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A CASE STUDY ON LIFE INSURANCE
CORPORATION OF INDIA
One of the World’s Largest Life Insurance Company
By:Ashish Singh Pathania ,Prashant Kaushal,
Richa Parmar , Sudhir Thakur & Uday Kaundal
INTRODUCTIONLife Insurance Corporation was formed as a government regulated monopoly in
September 1956 by an act of Parliamentary, (LIC Act 1956) with a capital contribution of Rs 50 million. Over the years, LIC built a strong distribution and agent network. By now, LIC had 2048 branches and 6,28,301 agents across the country. LIC was a financial powerhouse, with a presence in mutual funds and
housing loans besides life insurance.The company had insured more than 23 crore people in the country through its
individual and group schemes. Of the 60-80 million life insurance policies outstanding, 48% were from the rural and semi urban areas. This is very impressive since no company in any other industry had been able to tap the rural market to this extent. Other branches out of India- UK, Fiji, Mauritius, Nepal, Sri Lanka, Kenya,
Bahrain, Oman, Qatar, Kuwait, UAE, Saudi Arabia. It has assets estimated of 5 Trillion Rupees. Headquartered in Mumbai , which is considered the financial
capital of India. Today LIC can boast of great achievements in IT and investment under able Chairmanship of T S Vijayan.
The British opened general insurance in India
around the year 1700.
Bombay Insurance Company Ltd was
established in 1793.
In 1818 it was conceived as a means to provide for
English Widows.
The Bombay Mutual Life Insurance Society started its
business in 1870.
The Oriental Assurance Company was
established in 1880.
Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act
of 1912.
By 1938 there were 176 insurance
companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict
State Control over insurance business.
The insurance business grew at a faster pace after independence.
The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born.
Nationalization was justified on the grounds that it would create
much needed funds for rapid Industrialization.
HISTORICAL PERSPECTIVE
MISSION AND VISION OF LIC
Mission“Ensure & enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development”
Vision “A trans-nationally competitive financial conglomerate of significance to societies & PRIDE OF INDIA“
FINANCIAL HIGHLIGHTS
Total Premium Income : Rs. 1,57,186.55 crore Total Income : Rs. 2,00,280.68 crore Payments to Policyholders : Rs. 53,250.37 crore
As on Rs. (in crores)
31.3.2000 1,61,002.0231.3.2001 1,92,514.6531.3.2002 2,45,331.4631.3.2003 2,89,895.5231.3.2004 3,67,359.8431.3.2006 5,52,447.3331.3.2007 6,74,514.7831.3.2008 8,03,820.0031.3.2009 8,73,551.35
As on Rs. (in crores)
31.3.2000 1,54,043.7331.3.2001 1,86,024.7531.3.2002 2,27,008.9831.3.2003 2,73,004.9631.3.2004 3,21,753.5331.3.2006 4,63,147.6231.3.2007 5,72,602.8031.3.2008 6,86,616.0031.3.2009 8,07,317.45
1.8
4.8
1.97
1.14
3.81
6.86
2.22
70.52
4.12Max New York Life Insurance Co. Ltd.
ICICI Prudential Life Insurance Company Ltd.
Birla Sun Life Insurance Company Ltd.
Tata AIG Life Insurance Company Ltd.
SBI Life Insurance Company Limited .
Bajaj Allianz Life Insurance Company Limited
Reliance Life
LIC of India
Others
Market shares of different insurance companies
SWOT ANALYSIS
It is the oldest and most well experienced player having a Pan India presence.
LIC has a strong and very well developed distribution network.
It has a large product portfolio and claim settlement is easier to get.
It has the advantage of government guarantee is accompanied with it.
It is having a huge consumer base and is evolved as one of the most powerful brands of the country.
Its employees and other staff are lethargic and least motivated to render prompt and sincere customer service.
After sales customer grievance redressal mechanism is inefficient.
The top management or bosses are mediocre and there is large scale corruption in main office.
The top management or bosses are mediocre and there is large scale corruption in main office.
Agents not taking into account the needs of people and promote policies having high Commissions only.
STRENGTHS: WEAKNESSES:
SWOT ANALYSIS
Emergence of a huge middle income consumer market in the country.
People becoming more aware and demanding so there is scope for a whole lot of innovative products.
Pension markets, health insurance and large real estate portfolio.
There is too much internal discord.
Entry of new private players in industry.
Red-tapism is very much persistent.
OPPORTUNITIES:
THREATS:
Spread life insurance widely in particular to the rural areas and socially and economically Backward classes.
This is done with a view to reach all the insurable persons in the country and provide them adequate financial cover against death at a reasonable cost.
To maximize mobilization of people’s savings by making insurance linked savings adequately attractive.
To conduct business with utmost economy and keeping in mind that the money belongs to the policyholders.
It acts as a trustee of the insured public in its individual and collective capacities.
To meet the various life insurance need of the community that would arise in the changing social and economic environment.
Objective of LIC
CONTRIBUTION TO INDIAN ECONOMY:
Life Insurance is the only sector which garners
long term savings.
Spread of financial services in rural
areas and amongst socially less privileged.
Long term funds for
infrastructure.
Strong positive correlation between
development of capital markets and
insurance/pension structure.
Employment generation.
VALUES OF LIC
CULTURE
INVESTMENT PORTFOLIO OF LIC OF INDIA
About 50% is invested in
Government securities or other
approved investments.
About 15% is invested in
infrastructural and social sector investments.
About 35% in other
investments, to be governed by
exposure prudential norms
COMPETITIVE STRENGTH
Large market share.
Low cost operations.
Its marketing.
Developing special capabilities & competencies.
Product innovation.
LIC MARKETING STRATEGY
The Visakhapatnam division of the LIC has signed MoUs with two private broking firms for marketing its products, as provided for in the Insurance Regulatory and Development Authority (IRDA) Act. Setting a new trend, the divisional office signed memoranda of understanding with Insol Insurance Solutions Pvt Ltd, a broking firm, and Vijay Sai Associates, corporate agents, for the purpose. Mr Surendra Behera, the divisional manager, said that LIC was aggressively marketing its products through private channels as well.
INTERACTIVE VOICE RESPONSE SYSTEMS
IVRS has been made functional in more than 50 centers all over the country. This would enable customers to ring
up LIC and receive information about their policies on telephone. This information could also be faxed on
demand to the customer.
AWARDS WON BY LICReader’s Digest Trusted Brand Award (Platinum) 2009.
Brand Equity’s “Most Trusted Brands 2009” -Top in Insurance Category.
Declared “ Superbrand 2009” by Business Superbrand India.
Loyalty Award ,2009 from Loyalty Summit 2009.
CNBC Awaaz Consumer Award, 2008.
NDTV Profit Business Leadership Award, 2008.
Asia Brand Congress Brand Leadership Award, 2008.
IT USER 2008 NASSCOM Award.
RECOMMENDATIONS:
To increase the level of insurance penetration LIC may focus on bringing products that suit to the rural customers.
LIC should also tie up with several other banks apart from the existing ones to sell its products i.e. through banc assurance .
The Company has the option of tying up with local NGO’s for selling its rural insurance products.
Customer friendly documentation i.e. it should be made easier and faster.
LIC should keep a check that its agents equally promote all its products.
LIC may provide additional funds to its development officers and agents.
Some special focus should be laid on individual risk coverage while designing the products.
CONCLUSION
Growth of Indian Economy is not a consumption driven but it is an investment driven growth, and opens a wide variety of Investment Avenue. Competition means to compete, fight with other business in the insurance industry to get
maximum market share or profits, income, sales etc. The entry of private sector insurance companies into the Indian insurance sector triggered off a series of
changes in the industry. Even with the stiff competition in the market place, it is evident from the study that the public sector giant LIC dominates the Indian
insurance industry.LIC is competing with 16 other companies in the insurance sector and has successfully managed not only to beat the competition but also has
taken advantage of the competition to increase its market share and premium income. Thus, LIC has taken the competition positively as a means to innovate,
develop and re-engineer itself to the market. In this project, an attempt is made to determine the present competition in the Insurance and effective strategies to
overcome the competition.
THANK YOU
BE INSURED & BE SAFE
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