

result of product innovation by private players, LIC’s market share has gradually reduced in the

post-liberalization period. Despite that, the Life Insurance Corporation of India continues to

remain the largest player in the Indian Life Insurance market with a market share of 71.30% in

FY 2011-12. Life Insurance Corporation of India operates in 13 countries abroad through its

various branches and Joint Venture Companies/ Wholly Owned Subsidiaries. Branch Offices in

the U.K., Mauritius & Fiji and operate through Joint Venture Companies in Bahrain, Qatar,

Kuwait, U.A.E., Oman, Kenya, Saudi Arabia, and Nepal & Sri Lanka. A wholly owned

subsidiary – Life Insurance Corporation (Singapore) Pte. Ltd. has been incorporated in Singapore.

Key Words: Liberalization, Globalization and Privatization (LPG), Market share, First Year

Premium, Regular Premium, Renewal Premium, Chief Life Insurance Advisor, Micro Insurance,

Health Insurance, Supervised Agents.

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INTRODUCTION

Insurance is an integral part of national economy and a strong pillar of financial

market. Therefore, waves of globalization have also deeply influenced the insurance

market Worldwide. Financial Market Globalization has also been strongly supported by

Globalization of Insurance. With the increase in Trade, Direct Investment and Portfolio

Investment, there has been an ever growing demand for Insurance services particularly in

the emerging markets. Globalization of Insurance market, as a part of the overall process

of liberalization in emerging and other countries enabled the foreign insurance companies

to enter in those countries and benefited both.

Liberalization is the gateway of globalization and regulates the financial market

by reduction of tariff and non-tariff barriers, abolishment of industrial Licensing and by

exercising control over foreign direct investment. The major purpose of liberalization was

to free the large private corporate sector from bureaucratic controls. Liberalization of

insurance industry has witnessed major structural transformations and growth in life

insurance business. To end the monopoly of the life insurance corporation of India and to

induce a spirit of competition amongst the various insurers and to provide a choice to the

consumers were some of the main motives behind liberalization. In the first year of

insurance market liberalization (2001), ten private companies have registered under the

life insurance category and this number has been increased to 22 in 2010. Today, a public

giant LIC is facing direct competition with the rest 23 private life insurers.

LIFE INSURANCE CORPORATION OF INDIA

On 1st of September 1956, The Life Insurance Corporation of India (LIC)

embarked upon its momentous journey in true spirit of serving the people and nation as a

whole. Since then it has spearheaded the financial and infrastructure development of the

nation. The performance of LIC has been exemplary and it has been growing from

strength to strength be it customer base, agency network, branch office network, and the

like. LIC has played a significant role in spreading life insurance among the masses and

mobilization of people’s money for people’s welfare. Even after the entry of private

insurers for almost a decade now, LIC continues to be the frontrunner in the industry in

terms of market share.




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LIC today services its customers through 8 Zonal offices, 113 Divisional Offices,

2048 Branches, 1202 Satellite Offices, more than 1.19 lakh employees and 12.78 lakh

agents. Besides life insurance, through its various subsidiaries, it is involved in providing

various financial services viz. Pension (LIC Pension Fund Ltd.), Housing Finance (LIC

HFL Ltd), Mutual Fund (LIC Nomura MF), Credit cards (LIC Card Services Ltd),

Financial Products distribution (LIC HFL Financial Services Ltd) and LIC HFL Care

Homes Ltd. It also provides insurance services in several countries abroad through

branch offices, Joint Ventures (JVs) and a wholly owned subsidiary.

As a result of product innovation by private players, LIC’s market share has

gradually reduced in the post-liberalisation period. Despite that, the Life Insurance

Corporation of India continues to remain the largest player in the Indian Life Insurance

market with a market share of 71.30% in FY 2011-12. The Life Insurance Corporation of

India also transacts business abroad and has offices in Fiji, Mauritius and United

Kingdom. With its multinational presence, it is associated with joint venture abroad in

field of insurance namely, Ken India Assurance Company Limited, Nairobi, United

Oriental Assurance Company Limited, Kualalumpur and LIC (international) E.C.Bahrain.

REGISTERED INSURERS IN INDIA

After privatization, insurance industry has seen significant growth. Due to low

penetration and huge potential, many foreign and domestic players have entered the

sector. Moreover, several reforms and policy measures have provided a favorable

environment for insurance companies to flourish in the country. The insurance sector in

India is primarily divided into life and non-life, apart from a very small segment

comprising re-insurance. Both the life and non-life insurance segments, which were

nationalized in the 1950s and 1960s, respectively, witnessed an across-the-board

liberalization process in 2000. After the reforms, the number of players has increased

from one in life insurance and four in non-life insurance at end-September 2012, there are

forty-nine insurance companies operating in India; of which twenty four are in the life

insurance business and another twenty four are in general insurance business. In addition,

GIC is the sole national re-insurer.




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Table 1

Registered Insurer in India

(As on 30th

September, 2012)

Type of Insurer Public Sector Private Sector Total

Life Insurance 1 23 24

General Insurance 6* 18 24

Reinsurance 1 0 1

Total 8 41 49

*includes specialized insurance companies-ECGC and AIC

OBJECTIVES OF THE STUDY

1. To know market share of LIC of India in Life insurance business.

2. To know new market strategy adopted by LIC of India to increase the volume of

Business.

RESEARCH METHODOLOGY

The present study is based on secondary data. Data and information have been

extracted from Annual Reports of IRDA and LIC of India. The information so collected

has been classified, tabulated and analysed as per the objectives of the study.

CURRENT SCENARIO IN LIFE INSURANCE MARKET

Many players have joined insurance industry posing a tough competition to LIC.

LIC has been reorganizing itself in order to perform better than the new players. On the

basis of total premium income, the market share of LIC declined marginally from 70.10

per cent in 2009-10 to 69.78 per cent in 2010-11. Accordingly, the market share of

private insurers has gone up marginally from 29.90 per cent in 2009-10 to 30.22 per cent

in 2010-11.

The market share of private insurers in first year premium was 31.15 per cent in

2010-11 (34.92 per cent in 2009-10). The same for LIC was 68.85 per cent (65.08 per

cent in 2009-10). However, in renewal premium, LIC had a higher share of 70.49 per

cent (73.64 per cent in 2009-10) when compared to 29.51 per cent (26.36 per cent in

2009-10) share of private insurers. The performance if LIC and Private Players have been

shown for the year 2010-11 in table 2.




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Table 2

MARKET SHARE OF LIFE INSURERS (IN PER CENT)

Insurer 2009-10 2010-11

Regular Premium

LIC 43.13 56.73

Private Sector 56.87 43.27

Total 100.00 100.00

Single Premium

LIC 92.19 81.26


Total 100.00 100.00

First Year Premium

LIC 65.08 68.85


Total 100.00 100.00

Renewal Premium

LIC 73.64 70.49


Total 100.00 100.00

Total Premium

LIC 70.10 69.78


Total 100.00 100.00

Source: IRDA Annual Report




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Figure - I

Life Insurance Market Share 2009-10 and 2010-11

Note: RP – Regular Premium, SP – Single Premium FYP- First Year Premium.

NEW MARKETING STRATEGY

LIC have been taken following steps to increase its market competitiveness and

retains its dominant position in the insurance market.

1. PRODUCT DEVELOPMENT

In a competitive market, there is a greater need to provide insurance products that

meet the needs of our customers. LIC therefore offers a wide variety of products, which

fulfills the needs of different segments of the society. As at the end of the financial year

2010-11, the Corporation had 52 products available for sale. During the Year Corporation

introduced 5 new plans viz. LIC’s Pension Plus, LIC’s Endowment Plus, LIC’s Bima

Account –I, LIC’s Bima Account –II and LIC’s Samridhi Plus. As a result of product

innovation by private players, LIC’s market share has gradually reduced in the post-

liberalisation period. Despite that, the Life Insurance Corporation of India continues to

remain the largest player in the Indian Life Insurance market with a market share of

71.30% in FY 2011-12.




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2. COMPETITION

Private and foreign entrants in the insurance industry have made others difficult to

retain their market. Higher customer aspirations lead to new expectations and forced him

or her to move towards the insurer who provides him the best service in time. It becomes

less viable for them even to maintain the functional networks or competitive standards

and services. To survive in the industry they analyse the emerging requirements of the

policyholders /insurers and they are in the forefront in providing essential services and

introducing novel products. Thereby they become niche specialists, who provide the right

service to the right person in the right time. Today, a public giant LIC is facing direct

competition with the rest 23 private life insurers.

3. INFORMATION TECHNOLOGY

LIC has been a pioneer in using information technology for enhancing the quality

of its service to customers. Being the largest insurer in India, LIC has always explored all

the avenues that technology offers to provide the best of services to its valued customers

and other stakeholders.

Today, LIC customers can pay their premium not only in any one of its offices,

but also through LIC’s Premium Payment Gateway on our website through partner Banks

like Corporation Bank, Axis Bank or through associate agencies like APOnline,

MPOnline, etc. Customers can also use their Net Banking accounts, Debit Cards and

Credit Cards to pay premiums online.

LIC reaches out to its customers through IVRS, Call Centres, Customer Zones,

SMS, e-mail, website and now even the Social Networking sites. LIC has also undertaken

many other customer-centric initiatives like Enterprise Document Management System,

Portal for Customers, Agents, Development officers and Employees, etc. All LIC offices

and Training Centres have been connected to a Wide Area Network for more than 10

years now. Last year Central Office, Zonal Offices, Zonal Training Centres and the 113

Divisional Offices are connected through high definition Video-Conferencing. In order to

safeguard its IT infrastructure from external threats, LIC has also installed the latest IT

Security products in its setup. To keep pace with changes in the business environment

and the technology platforms, LIC migrated our Core Insurance Application to web based

architecture. The project called e-FEAP helps LIC to deliver quality service to its




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Policyholders and marketing force. In 2011-12, LIC also set up the infrastructure

necessary for the on-line sale of policies.

4. CHIEF LIFE INSURANCE ADVISORS (CLIAs)

LIC introduced the above Scheme on 12.04.2008 with an objective of increasing

its market presence through more agents by utilizing capabilities of existing high

performing agents for organizational growth.

In order to increase market presence, more number of agents should be in the

field. Understanding this well, the Corporation decided to utilize the capabilities of

existing senior agents for organizational growth by incentivizing them for identifying,

training and mentoring new agents. Retired employees and Financial Service Executives

(FSE) are also allowed to become Chief Life Insurance Advisors under certain

conditions. More than 1,47,200 agents were being supervised by the CLIAs as on

31.03.2012. The table 3 shows that new business procured by the chief life insurance

advisor channel.

Table 3

Chief Life Insurance Advisor New Business

Year No. of Policies (in lacs) FP income (in Crore)

2008-2009 10.99 1100.71

2009-2010 20.91 2563.88

2010-2011 23.31 2789.00

2011-2012 27.06 2136.67

Source: Annual Report of LIC 2008-09 to 2011-12

5. MICRO INSURANCE (MI)

The huge untapped market for insurance is the rural and social sector. Micro-

insurance is defined as the protection of low income households against specific perils in

exchange for premium payments proportionate to the likelihood and cost of the risk

involved. It provides an opportunity to the insurance companies to meet their social

responsibility as well as secure a strong footing in the rural market. The active

distribution channels for micro insurance in India are NGOs, MFIs, and SHGs (self-help

groups), Micro agents, Cooperative Banks and RRBs (regional rural banks), and Post




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Offices. The MFIs/NGOs have been identified as main delivery channels by most of the

insurance companies. These have a large network, catering to huge number of clients.

The year 2011-12 has been another successful year for the Micro Insurance

vertical of LIC. The vertical exceeded the budget of 32 lacs Policies by a hefty margin of

more than 6 lacs policies with 119.59 % A2B.The total number of Policies stood at 38.27

lacs with a growth rate of 29.67%. As many as 7 Zones crossed their budget with good

margin. Similarly 80 MI Units have achieved their budget. 7 MI Units have procured

more than 1 lac policies during the year. During this financial year MI vertical crossed

magical figure of 1crore policies and completed 1.12 crore policies as on 31.03.2012

since inception. The table 4 shows the new business of Micro Insurance.

Table 4

Micro Insurance New Business

Year No. of Policies ( In lac) FP income (in lacs)

2006-2007 8.06 138

2007-2008 8.54 1622

2008-2009 15.41 3120

2009-2010 19.85 3615

2010-2011 23.31 2789

2011-2012 38.27 4642


6. DIRECT MARKETING

In its 3 years of operations, Direct Marketing has successfully established itself as

a Value Pioneer. Through the years, it had striven to take a fresh view of the

environment, capture changes, identify new business opportunities and orchestrate

appropriate response. Direct Marketing has achieved reasonable success in creating a

professional and disciplined work force comfortable with approaching and tapping

emerging segments in the market. The channel, through the effective use of LMS has

been able to ensure fast response to queries to successfully position the Corporation as a

responsive organization sensitive to changing customers’ expectations. The table 6 shows

the direct marketing channel wise new business of LIC.




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Table 6

Direct Marketing Channel wise New Business

Year No. of Policies FP income (in lacs)

2010-2011 50962 144.04

2011-2012 87578 264.14


7. BANCASSURANCE AND ALTERNATIVE CHANNELS (B&AC)

Under Bancassurance, at present LIC have tie-ups with 8 PSU Banks, 4 Private

Banks and 33 UCBs / RRBs / CO-OP Banks under Corporate Agency agreement. These

Banks procure New Business for LIC through their Branch Outlets. At present,

approximately 19,000 Outlets under these Banks. The share of Banks in the total business

of B&AC in the year 2011-12 was 91% in FPI and 77% in Policies while Corporate

Agents contributed 8% & 22% respectively. In the current year, there is substantial

growth in Bancassurance Premium. The table 5 shows the banking and alternative

channel wise new business.

Table 5

Banking and Alternative Channel wise New Business

Year No. of Policies (in lacs) FP income (in Crore)

2008-2009 8.62 1076.00

2009-2010 7.54 1132. 92

2010-2011 6.95 1281.30

2011-2012 5.93 1207.50


8. HEALTH INSURANCE

During 2010-11, 67,668 Health Insurance Policies were sold for a Premium

Income of Rs.58.02 crore. LIC settled an amount of Rs. 8.38 crore towards health

insurance claims under 5,096 lives. Incidence of claims under Health Policies is 1.39%,

of which 51% are settled. As at 31.03.2011 LIC covering 7,23,752 lives under Health

Insurance Policies. LIC started Health Insurance Division in 2007-08, to tap the vast

potential for Health Insurance Business and to devise Health Products and Services. The

first product ‘Health Plus’ was launched in February, 2008 and the second product




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‘Health Protection Plus’ in April, 2009. Both are Unit Linked Health Insurance policies

providing for hospitalization and major surgery cover for 49 specified surgeries. The

plans also have a facility of withdrawal, linked to domiciliary treatment. Following IRDA

regulations on cap of charges, Health plus Plan was withdrawn from 01.01.2010. After

LIC of India introduced to Health product of Jeevan Arockya plan.

9. INDEPENDENT FINANCIAL ADVISORS (IFAs)

IFAs are authorised agents of insurance companies having tie-ups with more than

one insurance company. They are qualified persons or institution who can provide advice

on financial products. Independent financial advisors are commissioned agents whose

primary business is the sale of property and casualty insurance for several insurers. IFA

assembles different financial products in accordance to customer needs and provide value

added product by creating customized financial product. Today, IFA show their

significant presence as distribution channel in both life and non-life insurance business.

10) INTERNATIONAL OPERATIONS

Life Insurance Corporation of India operates in 13 countries abroad through its

various branches and Joint Venture Companies/ Wholly Owned Subsidiaries. Branch

Offices in the U.K., Mauritius & Fiji and operate through Joint Venture Companies in

Bahrain, Qatar, Kuwait, U.A.E., Oman, Kenya, Saudi Arabia, Nepal & Sri Lanka. A

wholly owned subsidiary – Life Insurance Corporation (Singapore) Pte. Ltd. has been

incorporated in Singapore and we are in the process of applying for an operating license.

1. Our Foreign Units collectively procured a First Premium Income (FPI) of around

Rs. 349 Crores in the 12 months’ period of each unit ended during 2011-12,

thereby registering a growth of 15.69%.

2. The Total Net Premium Income (TPI) of our units was around Rs. 1,247 Crores

during the same period in 2011-12 registering a growth of 28.2%.

LIC (International) B.S.C. (c), Bahrain and LIC Fiji are market leaders in their

respective geographies.

CONCLUSION

After privatization, insurance industry has seen significant growth. Due to low

penetration and huge potential, many foreign and domestic players have entered the

sector. Many players have joined insurance industry posing a tough competition to LIC.




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LIC has been reorganizing itself in order to perform better than the new players. LIC

offers a wide variety of products, which fulfills the needs of different segments of the

society. As at the end of the financial year 2010-11, the Corporation had 52 products

available for sale. The performance of LIC has been exemplary and it has been growing

from strength to strength be it customer base, agency network and branch office network.

LIC continues to remain the largest player in the Indian Life Insurance market with a

market share of 71.30% in FY 2011-12.

REFERENCES:

1. C. Barathi, D. Balaji And Ch. Ibohal Meitei (2011), “Innovative Strategies To

Catalyse Growth Of Indian Life Insurance Sector-An Analytical Review”, Indian

Journal Of Commerce And Management Studies, Vol. Ii, Issue IV, May 2011.

2. Chatterjee. P (2009) In Her Article Titled “Private Insurers Command Majority

Share Of Life Insurance Market”.

3. Krishnamurthy. S, Jhaveri. Nani, Bakshi. S (July-Sept 2005), Insurance Industry

in India: Structure, Performance and Future Challenges, Vikalpa, Iima Volume

30, No. 3, Pg No. 93-95.

4. Kulkarni.S.J. and Sagar. P.N. (2011) “Recent Trends in Marketing Strategy of

LIC of India” Vol.1. Issue No: 1. Feb. 2011 to July 2011.

5. Arnika Srinivasan, Sarika Tripathi, and Amith Kumar (2012) “Indian Life

Insurance Industry- The Changing Trends” international Journal of Research

World, Vol-III, Issue 2(3), April 2012,pp.93-98.

6. Sonika Chaudhry and Priti Kiran(2011) “ Life Insurance Industry in India-

Current Scenario” International Journal of Management and Business Studies,

Vol.1,Issue 3, September 2011, pp. 146-150.

7. www.licindia.com

8. www.irdaindia.org

9. www.bimadeals.com/life-insurance-india

10. www.insuringindia.com

11. www.economictimes

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