VSRD International Journal of Business and Management Research, Vol. 3 No.

2 February 2013 e-ISSN : 2231-248X, p-ISSN : 2319-2194 VSRD International Journals : www.vsrdjournals.com

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RESEARCH ARTICLE

A STUDY OF IMPACT OF LIBERALIZATION OF INDIAN INSURANCE SECTOR ON THE STRATEGIES OF LIFE INSURANCE CORPORATION (LIC) OF INDIA SINCE 2001
1 Neelam
1,2 Associate

Gulati* and 2C.M. Jain

Professor, Department of Business Administration, 1DAV Institute of Management, Faridabad, Haryana, INDIA. 2St. Johns College, Agra, Uttar Pradesh, INDIA. *Corresponding Author : neelamgulati2000@yahoo.com

ABSTRACT
Expansion of the Indian Insurance market has presented multitude of challenges and opportunities to all insurers whether old or new, private or public. This research paper studies the likely impact of opening up of India's insurance sector on LICs performance. At the time of liberalization LIC faced the fear of declining market share that proved to be an unrealistic fear. Untapped opportunities, huge agents strength and vast coverage of branch network proved to be the strength for Nationalized Insurance Company- LIC. LIC was able to retain its market share due to its key strengths viz. 1. Distribution, 2. Variety of Products, 3. Trust and Faith, 4. Large Work force of Agents. Even to this day, Life Insurance Corporation (LIC) of India dominates the Indian insurance sector.

Keywords : Distribution, Growth, Performance, Products, Productivity. 1. INTRODUCTION Life insurance in particular provides protection to the households against the risk of premature death of its income-earning member. In traditional societies like India the joint family system itself provided an insurance umbrella and succor to surviving family members of the bereaved. In modern times such arrangements are now increasingly made through market mechanism of buying insurance. Thus Life insurance in modern times provides protection against death and other risks such as risk of longetivity and risk of diseases and sickness (health insurance) through products like pensions and annuities. In a period of less than half a century, the insurance sector in the country since independence has come a full circle, from being an open competitive market to complete nationalization and then back to a liberalized market. The entry of private players in the Indian insurance market from year 2000 has changed the nature of competition. The vigorous campaigns of these players have increased customer awareness. This has led to rapid increase in insurance business and Life Insurance Corporation of India (LIC) has also reaped a sizeable gain. The present study is an attempt to study the strategies and performance of LIC after the liberalization policy regime introduced in year 2000. 2. REVIEW OF LITERATURE Appraisal of the Insurance Market: In the liberalized market the private players and public sector companies are on a level playing field. Most of the new companies in the industry have entered the market as joint ventures with participation of a foreign partner holding 26% of the total paid-up equity capital. The opening up of the sector to the private players witnessed the coming of new insurance players and introduction of a number of new products deserving the attention of the customers and possibly the Indian insurance market is one of the fastest growing markets. The factors that support the possibilities for increased penetration of the Indian market are the emerging socioeconomic changes, increased wealth, education and awareness of insurance needs. The industry, as such, is set to emerge independent of the normal driving factor of being driven by tax incentives for growth. The industry is today slowly emerging from the shadows of insurance being a synonym to Life Insurance Corporation (LIC). There has been a significant change in the parameters of the achievement of LIC. The performance of LIC in the rural sector is quite encouraging. On the basis of the revised yardsticks and the definition of rural sector, LICs business from this area is around 18%. The Insurance Regulatory and Development Authority (IRDA) hoped that in the years to come LIC improve its performance in the rural and social sectors. Reports indicate that in the last quarter of the year 2000 2001, LIC had a faster growth. This, perhaps, is one of the

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after- effects of opening of the insurance to private sector, and also owing to the consumer campaigns which the new insurers and the Authority have been carrying on in the recent past leading to growth in the awareness of insurance in the minds of the public. The sales of money-back products and assured return products like Bima Nivesh has been much more than the traditional whole life and endowment policies. It is encouraging to note that the LIC has adopted a market savvy approach and introduced new policies and products. Companies like Birla Sun Life have entered the market with new policies. The companies like ICICI Prudential, Max New York Life and HDFC Standard Life are adopting novel marketing practices. Some alignment with nongovernmental organizations enabling them to market group policies for the down trodden have been some of the instances of the development in this sector. The agency force devoted to Life insurance has grown phenomenally. The prescription of a minimum qualification followed by a test to be completed by an agent has for all purposes and intents, enhanced not only the efficiency of the agency force but has given a professional touch and importance to the selling and distribution mechanism. LIC the monolith in life insurance sector has extensive marketing and distribution network but still it has not been able to meet the global standards of covering insurable population for a population of nearly a billion the total life insurance premium generate is Rs. 19000 crore an average yearly premium of Rs. 190 per head, an extremely modes figure even considering the low GDP in India. LIC of India has reached only 24% Insurable population, which is very low as compared to other countries. Hence there is vast scope in this sector and even after entry of strong private players in this sector, LIC of India, due to its enormous network, would continue to dominate the life insurance market. The premium income is projected to touch Rs.105000 crores next 10 years while that of all other companies put together is expected to be less than half that amount. 3. NEED OF THE STUDY The structure of the insurance industry has undergone a drastic change since liberalization, privatization and globalisation of the Indian economy, in general, and the insurance sector in particular. For almost four decades LIC has been the sole player with virtual monopoly in the life insurance sector. In the early 90s the Government of India ventured into policy of liberalization, privatization and globalization. The entry of so many companies in this sector was likely to affect the performance of Life Insurance Corporation.

Thus, the Life Insurance public sector giant, i.e. LIC, which never faced competition earlier, now is competing with the private players who boast of the rich and long experience of their partners from the developed countries of the world. They are also coming up with different types of innovative policies and other strategic plans. It is also expected that the total business of Life Insurance Corporation, in terms of premium, sum assured and number of policies and its market share would get affected. The Life Insurance Corporation might even have to change its strategies of marketing as also its market structure and might lead to new, bolder and aggressive marketing policies to hold its position in the market. It has to improve customer service and increase the level of training to its agents. It is, therefore, necessary to study the business performance of Life Insurance Corporation (LIC) after the liberalization policy regime and as also the changes that might have occurred or any restructuring that might have been done by the LIC in the wake of entry of private players in the Life Insurance Sector. Hence, it becomes imperative to evaluate the performance of Life Insurance Corporation of India. Challenges for Life Insurance Corporation (LIC): In the wake of liberlisation the LIC has faced challenges like advent of new distribution channels, more demanding and aware customers, price cuts by the competitors, need to maintain brand equity, reshuffling, redeployment of the employees etc. In view of the above the LIC will need to formulate aggressive but flexible strategies to take the advantages of liberalization of Indian insurance sector. To be more competitive and responsive to the needs of society, the LIC will have to concentrate on strategies like environmental analysis, focus on HRD & CRM decentralization in operational mechanism and use of EMarketing. Though LIC would be facing a lot of challenges one must not forget the strengths: Strengths of LIC Life Insurance Corporation has a strong network of divisional offices; Branch offices etc. with large agent force that are widely spread throughout in country, the new players have yet to widen their network. At present the branches of new private companies are operating only in metros. It is having goodwill in the market, which it has created over the years. People think that buying the life insurance policy plan from Life Insurance Corporation means investments in the public sector and the money is safe. It has a sound capital base

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4. STATEMENT OF PROBLEM Liberalisation of the Indian insurance sector has brought about a lot of opportunities and challenges. The insurance companies have to formulate new strategies to win the competition. Since we know that in India the insurance market is highly untapped the main focus of insurance players of this industry will be to create brand equity and try to widen their market share. The LIC being an old government company already has brand equity. What it needs to do is to strengthen it. LIC never had a dearth of products but to meet competition it needs to reformulate them and put them before the customer in a lucrative manner. Customer awareness has to be enhanced no doubt. As there is no shortage of customers but they need to be educated and enlightened about LICs products. After opening up of the insurance sector no systematic study has been made so far to study the strategies being adopted by LIC to maintain its hold on Indian insurance market. The performance of LIC on various parameters in light of these strategies has been clearly brought about in the study. 5. OBJECTIVES OF THE STUDY The broader aim of this study is to evaluate the impact of liberalization on the performance of LIC. The following are the specific objectives of this study : 1. To measure and analyze the productivity of Life Insurance Corporation of India. 2. To study the impact of private new entrants in the insurance industry on the working and performance of Life Insurance Corporation of India viz.-a-viz. market share and other aspects. 3. To evaluate the overall performance of Life Insurance Corporation of India during the selected period of study. 6. RESEARCH METHODOLOGY The study is entirely being based on secondary data. These data has been collected from the relevant Annual Reports of the Life Insurance Corporation of India, Statistical Year Books of Life Insurance Corporation of India, Yogakshama and various news bulletins of the LIC. The Annual Reports of Insurance Regulatory and Development Authority (IRDA) and other related literature available both as hard copy and on the net have been consulted for collection of data. Apart from these two major sources various magazines devoted to the issues related to Insurance, like Life Insurance Plus, Insurance Times, Business Today, Business World, Yogakshama etc. have been used to supplement data and information required for the study. Interactions and discussions with the officials of the Life Insurance Corporation have also contributed to augmenting the required data and information. Raw data has been first subjected to simple tabulation and

then further processed to get the required form so as to represent various variables required for the study. These variables have been identified as per the objectives of the study. Broadly the chapters have been formed to devote one chapter to each of the objectives so as to arrive at analytically correct conclusions. Compound growth rates have been tested for significance. Line graphs and pie charts and other visual tools may be used. 7. HYPOTHESIS In the light of the study we can hypothesize that the competition in the field of life insurance between LIC (Public sector market) and other private companies, due to liberalization will result into effectiveness in the functioning of LIC and hence availability of better products at competitive prices and better services to the public at large. The competition will also enhance the awareness among people regarding life insurance. 8. DISCUSSION Since LIC being a nationalized company enjoyed monopoly position for over four decades, it emerged as one of the key public fundraisers in India. Nationalization leads to industry solidity, growth, development and un-parallel reach. Moreover, along with these achievements there also grew a feeling of insensitivity to the needs of the market, but ultimately led to a sense of lethargy, which probably led to a feeling amongst the public that the insurance industry was not fully responsive to customer needs. This led to opening of the insurance sector .The Malhotra committees (formed to explore the possibility/feasibility of privatizing the Indian insurance industry) recommendations in 1994 brought about a sea change in the industry. LIC found itself in a difficult situation when the newly formed Insurance Regulatory Development Authority (IRDA) issued licenses to many private insurance companies (starting November 2000). To sustain its growth in an intensely competitive environment LIC started initiating organizational changes and became more customer-focused. In January 2000, it adopted a threepronged business strategy for business, which involved reduction in premiums, higher returns and introduction of new products. It reworked its returns on its policies also. At the time of liberalization it was also forecasted that the element of competition will bring out the best in LIC. There is good evidence to show that the rate of growth of public sector undertaking viz. LIC had not shown any decline after the entry of the private sector companies. All of them are obviously having a share of a larger market. The Credit for enlarging the market goes to the private sector as they came up with aggressive marketing strategies to establish their presence and public sector also followed suit. LIC faced the opportunities and challenges of liberalisation.

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The opening of the insurance market has been far from a bad thing for nationalized insurer. With a strong presence, a wide network and considerable brand equity, they are in a good position to tap the very same segments profitably, while improving their product and service offerings. LIC leveraged information technology to service large number of customers efficiently and bring down overheads. Technology can complement or supplement distribution channels cost-effectively. It can also help improve customer service levels considerably. Thus the key changes brought about after liberalization is: a. Market Expansion b. New Product Offerings c. Customer Service d. Channels of Distribution e. Strategic Alternatives g. Positioning-Focus on different segments to survive and thrive in a multi-firm open environment h. Choosing the Right Strategy As said above LIC Stands Tall: The competitive environment presents opportunities and challenges. The softening of interest rates and growing competition are presenting a challenge. LIC needs to focus efforts, individually and collectively, to leverage its strengths and prove that it is the best whether it is in innovative product offerings, service to customers or competitive returns on products to meet the soaring expectations of policyholders. Collective efforts at LIC will continue to ensure that LIC remains a market maker and a market leader in the financial services sector and all stakeholders share the glory. Today LIC stands tall in the whole financial arena in the country. This has been achieved through the dedication of thousands of employees as well as agents. Since inception LIC has been growing and is one of the largest life insurance organizations in the world. LIC stands out as an organization which has been built in a very solid manner and which encompasses in its mammoth size immense value and vast resources of innate strength which have been added to it through prudent conduct. LIC has a very vibrant and distinct culture reflecting the best in Indian ethos. While it has been conducting business never losing sight of commercial principles its operations have always been formed by the awareness that it is in the business for spreading care and compassion. Over the years LIC has been able to transmit its mission of service to the people of the nation and it stands central in their financial concerns. LIC is fully poised to remain on the top of popular preferences. The major reasons are: 1. Systems and Procedures: LIC has robust systems and procedures, follows prudent principles in actuarial, investment and accounting practices and has been bringing

out a variety of products for the benefit of various segments of the Indian populace. It has always been its sincere endeavor to render prompt, error free and courteous service to its esteemed policyholders. LIC has been harnessing information technology very liberally and extensively in simplifying the processes, cutting delays and evolving new systems to enhance customers satisfaction. The initiatives are paying off well as is borne out by the consistently high performance recorded by the organization. In order to provide the best experience to the insuring public, LIC has today put in place one of the largest IT and computerization infrastructure in the country with tremendous depth of usage. Through restructuring of its business processes, LIC has to provide the policyholders service in the most complex as well as in the simplest aspects through the use of Information Technology and its nationwide Network. LIC as an organization believes in making for the policyholders the possessing and obtaining the services for the LIC policies a matter of pleasure and of delight. 2. Customer Service: Providing policyholders service with greater accuracy, promptitude, pleasantness and courtesy and through channels of their choice and convenience is a defining characteristic of its servicing and marketing strategies. All LIC actions today are imbued with the realization that marketing and servicing are united activities and this awareness should back all actions. Few of the thrust areas in this direction that LIC has adopted are: Enlarging the customer base-growth in policies Improving service quality-specially for policies under the Salary Savings Scheme Data Management-warehousing and mining Competency enhancement of marketing personnel All non-early death claims to be settled within 30 days of intimation All maturity claims to be settled within 30 days before the due date All Survival benefit claims to be settled before due date Issuing all new policies within 7 days and customers letters and complaints to be attended on the same day. Internal and External communications strengthened at all offices and information sharing at all levels is to take place regularly. 9. ANALYSIS OF THE PRODUCTIVITY OF LIC AND RESEARCH FINDINGS Productivity may be taken to constitute the ratio of available goods and services to the potential resources of the group, community or country. International Labour Organization. Productivity means how well the resources are brought together in organization and utilized for accomplishing set

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of results. The provision of insurance services requires high technical skills and competence in such areas as risk assessment, risk control, loss evaluation, and actuarial science, which can only be acquired by investing in professional education and proper training. Such a professional cadre will demand and secure a high level of reward; it will no longer remain particularly cheaper in relation to the wage levels in other countries. Moreover the industry also cannot shy away from professionalizing its staff since it has to be less concerned with absolute figures of wages, and more with lowering of the per unit cost of production. LIC is one of the major companies providing life insurance in India. It has numerous products that address the need of each and every Indian from a newborn to a 70 year old. LIC did a commendable job of developing the life insurance market. Premiums from life insurance are 1.3% of GDP. It

has achieved this by leveraging its phenomenal brand and its widespread network. These efforts have made it possible to offer protection to more than 10 million policyholders, but even this is not 23% of insurable population. This indicates that the insurance awareness in India is low, insurance covers are expensive; returns from insurance products are low. All these problems are hurdles for LIC to achieve higher productivity. A complete picture of productivity can be drawn by considering labour productivity and related appropriate measures e.g. - efficiency of management, lesser expenses, lesser losses etc. Efficient labour utilization in service industry like LIC would help to generate funds for financing the development schemes of the nation and the organization itself is able to prosper. 1. New Business Procured per Branch:

Table 1 : New Business per Branch Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CGR t-value New Business (Rs. in Lacs) 4181383 5522850 5181554 5674050 6361769 7531628 9121425 12477162 19257227 17951222 19870712 17948139 28376374 20162074 17366272 36313570 15.50%
8.171

Total No. of Branches 2008 2021 2024 2024 2046 2048 2048 2048 2048 2048 2048 2048 2048 2048 2048 2048 0.13%
2.599

New Business per Branch (Rs. in Lacs) 2082.36 2732.73 2560.05 2803.38 3109.36 3677.55 4453.82 6092.36 9402.94 8765.24 9702.49 8763.73 13855.65 9844.76 8479.625 17731.23 15.35%
8.135

New business per branch went increasing at a greater speed but percentage growth has been erratic. The LIC restricted the number of branches to 2048 since year 1998-99 and the sum assured has increased due to continuous staff efforts as well as good marketing and advertising. Overall growth in productivity has been witnessed.

2. New Business per Active Agent: Productivity of the agents can be measured by dividing the total sum assured in a year by the total number of active agents in that year, i.e. average business per active agents. It gives the average productivity of agents.

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Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CGR t-value

Table 2 : New Business per Active Agent Average Business Per Agent New Business No. of Active Agents (Rs. in Lacs.) (Rs. in Lacs) 4181383 524427 7.97 5522850 5181554 5674050 6361769 7531628 9121425 12477162 19257227 17951222 19870712 17948139 28376374 20162074 17366272 36313570 15.50% 8.171 519504 513897 533133 558517 598217 683190 743064 744003 902199 1003241 980836 987689 1028256 1117908 1275611 6.10% 12.832 10.63 10.08 10.64 11.39 12.59 13.35 16.79 25.88 19.89 19.8 18.29 28.73 19.6 15.53 28.46 8.86% 5.8373 3. Number of Policies per Branch: The performance of the branches can be judged from the number of policies sold by the year after year. Thus, the productivity of the branches in a particular year is measured by dividing the total number of policies in a year by a total number of branches in that year. This indicates the average business done by each branch in terms of number of policies in different years.

Business per agent went on increasing at a greater speed .LIC was very cautious in year 2000-01 due to entry of private players. After 2000-01 new staff was recruited. More business was done while no or less recruitment of agents was done. Year 2005-06 was also a good performance year as LIC achieved high business with very less additions in agents. At LIC the sum assured has increased due to continuous staff efforts as well as good marketing and advertising. Overall growth in productivity has been witnessed.

Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Table 3 : New Policies/Business per Branch Number of Policies Number of Branches No. of Policies Per Branch 10725633 2008 5341 10874682 11020825 12268476 13311294 14843687 16976782 19656663 22491304 24268416 26456320 2021 2024 2024 2046 2048 2048 2048 2048 2048 2048 5381 5445 6062 6506 7248 8289.44 9598 10982 11850 12918

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2004-05 2005-06 2006-07 2007-08 2008-09 t-value

21817967 29284800 20910041 17961363 29322395 5.842

2048 2048 2048 2048 2048 2.599

10653.3 14299.21 10210 8770.19 14317.57 6.724

Comments: The number of policies per branch rose to 12,918 numbers of policies in 2003-2004, which is more than double of year 1993-94. But in 2004-2005, the number of policies has slightly decreased to 11698, which is due to the fall in the total number of policies in that year. This indicates the influence of the performance of private players on the LIC. The LIC restricted the number of branches to 2048 since year 1998-99 and the number of policies has increased due to continuous staff efforts as well as good marketing and advertising. Overall growth in productivity has been witnessed 4. Premium Income per Branch: Premium is the

consideration paid by the insured to the insurer for the risk undertaken by the insurer. So the productivity of the branches can be measured in terms of premium income received by the branches during a particular year. It is calculated by dividing the total annual premium income by the total number of branches in that year. It increased to Rs.7.81 Crores from Rs.4.32 Crores in 2000-2001 as there was two times increase in Annual Premium Income in 2001-02 as compared to previous year.

Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CGR t-value

Table 4 : Premium Income per Branch Premium Income No. of Branches Premium Income per Branch (Rs. in Crores) 2507.73 2008 1.24 2533.9 2021 1.25 2813.63 3345.39 3841.12 4863.41 6008.28 8851.89 16009.44 12505.38 12540.62 11224.19 15157.76 11672.72 9871.89 16858.57 13.55% 8.553 2024 2024 2046 2048 2048 2048 2048 2048 2048 2048 2048 2048 2048 2048 0.13% 2.599 1.39 1.65 1.87 2.37 2.93 4.32 7.81 6.1 6.12 5.48 7.4 5.69 4.82 8.23 13.45% 8.570

Year 2000-01, 02 witnessed growth but there was a declining trend after that. The LIC restricted the number of branches to 2048 since year 1998-99 and the number of policies has increased due to continuous staff efforts but the

growth has been erratic. This indicates the influence of the performance of private players on the LIC. 5. Outstanding Claims at the End of Financial Year to Claims Payable during the Year (In Percentage): The

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settlement of claim is a very important aspect of service to the policy-holders. Hence, the corporation has laid great emphasis on expeditious settlement of the majority as well as death claims. The corporation settles a large number of death claims every year. Only in case of suppression of material information, a claim is repudiated. Even in these cases, an opportunity is given to the claimant to make a representation for consideration by Claims Review Committee at the Zonal offices and at the central office. In order to ensure more transparency and greater satisfaction among the claimants, policy-holders and public, the Claims Review Committees were reconstituted at central office as well as at all seven zonal offices. The claim settlement is very important aspect of service of an insurer to insured. Hence LIC laid a great emphasis on

prompt and speedy settlement of the maturity as well as death claims. The LIC has settled large number of claims year after year very quickly except for in case of misrepresentation or non- disclosure of material facts .Even in such cases, an opportunity is given to claimant to make a representation before the Claims review committee at zonal offices and at central office. Number of Outstanding claims has reduced significantly. 6. Market share: The following table very aptly reveals the performance of in comparison to the private insurers. As regards premium we can see that LICs figures in market percentage have shown a sharp decline and private insurers percentage has increased. This totally represents the hold of the private sector being expanded undoubtedly.

Table 5 : Market Share of Life Insurers Insurer LIC Private Sector Total LIC Private Sector Total LIC Private Sector Total 2001-02 98.65 1.35 100 99.99 0.01 100 99.46 0.54 100 2002-03 94.3 5.7 100 99.6 0.4 100 97.99 2.01 100 2003-04 2004-05 2005-06 First Year Premium 87.67 78.78 73.52 12.33 100 21.22 100 26.48 100 92.82 7.18 100 85.75 14.25 100 2006-07 74.35 25.65 100 89.03 10.97 100 81.92 18.08 100 2007-08 64.02 35.98 100 83.42 16.58 100 74.39 25.61 100 2008-09 61.12 38.88 100 77.24 22.76 100 70.92 29.08 100

Renewal Premium 98.55 96.18 1.45 3.82 100 100 Total Premium 95.29 90.67 4.71 100 9.33 100

But it should not be inferred from this that LIC is not performing well. If we see in rupee terms LIC has progressed a lot after liberalization. Saying that LIC has lost its market share to private shares is a misnomer. Indian Insurance market is a highly untapped market as we have studied so far. All of them (insurers) have gained in the run and shall do same in future to come. Insurance market in India is too large. 10.CONCLUSION Until the Indian insurance industry was liberalized, LIC did not have any clear marketing strategies. Since it enjoyed monopoly status, it could afford to have a very limited focus on marketing. For the average India, LIC became synonymous with life insurance, and over the years it built up an enviable brand image in both rural and urban areas. The company grew by leaps and bounds, with people buying its policies due to the tax concessions attached to it. On account of its position as a monopoly, LIC did not standardize its practices nor did it focus on providing better

customer service to the policyholders. In the preliberalization era, most of the agents and development officers were only interested in generating new business, and there were many complaints about the poor customer service offered by the after policy were taken. The reason was that incentives for them were based only on new business generated, and not on satisfying the customer. The absence of customer service showed in the fact that more than 10% of the policies were surrendered or lapsed every year. LICs advertising and promotion was at a low level till the late 1990s, and, in fact, the company came out with only a few advertisements, which focused mainly on insurance as a tax-saving tool, rather than emphasizing on its products or the types of policies it offered. According to reports, though LIC had around 60 products in its portfolio only around 7-8 policies of LIC were popular with customers. In addition to the limited advertisements through the media of television, radio and print, the corporation used promotional material like diaries and calendars at the point of purchase. Thus

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insurance coverage was low and LIC Productivity in coverage terms was low in pre-liberalization period. As discussed in the preceding pages in this chapter LICs overall productivity has undergone a drastic change after liberalisation. There are various reasons for the change. It is the change in the policies and strategies of LIC which have really brought a change in its productivity. As we know the insurance sector cake is really large and there is enough for everyone to get, the only requirement is a great marketing effort characterized by aggression and passion. The five essential factors that have affected LIC are: Changing customer behavior Deregulation and government intervention (Regulatory) Competition-in respect to technology, distribution networks, automation etc. Technological innovations. Client relationship and quality There is enormous potential for life insurance and no doubt that LIC enjoys immense goodwill in our country today. A brilliant performance from LIC in areas of delivering customer satisfaction and spread of insurance business was expected at the time of liberalization. Thus, the performance of LIC in terms of growth of new business, business in force in India, new business under group insurance and other performance measures can be termed as satisfactory. Significant improvement has taken place in the settlement of claims especially after the introduction of private players in the business. The analysis of Productivity growth also reflected improvement in different dimensions. It is certain that Indian Insurance players along with their foreign partners are trying to grab the under explored Indian market. Though there are few innovations in the marketing Channels of Indian Insurance Industry, it is expected that they will try more innovative Channels as the industry grows. Innovatively, SBI life has offered group insurance to the employees of public sector companies, including their spouses. Also similar covers were offered to even the state Governments for their liabilities. Given the aggression with which they progress, surely these innovations are going to be a big hit and a metamorphosis of Indian Insurance sector is very much on its course. 11.FUTURE SCOPE There is still scope for further research in the evaluation of the performance of LIC in comparison to the private players of the life insurance industry. Only ten years have passed since the private players have entered into the insurance industry. So the detailed research can be conducted to study the financial performance of all the private as well as public insurers. The financial aspects regarding the insurance business like investment pattern, income

utilization, claims settlement, rural business, market share, etc. can be analysed and comparative study can be done of all the players of the insurance industry. Study can also be carried to find out the new marketing methodologies being adopted by insurers and so on. 12.REFERENCES Articles:
[1] Privatization of the Insurance Market in India: From the British Raj to Monopoly Raj to Swaraj by Tapen Sinha, Ph.D. ING Commercial America Chair Professor Instituto Tecnolgico Autnomo de Mxico Mexico City, Mexico and Professor, School of Business [2] "The Monitory Group Study on Insurance I and II." Business Today. March 22 and April 7, 2000. [3] "India Insurers Seek Perfect Partners." National Underwriters, March 5, 2001, 38-39. Kumari, Vaswati [4] Present and future scenario of insurance in India- M. Ramachandran. Insurance consultant- Bima online. Com-10th Nov 2001.

Reports and Books:

[5] Annual Reports of Life Insurance Corporation of India, Insurance Regulatory and Development Authority Of India and Life Insurance Council for different years. [6] Gupta, Aarti and Chuganee, Bhakti, (2001), LIC Learns to Tango, Insurance Chronicle, Business India, June July, Source: www:icfaipress.org. [7] Innovation in Product Design and Pricing by the LIC, IRDA Journal, Vol.11, No.6, May, pp 25-26. [8] Khan, M.Y. (1979), LIC in the Capital Market : Its Record and Responsibilities, Eastern Economist, February 9, PP, 222-29. [9] Mishra, M.N., (1985), Productivity Management in LIC , The Insurance Times, Vol. 5, No. 10. [10] Pandey, I.M. (2002), Financial Management, Vikas Publishing House Pvt. Ltd., New Delhi. [11] Simon, J.J., (1989), HRD For Our Agency Force, (Yogakshema), (September October) pp. 13-16. [12] Yogekshema-Monthly Journal of LIC Issues related to the period of study.