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