Escolar Documentos
Profissional Documentos
Cultura Documentos
INDIA
INTRODUCTION
The present chapter portrays the marketing activities of LIC of India
and discusses briefly the business performance of the Corporation during
the period before and after liberalization of the insurance sector.
An
101
has offices in Fiji, Mauritius and United Kingdom.
The Corporation is
associated with joint ventures abroad in the field of insurance, namely, KenIndia Assurance Company Limited, Nairobi, United Oriental Assurance
Company
Limited,
Kuala
Lumpur
and
Life
Insurance
Corporation
years of monopoly shows many ups and downs in the business of LIC. The
Corporation has been rated as No.1 Company in net worth and net profits
and No. 2 in total income in India.
Objectives of the Life Insurance Corporation of India
The Life Insurance Corporation of India (LIC) was set-up by the
Government of India to achieve the following objectives:
Spread Life Insurance widely and in particular to the rural areas and to
the socially and economically backward classes with a view to reaching
all insurable persons in the country and providing them adequate
financial cover against death at a reasonable cost.
Deploy the funds to the best advantage of the investors as well as the
community as a whole, keeping in view national priorities and
obligations of attractive return.
Conduct business with utmost economy and with the full realization that
the moneys belong to the policy holders.
Meet the various life insurance needs of the community that would arise
in the changing social and economic environment.
102
BOARD OF DIRECTORS
CHAIRMAN
MANAGING DIRECTORS
Central Office
(Mumbai)
Zonal Offices -8
Mumbai
Hyderabad
Delhi
Bhopal
Kanpur
Patna
Kolkatta
Chennai
103
Figure 4.1. Organizational set up of Life Insurance Corporation of
India
Under each divisional office there are branch offices and sub-
offices.
At the time of nationalization, LIC had 5 Zonal Offices, 33 Divisional
Offices and 240 Branch Offices. As on 31 st March 2007, the Corporation has
8 Zonal Offices, 101 Divisional Offices, 2048 Branch Offices and 132
Satellite Offices (SOs) 4.
104
A life insurance companys success reflects the consolidated effort of
all of its activities. These activities may be arranged into three major
functional classifications marketing, investments, and administration. Of
these three areas, marketing is the largest in terms of both personnel
requirements and costs and is critical to success 5.
Insurance marketing is an effort to transform the prospects into
actual policyholders6. The twofold goal of marketing is to attract new
customers by promising superior value and to keep current customers
satisfied by delivering value added services 7. Ensuring life security to an
individual and his family calls for the concerted efforts at four levels,
namely; (i) Insurer (LIC of India), (ii) Branch Manager, (iii) Development
officer, and (iv) Agent (Intermediary).
105
of India Act, 1956. It acts as trustees of the policyholders. It is the duty
and responsibility of the Corporation to conduct business with care.
Product development and pricing are the important functions of the
Corporation. It is the function of the Development Department to develop
training programme for branch officials, development officers and agents.
Publicity and public relations are also looked after by this department.
Zonal Office
The Zonal Offices of the Corporation are at Mumbai, Hyderabad, New
Delhi, Bhopal, Kanpur, Patna, Kolkatta, and Chennai.
Southern Zone
It reviews the
Divisional Office
A divisional office is akin to a head office of an erstwhile insurer and
is concerned with all activities of the insurer from procurement of new
business to settlement of claims. There are 12 Divisions in the Southern
Zone; 8 in Tamil Nadu and 4 in Kerala. The Divisional Offices in Kerala are:
(1) Thiruvananthapuram, (2) Kottayam, (3) Ernakulam and (4) Kozhikode.
The branches in Kasargod and Kannur districts fall under the jurisdiction of
Kozhikode Division.
106
The marketing department at Divisional Office supervises the quality
of work done in various branches through its various sections. The sales
section is entrusted with the functions of product research vis--vis the
markets, review of branch plans to develop agency force, recruitment of
agents, appointment of development officers, opening of branches,
allocation of territories between branches, analysis and review of monthly
performance of branches, conducting of training programme for Assistant
Branch Managers (sales), Development Officers and Agents, deciding cases
beyond the branch authority, processing of early claims, etc. As on March
31, 2007, there were 101 divisional offices in India including one salary
savings scheme (SSS) division at Mumbai.
Branch Office
The Branch Office of the Corporation is the main operating office in
the sense that this is the only office where sales of insurance products are
made and services given. At the time of nationalization LIC had 240 branch
offices; the number increased to 2,048 by 1998
between 1998 and 2007 no single branch office was opened. But with a
vision of providing easy access to its policyholders, LIC has launched as
many as 132 Satellite Offices (SOs) during the period from 2005 to 2007.
These satellite offices, which are attached to the respective parent
branches, are basically an extension of the large parent branches for
services to policyholders.
107
to the provisions contained in the Insurance Regulatory and Development
Authority (Licensing of Insurance Agents) Regulations, 2000.
Figure 4.2
Development Officer
(DOs)
Direct Agents
Branch
Manager
(Sales)
and
Assistant
Branch
Manager
108
enthusiasm in employees and agents. Preparing performance budgets at
the branch level, timely reporting of performance of the branch to Divisional
Office, and prompt and unfailing service to the customers are the duties of
the branch manager.
Development Officers
Development officers are the field personnel in the distribution of life
insurance products.
insurance products. They can appoint agents and give the initial training
for selling life insurance products.
under them conduct their work and / or business strictly in accordance with
the provisions of the Insurance Act, 1938 and Rules framed there under, LIC
of India (Agents) rules 1972 read with IRDA (licensing of Insurance Agents)
109
Regulations, 2000 as amended from time to time and in the best interest of
the Corporation.
Individual Agents
Individual agents are the most important distribution channels in life
insurance marketing.
dependent on the army of agents and brokers 9. The Insurance Act, 1938
defines Insurance Agent as agent licensed under section 42 being an
individual who receives or agrees to receive payment by way of commission
or other remuneration in consideration of his soliciting or procuring
insurance business including business relating to the continuance, renewal
or revival of policies of insurance.
Direct Agents and Career Agents. The Corporation has a scheme of career
agents to promote the cause of professionalising the agency force. There
are two types of Career Agents: (i) Urban Career Agents (UCAs), and (ii)
Rural Career Agents (UCAs). UCAs are recruited for the Career Branch at
the Divisional Office.
110
The training has to be conducted by an institute approved and notified by
the IRDA.
An agent is required to do a Minimum Business Guarantee (MBG) of
12 policies (12 lives) in a year.
10
Every agent shall solicit and procure new life insurance business which
shall not be less than the minimum prescribed in these rules and shall
endeavour to conserve the business already secured.
The agent should make all reasonable enquiries in regard to the lives to
be insured before recommending proposals for acceptance. He should
bring to the notice of the Corporation any circumstances which may
adversely affect the risk to be underwritten. For this purpose, Agents
Confidential Report and in all cases of large sum proposed, a Moral
Hazard Report (MHR) is obtained from agents.
An agent shall not interfere with any proposal introduced by any other
agent.
Every agent shall maintain contact with all persons who have become
policyholders of the Corporation through him and shall advice every
policyholder to effect nomination or assignment in respect of their policy
and offer necessary assistance in this behalf.
111
112
figure 4.3. A sale results when the salesman takes the prospect along with
him through well defined steps. These steps are not separate and clear-cut
but blend into one integrated process if it can be so called.
Prospecting
Pre-approach and
Approach
Interview
Solicitation
Policy
Preparation
Underwritting
Acceptance
OfferProposal
Over the years on account of the trust and the huge network of
agents that has been built, LIC has come to occupy a special place in the
hearts of its policy holders.
12
Table 4.1 shows the growth in the number of active agents and their
average business during the last twelve years from 1996 to 2007.
The
as at
113
Table 4.1
Number of Active Agents and their Average Business
Year
1996
No. of Active
Agents
Increase/Decrease
(in %)
Average
Business (Rs.)
10,08,286
5,13,897
Increase /
Decrease (in
%)
1997
5,33,133
3.74
10,64,284
5.55
1998
5,58,517
4.76
11,39,047
7.02
1999
5,98,217
7.11
12,59,013
10.53
2000
6,83,190
14.20
13,28,292
5.21
2001
7,43,064
8.76
16,56,370
24.70
2002
7,44,003
0.13
25,88,326
56.26
2003
9,02,199
21.26
19,89,718
(-) 23.13
2004
10,03,241
11.20
19,80,651
(-)0.46
2005
9,80,836
(-)0.02
18,29,881
(-)7.61
2006
9,87,689
0.70
28,73,006
57.00
2007
10,28,047
4.08
29,52,987
2.78
Source: LIC Annual Reports from 1997 to 2005, chairmans review 2006,
and Insurance Master, June 2007.
It is evident from Table 4.1 that the number of active agents
increased from 5,13,897 to 10,28,047 at a growth rate of 100.05 percent
over a period of twelve years from 1996 to 2007. At the same time, the
growth in number of active agents was not steady during the same period.
The growth rate fluctuated between a high of 21.26 percent in 2003 and a
low of (-) 0.02 percent in 2005.
The All India productivity of active agents showed an overall growth
of 192.87 percent over a period of twelve years from 1996 to 2007. The
growth in productivity of agents was also not steady during the period
under study. It fluctuated between a high of 57 percent in 2006 and a low
of (-) 23.13 percent in 2003. The reason for the highest negative growth in
productivity in 2003 was mainly due to the sharp increase (21.26 percent)
in the number of active agents over the previous year and the strong
presence of private players in the market.
This was
114
because of the aggressive marketing strategy followed for LICs golden
jubilee product Bima Gold and active participation of many agents in the
campaign. Up on analysis of Table 4.1, one could find that the increase in
number of active agents was not followed by proportionate increase in
productivity.
Alternative Channels
Any sales process which does not involve the tied channels will be
called an alternative channel 13. Channels play a pivotal role in marketing ;
they perform a number of vital distribution functions.
The alternative
Corporate Agents, Internet Marketing, Tele Marketing, etc. The figure 4.4
gives a clear picture of the marketing channels of LIC.
Individual
Agents
Alternative
Channels
Bancassurance
Corporate
Broker
Agents
s
Figure 4.4. Marketing Channels of LIC
115
Bancassurance
Bancassurance in its simplest form is the distribution of insurance
products though banks distribution channels. The concept of bancassurance
originated in France and the first bancassurer started its operation way
back in the 1970s. The success of bancassurance in France attracted the
attention of banks and insurers all over the world and it spread
subsequently in other parts of Europe, USA, Australia, and Asia
15
The banks
allow access to the insurance company for use of its data base of
customers.
agency is similar to the individual agency, the only difference being the
agency is in the name of bank. Under the Joint Venture model the bank
enter into a joint venture with insurance company and launches an entirely
new insurance company. The bank may enter in to an agreement with a
local insurance company or Have tie-up with a foreign company. In India,
the joint venture system is adopted by major private players such as ICICI
Prudential, Bajaj Allianz, HDFC Standard,etc. The corporate agency model
of bancasurance is adopted by LIC of India. Under this arrangement, the
Corporation has entered into memorandum of understanding with 39 banks
as at 31-03-2006.
BANCASSURANCE
M
O
D
E
L
S
Referral
Arrangement
Corporate Agency
Joint Venture
116
Corporate Agents
Many
companies,
firms,
non-banking
finance
companies,
co-
insurance products.
corporate agents across the country. The Kerala State Financial Enterprises
Limited and District Co-operative Banks function as the corporate agents of
LIC in Kannur and Kasargod districts to sell life insurance products.
Brokers
The institution of brokers in India is in a nascent stage. But brokers,
who are professionals in the area of insurance, will be acting on behalf of
the customers, rendering quality advice to them not only on the products
but also on the life insurance company through which they can take such
products. There were 103 brokers in the marketing network of LIC as on
31st March, 2006
16
117
Individual Agents
Year
Bankers
Others*
LIC
Private
Players
LIC
Private
Players
LIC
Private
Players
2003-04
99.78
60.39
0.11
10.67
0.11
28.94
2004-05
98.79
59.30
0.87
15.42
0.34
25.28
2005-06
98.37
59.71
1.25
16.87
0.38
23.42
2006-07
97.28
65.80
1.24
16.58
1.48
17.62
Source: Insurance Chronicle, August 2006 and IRDA Annual Report 200607.
* Others include Corporate Agents other than Bankers, Brokers and
Referral
arrangements.
The contribution of bankers which was a meager volume (0.11
percent) in 2003-04 increased to 1.24 percent in 2006-07 in the case of LIC.
In the case of private players it increased from 10.67 percent to 16.58
percent during the same period. The individual agents dominated in the
filed throughout the period, but their contribution decreased from 99.78
percent in 2003-04 to 97.28 percent in 2006-07 in the case of LIC, whereas
it increased from 60.39 percent to 65.80 percent in the case of private
players during the same period. The share of brokers and corporate agents
other than bankers was insignificant in the case of LIC, whereas it
decreased from 28.94 percent in 2003-04 to 17.62 percent in 2006-07 in
the case of private players.
118
regarding marketing channels were discussed in the preceding pages. The
other core issues are elaborated in the following pages.
Meetings at
branch office and divisional office level with development officers, agents,
and customers, etc. will be helpful in understanding their needs and
requirements which will lead to development of new product ideas.
Practices developed by the marketing wing will encourage generation of
119
new ideas which can be screened and brought up to the Zonal Office (Z.O.)
and Central Office (C.O.). Procedures would also be evolved which would
facilitate interaction between marketing and actuarial wing so that
thorough consideration is given to feasibility of proposals vis-a-vis customer
needs and pricing.
Life Insurance Corporation offers a basket of schemes to meet the
various needs of an individual and his family.
The
group schemes and social security schemes are sold through Divisional
office. Under group scheme, LIC offers life insurance protection to various
groups such as employer-employee, professionals, co-operatives, weaker
sections of the society, etc.
120
L I CS P R O D U C T S
I INDIVIDUAL PLANS
II GROUP SCHEMES
III SOCIAL
SECURITY
SCHEMES
1 Janasree Bima
Yojana (JBY)
2 Shiksha
Sahayog
Yojana (SSY)
lieu of EDLI
3. Group Gratuity Scheme
4. Group Super Annuation
Scheme
5. Group Savings Linked
Insurance
6. Group Leave Encashment Scheme
7. Group Mortgage
Redemption Insurance
Fig 4.6.
LICs products
121
Figure 4.6 depicts popular plans developed by LIC.
The object of
Under the
Products
launched by LIC before IRDA set up were 127. Products cleared by IRDA up
to 2007-08 are 46 plus 8 rider benefit products.
Internationally, till
21
122
products and riders and add-ons have changed the market. About 80 per
cent of the premium income of private players was from ULIPs, whereas it
was about 20 percent in the case of LIC in the year 2004-05. From 2005-06
onwards, LIC also has shifted from conventional products to ULIPs and
about 45 percent of the premium income was from this segment.
Life insurance companies give much importance to ULIPs because
these products impose very little liability on companies compared to
conventional products. As per the IRDA rules, an insurance company need
to keep 1.5 times of its insurance liability as solvency margin.
In the case
123
SEGMENTS
Sub-segments
REGION WISE
Central Zone
Northern
Eastern
Southern
Western
AREA WISE
Urban Area
Rural Area
Salaried class
Self employed
Retired employees
Wage earners
HOUEHOLD SECTOR
Public sector
Private sector
Co-operative sector
INDUSTRIAL SECTOR
INSTITUTIONAL SECTOR
Universities, Colleges,
Schools, Institutes
TRADE SECTOR
Small business
Big business
GENDER WISE
Men, Women
AGE WISE
the
prospects.
The
advertisement
appeals,
messages,
124
data simplifies the task of branch manager, especially while identifying a
profitable segment23.
Depending on the training needs, LIC also expose their agents and
to
the
above,
meeting
of
managers
at
different
In
levels,
125
and improve service quality. CRM requires a team approach to serve the
policyholders, which makes it easier to take care of the needs and
expectations of the policyholders. At the branch offices of the Corporation,
there is one Customer Relations Executive to understand the policyholders
needs and behaviours. This officer is required to hold at least two meeting
of customers; one before 31 st January and second before 30 th September of
every year.
Central Office of the Corporation. The marketing strategies for the products
identified to market are also developed at the Central Office. But selection
of
banks
and
other
corporate
agents,
signing
Memorandum
of
126
market by the end of March 2007
25
existence has undergone several trials and tribulations, faced ups and
downs in business growth but managed to grow and metamorphose into a
giant in the industry. In the light of the above, the business performance of
LIC viewed from different dimensions like new business in terms of number
of products, sum assured, first premium income of products marketed,
growth of rural new business, etc. is presented in the following sections.
New
Business
Number
of
Products
(Individual
Insurance)
Marketed
To spread life insurance at a reasonable cost is the first and foremost
objective of the Corporation. New business is a pointer towards the spread
of message of insurance among those people who have never availed of the
benefits of life insurance as well as the existing policyholders. LIC has its
insurance business in India as well as outside India. The business outside
India is negligible compared to the business in India.
Number of
127
fluctuated between a low of (-) 37.45 percent in 2000-01 and a high of
19.42 per cent in 2004-05.
Table 4.3
Number of Products Marketed under New Business-Individual
Insurance
Year
Trend
(%)
Outside
In India
Total
India
1995-96 1,10,20,825 13,345
1,10,34,170
100
(99.87 %)
(0.12 %)
1,22,68,476
12,296
1996-97
1,22,80,772 111.30 11.32
(-)7.86
(99.89 %)
(0.11 %)
1,33,11,294
13,904
1997-98
1,33,25,198 120.76
8.50
13.07
(99.89
(0.11 %)
1,48,43,687
13,356
1998-99
1,48,57,043 134.64 11.51
(-)3.94
(99.90 %)
(0.10 %)
1,69,76,782
12,648
1999-00
1,69,89,430 153.97 14.37
(-)5.30
(99.93 %)
(6.07 %)
1,96,56,663
7,911
2000-01
1,96,64,574 178.21 15.78 (-)37.45
(99.95 %)
(0.05 %)
2,24,91,304
8,695
2001-02
2,24,99,999 203.91 14.42
9.91
(99.95 %)
(0.05 %)
2,42,68,416
10,359
2002-03
2,42,78,775 220.03
7.90
19.14
((99.94 %)
(0.06 %)
2,64,56,320
11,562
2003-04
2,64,67,882 239.87
9.01
11.61
(99.56 %)
(0.04 %)
2,18,17,967
13,807
2004-05
2,18,31,774 197.85 (-)17.53 19.42
(99.94 %)
(0.06 %)
3,15,59,177
13,370
2005-06
3,15,72,547 286.13 44.65 (-)3.16
(99.96 %)
(0.04 %)
3,81,92,783
15,792
2006-07
3,82,08,575 346.27 21.02
18.11
(99.96 %)
(0.04 %)
Source: Annual Reports of LIC of India (1995-96 to 2004-05) and Insurance
Master, June 2007.
Note: Figures in parenthesis shows percentage to total.
128
resultant withdrawal of guaranteed return products. The drought situation
during 2002-03 also had adversely affected the business of LIC.
The introduction of more and more Unit Linked Products by private
players, decline in number of agents, severe competition from new players
and strike by development officers as a result of withdrawal of certain
benefits enjoyed by them previously, resulted into negative growth of
business in the year 2004-05
26
2005-06 onwards greater emphasis was being given for premium income
and number of policies marketed. The sum assured under new business for
the period from 1995-96 to 2006-07 is depicted in Table 4.4.
During 1995-96, the sum assured under new business in India was
Rs.51,815.54 crores, which accounts 99.51 percent while it was Rs.255.99
crores outside India, which constitutes 0.49 percent only. Sum assured of
business in India rose to Rs.2,92,752.63 crores (99.86 percent) in 2006-07,
while it was Rs.423.15 crores (0.14 percent) outside India. In case of sum
assured of products marketed in India, the performance of the Corporation
has been quite satisfactory during the period under study except for two
years, i.e., 2002-03 and 2004-05 when there was a fall in the amount of
sum assured.
129
Table 4.4
Sum Assured under New Business - Individual Insurance
Sum Assured (Rs. in Cr)
Year
In India
Outside
India
1995-96
51,815.54
(99.51 %)
255.99
(0.49 %)
52,071.53
100.00
1996-97
56,740.50
(99.55 %)
253.44
(0.45 %)
56,993.94
109.45
9.50
(-)0.99
1997-98
63,617.69
(99.51 %)
310.14
(0.49 %)
63,927.83
122.77
12.12
22.37
1998-99
75,316.28
(99.61 %)
289.98
(0.39 %)
75,606.26
145.20
18.39
(-)6.50
1999-00
91,214.25
(99.70 %)
276.69
(0.30 %)
91,490.94
175.70
21.11
(-)4.58
2000-01
36.79
(-)35.30
2001-02
54.34
18.81
2002-03
40.56
2003-04
10.69
14.20
2004-05
18.71
2005-06
Total
58.10
2.67
2006-07
130
05, the Corporation improved its performance in 2005-06 as is evident from
the fact that the annual growth rate showed 58.10 percent increase over
the previous year.
. Premium income can be classified into two: (i) first year premium, and
(ii) renewal premium. Premium collected on the new business is called first
year premium and premium collected on business in force is called renewal
premium. First Year Premium Income (FYPI) collected is taken to assess the
growth of a life insurance company
28
131
Table 4.5
Premium Income from New Business
Year
Premium
Growth Trend
Annual Growth
(Rs.in crore)
(%)
(in %)
1995-96
2,829.26
100.00
1996-97
3,360.78
118.79
18.79
1997-98
3,859.19
136.40
14.83
1998-99
4,880.52
172.50
26.46
1999-2000
6,026.02
212.99
23.47
2000-01
8,863.35
313.27
47.08
2001-02
19,588.77
692.36
121.00
2002-03
15,976.76
564.69
(-) 18.44
2003-04
16,284.69
575.58
1.93
2004-05
19,972.26
705.92
22.64
2005-06
21,698.91
766.95
8.65
2006-07
44,540.41
1574.28
105.27
Source: Annual Reports of LIC (1995-96 to 2004-05), Chairmans review
2005-06, and IRDA Journal, May 2007.
Analysis of Table 4.5 further reveals that premium income of LIC
increased by more than double in the year 2001-02, i.e., the year
immediately after the entry of private players and in 2006-07. But it is right
to mention here that the Corporation was not able to keep this pace for
next four years after 2001-02, as is evident from Table 4.5.
between the per capita income and literacy rate, among other things, in
these two market segments. The marketing policy of LIC aims at covering
both urban and rural markets. Statistics show that insurance penetration in
rural India is very low, at 20 percent
29
It
requires a great deal of sustained effort. Whether offering insurance to lowincome people is a viable business proposition is one major issue that must
be tackled
30
Rural sector obligation in case of life insurer in 1 st, 2nd, 3rd, 4th, and 5th
year is 7, 9, 12, 14, and 16 per cent respectively of the total number of
132
policies written in rural sector
31
two parts on the basis of time period. After the formation of IRDA in 1999,
it changed the definition of rural area. This lead to a huge change in the
figures related to number of products and sum assured of the rural market
after 1999-2000. Year 1994-95 to 1999-2000 forms the first part and 200001 to 2005-06 constitutes the second part of the rural new business.
Table 4.6
Growth of Rural New Business
Year
% Growth Rate
No. of
Sum Assured
Policies
Sum
(Rs. in cr.) Policies
(in lakh)
Assured
1994-95 49.02
21,571.00
1995-96 52.57
21,263.59
7.2
1996-97 60.33
24,278.73
14.8
1997-98 68.40
27,550.69
13.4
1998-99 81.23
35,372.94
18.8
1999-00 97.04
44,168.19
19.5
2000-01 109.20
59,676.42
12.5
2001-02 37.02
25,461.94 (-)66.1
2002-03 45.23
23,574.69
22.2
2003-04 62.20
35,651.99
37.5
2004-05 55.03
46,037.01 (-)11.5
2005-06 74.66
60,971.85
35.7
Source: Annual Reports of LIC of India.
(-)1.4
14.2
13.5
28.4
24.9
35.1
(-)57.3
(-)7.4
51.2
29.1
32.4
number and sum assured of products marketed during the six year period
before opening of the sector to private players showed an increasing trend,
but it fluctuated widely during the post-liberalization period.
133
Figure 4.8
Rural new business (number of policies) in India
120
Number (Lakhs)
100
80
60
40
20
0
1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Year
Figure 4.9
Growth in Rural New Business (Sum Assured)
70,000
60,000
Amount (Crores)
50,000
40,000
30,000
20,000
10,000
0
1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Year
134
The share of products marketed in rural area to total new products
marketed has steadily increased from 45.1 percent in 1994-95 to 57.5
percent in 1999-2000. Similarly, the sum assured has steadily increased
from 39.1 percent to 48.71 percent during the same period. But the share
of rural products marketed and sum assured which was 55.53 percent and
47.76 percent respectively in 2000-01 declined to 23.65 percent and 21.21
percent respectively in 2005-06. From the above analysis it is evident that
LIC concentrated in urban areas and lost business in rural areas after
liberalization of the sector, as private players established their presence in
rural areas also by opening more and more branches. Figure 4.8 and 4.9
portrays the growth in number and sum assured of products marketed by
LIC in rural area during the pre-libralisation and post-liberalisation period.
LIFE INSURANCE MARKETING IN KASARGOD AND KANNUR
The Kasargod and Kannur districts which are situated in the northern
part of Kerala come under the Kozhikode Division of the LIC.
Kozhikode
division is one of the prominent divisions under the Southern Zone. The
performance of marketing individual life insurance products of LIC in
Kasargod and Kannur districts vis-a vis the performance at national level is
evaluated from different dimensions like number of products marketed,
sum
assured
of
products
marketed,
premium income
on
products
135
insurance products of their choice by giving required information about
various insurance products.
KANNUR
KASARGOD
ALL INDIA
KANNUR
KASARGOD
ALL
INDIA
2001-02
97,912
33,308
2,24,91,304
2002-03
1,12,615
39,095
2,42,68,416
15.02
17.37
7.90
2003-04
1,10,605
41,284
2,64,56,320
(-)1.78
5.60
9.01
2004-05
97,495
33,625
2,18,17,967
(-)11.85
(-)18.5
5
(-) 7.53
2005-06
1,41,327
52,433
3,15,72,547
44.96
55.93
44.71
2006-07
1,31,433
54,035
3,82,08,575
(-) 7.00
3.05
21.02
CAGR
6.07
10.16
11.18
Source: Compiled from Divisional Office, Annual Reports of LIC (2002 to
2005), and IRDA Journal various issues.
Analysis of the Table 4.7 reveals that number of products marketed
showed a growth rate of 134.24 percent in Kannur and 162.23 percent in
Kasargod district, whereas it was 169.88 percent at all India level during the
post-liberalisation period from 2001-02 to 2006-07,.
136
except in 2004-05.
of products marketed in Kasargod and Kannur districts and at all India level
during the post-liberalisation period from 2002-03 to 2006-07.
Figure 4.10
Growth (in percntage) of Products Marketed
60
50
40
Pecentage
30
Kannur
20
Kasargod
10
India
0
-10
2002-03
2003-04
2004-05
2005-06
2006-07
-20
-30
Year
Approach, and Capital Retention approach are the three standard ways of
estimating the amount of life insurance to own 32. Table 4.8 shows the sum
assured of products marketed and the growth in Kasargod and Kannur
districts and at all India level during the period from 2001-02 to 2006-07.
137
Table 4.8
Sum Assured of Products Marketed (2001-02 to 2006-07)
(Rs. in crores)
Year
2001-02
710.19
204.97
1,92,572.27
2002-03
929.21
265.04
1,79,512.22
2003-04
1,003.32
336.40
2004-05
912.89
2005-06
2006-07
Growth (in % )
KANNUR KASARGOD
-
30.84
29.31
(-)6.79
1,98,707.12
7.97
26.92
10.69
307.30
1,79,481.39
(-)9.01
(-)8.65
(-)9.67
1,411.88
539.60
2,83,763.74
54.66
75.59
58.10
1276.84
480.44
2,59,373.18
CAGR
ALL
INDIA
18.57
(-) 8.59
6.14
138
level, the sum assured of products marketed had grown significantly in
Kasargod district during the years 2003-04 and 2005-06.
Analysis of table 4.7 and 4.8 further reveals that there was fall in the
number as well as sum assured of products marketed in both the districts
and at all India level during the year 2004-05.
The main
reasons for this can be attributed to: (i) concentration on Unit Linked
Products in 2004-05, and (ii) laxity on the part of Development Officers and
Agents as part of their All India strike in 2004-05 and competition from
private players.
139
Table 4.9
First Premium Income Collected (2001-02 to 2006-07)
(Rs. in Lakhs)
First Premium Income Collected in
Year
Growth (in %)
KANNUR
KASARGOD
ALL INDIA
2001-02
2,291. 46
754. 31
19,58,877.25
2002-03
3,232. 04
1,180. 90 15,97,676.15
41. 05
2003-04
3,237. 88
1,414. 63 16,28,468.67
0.18
19.79
1.93
2004-05
3,725. 45
1,587. 40 19,97,225.52
15.06
12.21
22.64
2005-06
5,098. 32
2,367. 35 21,69,891.21
36.85
49.13
8.65
4,515.72
99.99
90.75
105.27
34.79
43.03
22.69
2006-07 10,196.58
44,54,041.01
KANNUR KASARGOD
-
ALL
INDIA
-
56. 55 (-)18.44
CAG
R
income in Kasargod and Kannur districts and at all India level during the
period from 2002-03 to 2006-07. The heavy growth in the first premium
income in the last two years of study can be attributed to: (i) concentration
on Unit Linked Policies, and (ii) aggressive marketing campaign adopted by
LIC for its Golden Jubilee product Bima Gold.
140
Figure 4.11
Growth (in percntage) of First Premium Income
120
100
Percentage
80
60
Kannur
40
Kasargod
India
20
0
-20
2002-03
2003-04
2004-05
2005-06
2006-07
-40
Year
dependent on the army of agents and brokers. The agent is the central
figure in the insurance marketing process.
winners of LIC.
Before
141
measuring productivity of agents, growth of individual agents in the two
districts and at all India level is assessed.
Table 4.10
Growth of Individual Agents (2001-02 to 2006-07)
Year
Number of Agents in
Growth (in %)
KANNUR
KASARGOD
KANNUR
KASARGOD
2001-02
3,161
1,334
2002-03
3,613
1,432
14.30
7.35
2003-04
3,993
1,609
10.52
12.36
2004-05
4,046
1,513
1.33
(-) 5.97
2005-06
4,218
1,580
4.25
4.43
2006-07
4,564
1,781
Source: Compiled from Divisional Office.
8.20
12.72
142
average business done by each agent in terms of number of products, i.e.,
by dividing the total number of policies of a particular year by the number
of agents in that year.
productivity in both the districts and at all India level in the year 2005-06.
Year
Table 4.11
Productivity per Agent Number of Products
Average No. of Products
Growth in Productivity (in %)
Marketed per Agent in
KANNUR KASARGOD
ALL
INDIA
2001-02
26
25
30
2002-03
31
27
27
19.23
8.00
(-) 10.00
2003-04
28
25
26
(-) 9.68
(-) 7.41
(-) 3.70
2004-05
26
22
22
(-) 7.14
(-) 12.00
(-) 15.38
2005-06
31
33
29
19.23
50.00
36.36
2006-07
29
30
35
(-) 6.45
(-) 9.09
20.69
CAG
R
2.21
3.71
Source: Compiled from Divisional office & Annual Reports of LIC.
3.13
143
The CAGR of productivity for the entire study period was 2.21 in
Kannur, 3.71 in Kasargod, and 3.13 at all India level. On the basis of CAGR,
it can be concluded that growth in productivity of agents in the branches in
Kasargod district was better than the agents in the branches in Kannur
district and at all India level over a period of six years.
Table 4.12
Analysis of Variance of Products Marketed per Agent
District
Mean
SD
Kannur
28
2.26
Kasargod
27
3.95
Total
27
3.17
p value
Significance
0.65217
4
0.43812
4
Not
Significant
The mean number of products marketed per agent was 28 (S.D. 2.26)
in Kannur and 27 (S.D. 3.95) in Kasargod. The analysis further reveals that
there is no significant difference in productivity in terms of number of
products marketed, between the agents in Kasargod and Kannur district
branches.
2. New Business per Active Agent
Agents play an important role in procuring new business every year.
In a competitive scenario, there is lot of scope and potential in the
insurance market for this type of distribution channel. Productivity in terms
of new business per LIC agent can be measured by dividing the total sum
assured in a year by the total number of active agents in that year. It gives
the average business per active agents.
Table 4.13 reveals that productivity per agent in terms of sum
assured of new business has been fluctuating in both the districts under
study from 2001-02 to 2006-07.
144
a low of (-) 18.13 percent in 2004-05 and a high of 41.79 percent in 200506 in the case of agents in Kannur district branches. Productivity increased
from Rs.15.07 lakhs in 2001-02 to Rs. 26.97 lakhs in 2006-07 at a growth
rate which fluctuated from a low of (-) 2.05 percent in 2004-05 to a high of
68.61 percent in 2005-06 in the case of agents in Kasargod district
branches. Growth in productivity at all India level also fluctuated between a
low of (-) 23.13 percent in 2002-03 and a high of 57 percent in 2005-06.
Table 4.13
Productivity per Agent Sum Assured
Sum Assured per Agent
Growth (in %)
(Rs. in lakhs)
Year
ALL
INDIA
2001-02
21.03
15.07
25.88
2002-03
23.99
18.31
19.89
14.07
21.50
(-)23.13
2003-04
27.74
20.46
19.80
15.63
11.74
(-)0.46
2004-05
22.71
20.04
18.29
(-)18.13
(-)2.05
(-)7.61
2005-06
32.20
33.79
28.73
41.79
68.61
57.00
2006-07
27.98
26.97
26.35
(-)13.11
(-) 20.18
CAGR 5.88
12.34
Source: Compiled from Divisional Office & Annual Reports of LIC.
(-) 8.28
0.36
The decline in sum assured of new business per agent in both the
districts in the year 2004-05 was mainly because of the impact of the entry
of private life insurers as new players like Bajaj Allianz, ICICI Prudential, etc.
started making their presence felt in the districts in the later part of 2004.
Table 4.14
Analysis of Variance of Sum Assured of Products Marketed per
Agent
District
Mean
S.D.
Kannur
25.94
4.12
Kasargod
22.44
6.79
Total
24.19
5.66
p value
Significance
1.166555
0.30547
Not
significant
145
linked with the premium they collect as they are paid commission on the
basis of premium collected in a particular year. The first premium income
collected is used to assess the growth in business of insurance companies.
The productivity of agents in terms of FPI is calculated by dividing first
premium collected in a particular year by the number of agents in that year.
Year
Table 4.15
First Premium Income per Agent
Premium income per Agent (in
Growth (in %)
Rs.)
KANNUR KASARGOD ALL INDIA KANNUR KASARGOD ALL INDIA
2001-02
72,492
55,046
2,15,344
2002-03
89,456
82,465
1,38,805
23.40
49.81
2003-04
81,089
87,920
6.61
(-)9.78
2004-05
92,077
1,04,917
1,14,705
13.55
19.33
(-)8.41
2005-06 1,20,871
1,49,832
1,53,722
31.27
42.81
34.02
2006-07
2,23,413
4,03,794
109.76
49.11
2,53,549
CAGR 28.46
32.34
Source: Compiled from Divisional Office & Annual Reports of LIC.
(-)35.54
162.68
13.40
146
It is evident from Table 4.15 that performance of agents in the
branches in both the districts has been improving year by year except a fall
in 2003-04 in Kannur district. Average premium income per agent in the
branches in Kannur district increased from Rs. 72,492 in 2001-02 to Rs.
2,53,549 in 2006-07 at a growth rate of 249.76 percent, whereas it
increased from Rs. 55,046 to Rs. 2,23,413 at a growth rate of 305.87
percent in the case of agents in Kasargod district branches during the same
period.
2006-07 and a low of (-) 9.35 percent in 2003-04 in the case of agents in
Kannur district branches, whereas it fluctuated between a high of 49.81
percent in 2002-03 and a low of 6.61 percent in 2003-04 in the case of
agents in Kasargod district branches. The average productivity of agents in
terms of premium income during the period under study was Rs. 1.17 lakhs
in Kasargod and Rs. 1.18 lakhs in Kannur, which were less than the all India
average of Rs. 1.91 lakhs. The CAGR of first premium income reveals that
growth in productivity per agent in Kasargod district branches was better
than their counterparts in Kannur district branches and all India level during
the study period.
Table 4.16
Analysis of Variance of First Premium Income per Agent
District
Mean
SD
Kannur
1,18,256
68,266.4
5
Kasarago
d
1,17,265
60,702.3
1
Total
1,17,761
61,591.2
8
p value
0.000705
0.97934
1
Significanc
e
Not
Significant
147
Analysis of variance in Table 4.16 reveals that the difference in mean
premium income per agent, between Kannur and Kasargod district is not
significant at 0.05 percent level.
The productivity analysis on the whole reveals that it increased
heavily in 2005-06 in both the districts and at all India level in terms of
parameters like number of policies, sum assured and FPI, as an aggressive
marketing campaign was followed for LICs golden jubilee product Bima
Gold and the Corporation emphasized much for marketing Unit Linked
policies from 2005-06 onwards.
The new
148
Total Premium Income collected is one of the main indicators of the
performance of insurance business. The total premium income relates to
the first year premium income which includes Individual Single Premium,
Individual Non-Single Premium, Group Single premium and Group NonSingle premium. In the year 2006-07 there were 16 players in the market;
one in the public sector (LIC) and 15 in the private sector.
The total premium income of LIC and the private players during the
period from 2001-02 to 2006-07 is displayed in Table 4.17.
It can be
visualized from Table 4.17 that the first year premium income of LIC which
was Rs.19,58,877 lakh in 2001-02, decreased by (-) 18.44 percent in 200203.
Even though there was set back in 2002-03, LIC improved its
performance much better in the later period. The growth in total premium
income was impressive at a rate of 118.11 percent in 2006-07.
Table 4.17
Total Premium Income of LIC and Private Players (Rs. in lakhs)
Insurer
LIC
Year
2001-02 2002-03
2003-04
2004-05
2005-06
2006-07
Private
Insurer
27,253
Industry
Total
(1.93)
(22.64)
(28.40)
(118.11)
95,813
2,42,547
(251.57)
(153.15)
(125.00)
(87.87)
(89.92)
(10.48)
(35.91)
(41.17)
(110.06)
149
Over a period of six years from 2001-02 to 2006-07, the total premium
income of all private players increased at an impressive growth rate of
7,145 percent, whereas the premium income of LIC has grown at a rate of
286 percent during the same period. The CAGR of premium income was
134.85 percent in the case of private players and 23.35 percent in the case
of LIC over a period of six years from 2001-02 to 2006-07. It is to be noted
that the CAGR of total premium income of LIC was less than the industry
average of 30.58 percent during the six year period under study.
Table 4.18
Market Share of Life Insurers in Total Premium Income
Name of
insurer
LIC
98.68
94.34
87.05
78.63
71.43
72.47
Private
Players
1.32
5.66
12.95
21.37
28.57
27.53
Total
100.00
100.00
100.00
100.00
100.00
100.00
150
3.82 crore policies with a market share of 72.47 percent.
Even though
there was very much increase in the premium income of private players in
2006-07, its market share has declined by 1.04 percent from the previous
year. Figure 4.12 shows the market share of life insurers in total premium
income for the period from 2001-02 to 2006-07.
Figure 4.12
Market Share of Life Insurers in Total Premium Income (in Percentage)
100
90
80
Percentage
70
60
Private Total
50
LIC
40
30
20
10
0
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Year
151
Table 4.19
New Business of Life Insurers (Number of Products Sold)
Year
Name of
Insurer
2002-03
2003-04
2004-05 2005-06
2006-07
LIC
Private
Players
8,36,621
Industry
Total
16,58,846
(98.28)
23,13,305
(39.45)
38,71,410
(67.35)
79,22,274
(104.64)
The
growth of LIC in number of products marketed was less than the industry
average growth throughout the period under study.
Table 4.20
Market Share of Life Insurers in number of Policies
Name of Insurer
2003-04
2004-05
2005-06
2006-07
LIC
96.70
94.20
91.21
89.08
82.83
Private players
3.30
5.80
8.79
10.92
17.17
Total
100.00
100.00
100.00
100.00
100.00
152
Figure 4.13
Market Share of Life Insurers in Number of Policies (in percentage)
100
90
80
Percentage
70
60
Private Total
50
LIC
40
30
20
10
0
2002-03
2003-04
2004-05
2005-06
2006-07
Year
Table 4.20 depicts the market share and Figure 4.13 depicts the
growth in market share in number of products marketed by LIC and private
players during the period from 2002-03 to 2006-07. It is evident from Table
4.20 that the market share of LIC in terms of number of policies has been
decreasing year after year with the entry of private players. The share of
LIC, which was 96.70 per cent in the year 2002-03 decreased to 82.83
percent in 2006-07.
market share from 3.30 per cent in 2002-03 to 17.17 per cent in 2006-07.
153
CONCLUSION
From the above analysis it can be concluded that the LIC, during the
last 52 years of its existence has undergone several trials and tribulations,
faced ups and downs in business growth but managed to grow and
metamorphose into a giant in the industry. At the same time, there has
been a tremendous growth in the life insurance business in India after the
entry of private players. The growth in terms of number of products, sum
assured of products and premium income in Kannur and Kasargod districts
have been found decreasing from 2003-04 onwards.
The growth in
productivity of agents in both the districts was not steady during the period
under study. At the same time, agents in the branches in Kasargod district
showed a better productivity than their counterparts in Kannur and all India
Level. The market share of Life Insurance Corporation of India has been
showing a constant fall after the entry of private players. The performance
of LIC has been affected badly in terms of premium income and number of
policies, after privatization of the insurance sector.
The next chapter analysis views of the policyholders.
154
References:
1.
2.
3.
4.
5.
Kenneth Black, Jr. and Harold, D. Skipper, Jr., Life and Health
Insurance, 13th ed., Pearson Education, Singapore, pp. 600-632.
6.
7.
8.
9.
Ibid.
12.
13.
14.
http:/www.etstrategicmarketing.com/Smjan-feb
04/artl.html
accessed on 19/5/2007.
15.
16.
17.
155
18.
19.
Ibid.
20.
21.
22.
23.
24.
25.
Ibid.
27.
28.
29.
30.
Rajeev Ahuja,
Policy Choices,
Economic and Political Weekly, Vol. XXXVIII, No. 48, Nov. Dec. 2003,
pp. 5034-5036.
31.
32.