INNOVATIVE MARKETING OF LIFE INSURANCE

CORPORATION OF INDIA IN THE GLOBAL

MARKET
(1) DR. PARAG KR. DEKA
Associate Professor & Head, Department of Commerce, Nagaland University,
Kohima
(2) MR. SANT KR. GUPTA
Lecturer in Commerce, S.D.Jain Girls’ College, Dimapur (Nagaland)

Abstract

Globalisation has initiated far-reaching changes in economies across the

world. India is no exception. There was a time when Indian corporate giant
the Life Insurance Corporation of India (LICI) had a virtual monopoly in
insurance and there was no need for them to be customer friendly. Once the
Indian markets were opened up, private players from India and abroad
entered the Indian life insurance market and the whole complexion of the
game has changed. Liberalization and globalisation on the financial and
insurance sector has allowed the participation of foreign and private player
to enter the life insurance markets with their Indian partners. Most of the
foreign insurers have joined within the local market. India offers immense
possibilities to foreign insurers since it is the world’s most populous country
over a billion people. The customers have now more option to choose from
different insurance products & services. So, in order to capture the life
insurance market the insurance companies have to focus on modern
marketing approach to retain their existing and attract new customers. At
this critical juncture innovative promotional measure of LICI is the need of
hour while marketing the services. A new and innovative strategy will be
best fit to improve the level of existing performance of LICI in the
competitive market. It is with this background that the present research

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paper has been conceived and it takes into account the ground realities that
exist today for LICI and what marketing strategies it is adopting to cope up
with competition at national and international levels.
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INNOVATIVE MARKETING OF LIFE INSURANCE
CORPORATION OF INDIA IN THE GLOBAL MARKET

INTRODUCTION:

YOGAKSHEMA VAHAMYAHAM, the famous words form lord Krishna’s discourses at

Kurukshshetra, is the motto LICI has convincingly used all these years in its monopoly
avatar as the sole life insurer. Your welfare is our responsibility is what LICI proclaims
through its motto. Ever since the life insurance industry was nationalized in 1956 and the
life insurance corporation (LICI) born on September 1, 1956, the monopoly grew in size
and stature with every passing decade. From 57 hundred thousand policies in operation in
1957 to 2,57,823 hundred thousand by the end of year 2008-09, the LICI has come a long
way. The monopoly status of LICI is being threatened. The insurance giant is now a
player rather than the player in the life segment as was the case prior to nationlisation in
1956. LICI now has to worry about its won ‘yogakshema’. To borrow the motto from
their competitor AVIVA they need to think about exercising ‘Kal Par Control’ as they are
slowly losing market share to other entrants.

The existing life insurance marketing scenario has changed with emergence of
globalisation. With the whole hearted support to economic reforms, the marketing
scenario of insurance sector has become of Government Company in competition with
private sector and partnership by government. Today, life insurance business is operating
within a complex competitive environment, while demands specialization, and
sophistication in marketing efforts. Towards this end, ordinary branch of the insurance
companies is involved in carrying out the marketing activities. Although selling medium
of insurance companies’ has been predominantly that of corporate agents and brokers, of
late, there has been a noticeable extension of the medium to encompass alternative
marketing Organisation thus pushing further the movement of insurance companies
towards the formation of financial supermarkets.

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In this critical juncture with the maturing of world trade Organisation and carrying
forward the second generation reforms as it is named in India, LICI have to re look into
its marketing strategies. In view of the above, an attempt has been made to study the
innovative marketing of LICI in the global competition.

OBJECTIVES OF THE STUDY:

Marketing system is the system that integrated all other system in an organization. The
information and processing of all other system ultimately contribute to the
accomplishment of the goals of the marketing system carried out to achieve its goals
maximum profit by increasing consumer’s satisfaction and choice with quality products
and services at a reasonable price. The proposed topic is targeted to examine the
innovative promotional measures of marketing of LICI with a view to advocate the
suggestions to meet the globalization challenges. The specific objectives of the study are:
• To review the changing scenario of life insurance market in the competitive
globalisation challenges.
• To highlight the challenges of LICI in the competitive market.
• To examine the short coming in the marketing strategies of LICI.
• To advocate the suggestion to improve the performance of LICI in the global
market.

METHODOLOGY:

The study is completely based on empirical approach. In order to achieve the objectives,
data base is both secondary as well as primary. The secondary data are collected from
various periodicals and official gazette published by LICI. The publication of insurance
times and other life insurance journal are considered. The primary data are collected by
personnel interviewing of various corporate agents and officials of LICI locally
accessible. Data so collected are analyzed and interpreted theoretically to draw the
inferences.

CHANGING SCENARIO OF LIFE INSURANCE MARKET:

As things stand today LICI is still on strong footing vis-à-vis its competitors. However,
to retain its market leader status the LICI needs to acquire competitiveness. With new

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contenders entering the fray there is need to act more market savvy. Rather than getting
bogged down by competition the LICI needs to see the challenge as an opportunity.
Insurance in India was largely misconstrued as an investment or a tax saving device
rather than a security hedge. In fact, insurance agents were promoting policies on life as
instruments of returns and tax saving. Insurance consciousness as such was largely
missing from the market. The new entrants with their aggressive penetration strategies
are at least contributing to the cause of LICI by creating insurance consciousness in the
minds of a wide cross section of consumer. Privileged by its monopoly status LICI did
not bother much about creating an insurance consciousness, as its objective was to insure
any how that was happening. This complacency now has to go and LICI must opt for
marketing insurance as insurance. Further more, India is utterly underinsured, not only in
comparison to other countries but also in relation to its own needs, the scenario is that
only around 20 per cent of the population has any insurance cover worth its name.
Moreover, such a cover meets only 25 percent of their needed and affordable insurance
cover.

While nationalized insurance companies have done a commendable job in extending the
volume of the business, opening up insurance sector to private players was a necessity in
the context of globalization of financial sector. If traditional infrastructural and
semipublic goods industries such as banking, airlines, telecom, power etc., have
significant private sector presence, continuing a state of monopoly in provision of
insurance was indefensible and therefore, the globalization of insurance has been done.
Its impact has to be seen in the form of creating various opportunities and challenges.

The monopolistic character of the sector with the LICI as the sole player has changed into
a vibrant multiplayer competitive industry. Some more companies have announced their
intentions to join the party and this will increase the existing number of 22 players. Since
the advent of the private players in the market the industry has seen new and innovative
steps taken by the players in the sector. The new players have improved the service
quality of the insurance. As a result LICI down the years have seen the declining in its
career. The market share was distributed among the private players. Though LICI still
holds 70.92% (up to 31st march 2009 by IRDA websites) of the insurance sectors the
upcoming nature of these private players are enough to give more competition to LICI in

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the near future. LICI market share has decreased from 100 %( 1999-2000) to 70.92. %
(2008-09).

The following table-1 holds the market share of the life insurance industry.

TABLE – 1 Market share of Life Insurers (%)

Year LICI Private Sector

1999-00 100 0

2000-01 99.98 0.02

2001-02 99.46 0.54

2002-03 97.99 2.01

2003-04 95.29 4.71

2004-05 90.67 9.33

2005-06 85.75 14.25

2006-07 81.90 18.10

2007-08 74.39 25.61

2008-09 70.92 29.08

Source: - IRDA various issues

CHART –A MARKET SHARE OF LIFE INSURER

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 120

100

80
Percentage

60

40

20
LICI

0 PVT
1999-00 2001-02 2003-04 2005-06 2007-08
2000-01 2002-03 2004-05 2006-07 2008-09

YEAR

By end March 2009, there were forty-four insurance companies operating in India; of
which twenty-two were in the life insurance business and the remaining twenty-one were
in general insurance business and one national re-insurer. Of these forty-four companies,
8 are in the public sector (two specialised insurers, namely ECGC and AIC, one in life
insurance, four in general insurance and one re-insurer). The remaining thirty-six are
private sector companies.

TABLE – 2

NUMBER OF REGISTERED INSURERS IN INDIA

Type of Public
business Sector Private Sector Total
Life Insurance 1 21 22
General
Insurance 6* 15** 21
Re-insurance 1 0 01
Total 8 36 44

* Includes specialized insurance companies - ECGC and

AIC
** Includes two Standalone Health Insurance Companies –
Star Health &
Allied Insurance Co. and Apollo DKV Health Insurance Co.
source: IRDA

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The total industry had a total premium including group business (addition of regular
premium, single premium and renewal premium) of Rs. 22179.26 crore during 2008-09
as against a total premium of Rs. 201351.4 crore in the previous financial year 2007-08.

Private life insurance companies have grown by 25.10 % in total premium income,
including group business, by registering a total premium of Rs. 64503.22 crore up to
March 31, 2009, as against a total premium of Rs. 51561.42 crore in 2007-08. LICI
registered a growth of 5.01% for 2008-09 with a premium of Rs. 157288.04 crore as
against a total premium of Rs. 149789.99 crore for 2007-08. (See Table-3)

TABLE – 3 TOTAL LIFE INSURANCE PREMIUM (Rs. Crore)

INSURER 2000-01 2002-03 2004-05 2005-06 2006-07 2007-08 2008-09

127822.8 149789.9 157288.04

LICI 34892.02 54628.49 75127.29 90792.22 4 9

— (9.65) (18.25) (20.85) (40.79) (17.19) (5.01)

ING VYSYA — 21.16 338.86 425.38 707.20 1158.87 1442.28

HDFC STD
LIFE 0.002 148.83 686.63 1569.91 2855.87 4858.56 5564.69

BSLI 0.32 143.92 915.47 1259.68 1776.71 3272.19 4577.59

ICICI PRU 5.97 417.62 2363.82 4261.05 7912.99 13561.06 15356.22

KOTAK LIFE — 40.32 466.16 621.85 971.51 1691.14 2343.19

TATA AIG* — 81.21 497.04 880.19 1367.18 2046.35 2747.50

SBI LIFE — 72.39 601.18 1075.32 2928.49 5622.14 7212.10

BAJAJ
ALLIANZ — 69.17 1001.68 3133.58 4302.74 9725.31 10624.52

MNYL 0.16 96.59 413.43 788.13 1500.28 2714.60 3857.26

MET LIFE — 7.91 81.53 205.99 492.71 1159.54 1996.64

RELIANCE
LIFE — 6.47 106.55 224.21 1004.66 3225.44 4932.54

AVIVA — 13.47 253.42 600.27 1147.23 1891.88 1992.87

SAHARA — — 1.74 27.66 51.00 143.49 206.47

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SHRIRAM
LIFE — — — 10.33 181.17 358.05 436.17

BHARTI AXA — — — — 7.78 118.41 360.41

FUTURE
GENERALI — — — — — 2.49 152.60

IDBI FORTIS — — — — — 11.9049 318.97

CANARA
HSBC — — — — — — 296.41
DLF
PRAMERICA — — — — — — 3.37
AEGON
RELIGARE — — — — — — 31.21
STAR
UNION DAI- 50.19
ICHI — — — — — —
PRIVATE
SECTOR 6.45 1119.06 7727.51 15083.54 28253.00 51561.42 64503.22
(310.59) (147.65) (95.19) (87.08) (82.50) (25.10)

Total 34898.47 55747.55 82854.8 105875.76 156075.8 201351.4 221791.26

4 1

(11.28) (24.31) (27.78) (47.38) (29.01) (10.15)

Source: - Annual report 2005-06, 2007-08, 2008-09. (IRDA)

Note:
1) *Figures revised for the year 2002-03 and include the Group business.
2) Figures in the bracket represent the growth over the previous year in
percent.
3) — represents business not started.
4) 1 Crore = 10 Million

During the first quarter of the current financial year of 2009-10 life insurers underwrote a
premium of Rs.14456.34 crore, marginally higher than Rs.14320.20 crore in the
comparable period of last year. LIC accounted forRs.9028.68 crore and the private
insurers accounted for Rs.5427.66 crore. While the premium underwritten by LIC
increased by 19.99 per cent, premium of the private insurers declined by 20.13 per cent
over the corresponding period of the previous year. The number of policies written by life
insurers grew by 12.06 per cent. While the number of policies written by LIC increased
by 22.59 per cent, there has been a decline of 6.57 per cent in the case of private insurers.
Of the total premium underwritten, individual premium accounted for Rs.10308.40 crore
and the remaining Rs.4147.93 crore came from the group business. In respect of LIC,
individual business was Rs.5963.64 crore and group business was Rs.3065.04 crore. The
corresponding figures for private insurers were Rs.4344.75 crore and Rs.1082.90 crore

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respectively. The numbers of lives covered by life insurers under the group scheme were
89.90 lakh recording a growth of 60.16 per cent over the previous period. Of the total
lives covered under the group scheme, LIC accounted for 33.18 lakh and private insurers
56.72 lakh. The life insurers covered 37.86 lakh lives in the social sector with a premium
of Rs.34.13 crore. In the rural sector, the insurers underwrote 21.89 lakh policies with a
premium of Rs.1455.71 crore. (Source: IRDA website, IRDA Annual Reports)

CHALLENGES OF LICI IN THE COMPETITIVE MARKET:

The legacy of economic reforms is being carried forward to the new millennium but with
human face. As a result the challenges before LICI are imperative. The emerging
challenges faced by LICI are:
• The opening up of the insurance sector for foreign and private participation is
resulting contraction of the target market of LICI;
• LICI is gradually loosing the status of being a monopoly undertaking and thereby,
profitability will fall subsequently;
• The scope of borderless business demands specialized marketing efforts to face
the developed markets abroad. Also the competition from foreign insurance
companies will be very tough.
• The departure from socialist pattern of society toward market economy expects
the LICI to adopt itself to changing economic scenario and revise its marketing
approaches.
• The changing business environment market by deregulation and decontrol require
trained and specialized corporate agents for increasing new business.
• Consumers have become more aware today because of quick dissemination
information through electronic media including internet. This has trusted pressure on
the insurance companies to introduce anew schemes with more economic benefit as
well as risk cover.
• The approach of marketing in the insurance sector has shifted from production
and selling orientation stage to that of marketing and social responsibilities stage.
• Trust and faith are essential for insurance business. In a competition market
building trust and faith in the minds of potential customers is a real challenge today.
Developing insurance consciousness amongst the community is essential in the global
market.

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SHORTCOMING IN THE MARKETING STRATEGIES OF LICI:

The challenges cited above need to be met adequately for the survival of LICI in the
years to come. We cannot be indifferent to these challenges placed before LICI. IN fact,
the empirical approach by LICI, it continued, will be a suicidal. So far, much has not
been done to tackle these challenges, although many reforms and amendment have taken
place in life insurance business. Still there exists lots of short coming or lapses in
marketing activities. The following important short coming or lapses that require to be
addressed properly:
• The schemes or services of LICI are target specific only certain section of people
belonging to higher income groups are the potential customers for LICI. Thus, the
coverage of LICI business is not mass based.
• So far selling of LICI products and services has been automatic to some extent
owing to monopoly nature of the business. With the opening up of insurance sector
for the private participation such selling will be difficult. Also the LICI is not yet
recognized to tap the potential market while rivalry started crippling in.
• Generally, life insurance policies are long term, which discourages many of the
prospective customers.
• Another limitation is the procedural difficulties and formalities with legal
implications for claim settlement in LICI business. This is one of the important
factors that may be serious problem ahead of LICI.
• In the years went by, the LICI failed to create awareness about the utility of life
insurance among common people. This is mainly due to lack of publicity and
advertisement.
• The high establishment cost including massive labour force is a barrier for LICI’s
today in the competitive market.

REMEDIAL MEASURES AND SUGGESTIONS:

LICI can no longer continue with its traditional marketing approach, which is obsolete
today. In the preceding eras, the limitations of LICI were not duly recognized, mainly
because of the growing business performance as it maintained a monopoly status. In the
backdrop of the liberalization and globalisation, marked by various challenges and
limitations, the following suggestions are note worthy:

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• Today’s insurance market is very competitive under such a market condition
quality and a reasonable price of products and services are prerequisite. LICI shall
have to re-look into these aspects. Quality of services is the prime consideration of
insurance business now.
• In addition to the schemes and policies already in the market, LICI shall have to
come up with new and innovative schemes with more economic benefits to the
policyholders. Also short term policies will be very effective to attract more buyers.
• Publicity and advertisement is the elements of marketing communication process.
These are indispensable pillars of market mix involving products, pricing, and
promotion as a par of their sales and marketing activity. In order to expand markets or
to maintain existing markets it is essential for LICI to make sufficient investments in
this head. Only then common people will be attracted towards life insurance.
• Under the present circumstances inter company a relationship within the industry
is of paramount importance. For this purpose merger and amalgamation of companies
may be encouraged. LICI shall also have to re-think of collaborating with Indian and
international players.
• Imparting knowledge is indispensable but without training it is not sufficient. The
employees and officers of LICI shall have to acquire practical training or on the job
study. Presently the employees of LICI have the knowledge about the subject but they
are lack in rigorous training which is compared to that of “knows swimming but
never swam”. Now it is the time for integrating knowledge and training for
maintaining or improving upon the existing level of performance.
• Given the brand equity, visibility, credibility and wide reach the LICI enjoys,
tapping unexplored markets will not be difficult. The vast and under explored rural
market is a case in point. Only LICI can tap the rural market effectively by using its
huge sales force. Further, with the declaration of the IRDA Act, 1999, the insurance
Act, 1938, the basic backbone of insurance, stands revised. Thus, according to
sections 32B and 32C of the IRDA Act it has been made obligatory for life and non-
life insurers to undertake a certain percentage of business in the rural market. This is
one area in which LICI can take a big lead over its competitors.
• The customer of today is having more to choose in terms of policy instruments as
new players have come up with innovative product line. Naturally, the policies issued
by LICI need to be seen in these light and suitable steps taken to customize the

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 products. Hitherto, when challengers were not there LICI could get a way with
whatever products it had to offer. The customer had no inkling as to what insurance
could offer by way of products. Obviously, he was satisfied with whatever he could
get. Entry of new players has changed all this. As the new players are coming up with
their innovative products the customers’ expectations are rising. Even though LICI is
the market leader, it still needs to change its product mix to suit customer needs.
• In an insurance contract the clauses must be simple and easy to understand. In
India, policyholders usually do not read the policy documents for the simple reason
that the way the clauses are framed therein they do not make sense to the average
reader. New players are introducing the free look in period. Whatever be the free part
of it, the policyholder is being made to go through the clauses or the policy conditions
and to this extent alone, it is a great achievement. In this regard LICI should think and
prove its leader’s position in the market.
• In a business like insurance where credibility and trust are essential ingredients
for success. One possible solution to this problem could be having in place a better
motivational system that takes care of both material and non material needs of the
agents who would propel them to look at the long term perspective rather than the
short term interests like an immediate high rate of commission.
• While some new products have been introduce in the market, information related
to them is being communicated completely there by putting the customer in a
quandary. When a new policy is being introduced in the market it sounds as if it is a
competitive product rather than a genuine useful product of customer. The LICI must
make sure that its products and their implication are properly understood by the
customers.

CONCLUSION:
The insurance industry in India has witnessed a sea change ever since it was opened up to
private players in 1999. The liberalization transformed the industry’s outlook towards the
huge Indian market. The sudden rise in the number of players has brought about
innovation in product development and distribution channels. The Indian customer thus
has a whole new range of insurance products to choose from, there is choice for every
societal segment.
The Life Insurance Corporation of India needs to welcome competition with open arms
and treat it’s as an opportunity rather than a threat. The ultimate objective of reforms is to

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increase insurance-density and insurance penetration levels by designing more tailor
made products for customers, both individuals and institutions. LICI now needs to use its
reach and visibility to penetrate deeper into the Indian market. The challenge for the LICI
is three fold creating the need where it is not there, changing the need into their want and
turning the want into demand which the6 must be able to satisfy. LICI needs to rebuild
trust with the public and to deliver sustainable, affordable and understandable products
and services.
Thus, to conclude, business is rediscovering growth, because operational excellence
would not only be the lone criterion for successful operator. Marketing mix will have to
be more competitive establishing creditability sounding earnestness, developing a
different momentum of business through client relationships, elevating performance
standards, not living by myths but a fundamental rethink of the total modus operandi and
basis of competing in the competitive global market.
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References:-
Books:-
1. Rajiv Jain’s, Insurance Law & Practice,Second Edition 2006,Vidhi Publication
(P) Ltd. New Delhi.
2. M.N.Mishra, Insurance Principles & Practice,S.Chand & Co. Ltd., New Delhi.
3. L.M.Bhole, Financial Institutions and Markets- fourth edition, The McGraw-Hill
Companies. New Delhi.
4. India 2007 & India 2008 Publications Division Ministry of information &
Broadcasting, Govt. of India.
5. P.N.Varshney & D.K. Mittal. Indian Financial System.Sultan Chand & Sons,
New Delhi.
6. Vasant Desai, the Indian Financial System. Himalaya Publishing House,Mumbai.
7. Dutta Ruddar & KPM Sundaram, Indian Economy, S Chand, New Delhi.
Journals & Periodicals:-
8. IRDA Journal Various Issues.
9. ICAI Journal Various Issues.
10. DGCCS’S Journal of Commerce, Vol –V No.1 2008, Diphu Govt. College
Committees Reports , Recommendations & others:-

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 11. Govt. of India, Report of the committee on reforms in the insurance sector
(Malhotra Committee)
12. LICI annual report various issues.
13. IRDA annual report various issues
Websites:-
14. www.irdaindia.org
15. www.lici.com
16. www.indiacore.com/insurance.html
17. www.bimaonline.com
18. www.indiainsuranceresearch.com
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