Organisational Behaviour

Organisational Structure of LIC

Submitted to: Submitted by:

Mr. Jacob D. Vayakkil Vivek Chandra Gautam

Prof, IIM Calcutta EPMI-92

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 MISSION

Explore and enhance the quality of life of people through

financial security by providing products and services of
aspired attributes with competitive returns, and by
rendering resources for economic development."

VISION

"A trans-nationally competitive financial conglomerate

of significance to societies and Pride of India."

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 About LIC

Life Insurance Corporation of India is the largest life insurance company in

India. It is fully owned by government of India. LIC happens to be the biggest
investor in the country. LIC has assets worth US$17O Billion.

Headquartered in Mumbai, which is considered the financial capital of India,

the Life Insurance Corporation of India currently has 8 zonal Offices and 105
divisional offices located in different parts of India, at least 2048 branches
located in different cities and towns of India along with satellite Offices
attached to about some 50 Branches, and has a network of around 1.2 million
agents for soliciting life insurance business from the public.

Evolution of LIC: Timeline

1818: Oriental Life Insurance Company, the first life insurance company on
Indian soil started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance
company started its business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with
the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by
the central government and nationalised. LIC formed by an Act of Parliament,
viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the
Government of India.

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 LIC & Subsidiaries

If we look at the LIC Structure from the top, it is made up of parent company
LIC India and its following 5 subsidiaries:

1. LIC International Operations

2. LIC Housing Finance Ltd
3. LIC Care Homes Ltd
4. LIC Mutual Fund
5. LIC Pension Fund

While LIC India (Core) has a tall hierarchy, where level of hierarchy is as high as
13 others have relatively flat hierarchy with just 4-7 levels.

If we look at the structure at this level, it definitely looks likes

a Multi-divisional Structure, with each sub units performing
almost different work.

Our course of discussion regarding structure would be limited

to the LIC core business, limited in india.

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 LIC: Insurance Segment (Operational Structure)

Central Head Office

Zonal Offices (8)

Divisional Offices (105)

Branch Offices (2048)

Central Office: Mumbai

Zonal Offices: Bhopal, Chennai, Hyderabad, Kanpur, Kolkata, Mumbai,

New Delhi, Patna

Divisonal Offices: 105 Divisional Offices.

Branches: 2048, its present in almost every Notified Region (as per
Municipal Regulation Act of India)

Total Employee: 1.12 Lakh

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 LIC (Organisational Structure)
If we look at the size of the organisation, which employs 1.12
Lakh employee, with 2048 branches we could clearly predict
that the organisation would be a tall-hierarchy organisation
with functional-cum-divisional structure in place. LIC almost
has its structure, on the predictable note.

Details of Structure
Owner/Share Holders: Government of India is the complete
owner of LIC.

Chairman:

Mr. T.S Vijayan is the chairperson of LIC. He is also the Non

Executive Chairman of LIC Internationals, LIC Housing Finance,
LIC Mutual Fund and LIC Pension Fund.

Managing Directors:

Mr. T.S Vijayan

Mr. D.K Mehrotra

Mr. Thomas Mathew

Mr. A Dasgupta

While Chairman Mr. T.S Vijayan works as a CEO, but he also

looks after the major IT initiative of LIC. Other Managing
Directors heads the most important functions of the
organisation. While D.K Mehrotra heads Marketing, Mr. Mathew
looks after Investment and Mr. A Dasgupta looks after
Engineering and remaining important areas.

Actuary: Mr T. Bhargava is the appointed actuary and reports

to Mr. D.K Mehrotra (Marketing) & Mr. Thomas Mathew(Invst.)

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Executive Directors: There are 18 executive directors each
looking after a sub field. Every sub field could be classified as a
part of top three function at the Managing Director level. The
sub fields includes Marketing, IT, CRM, Micro Insurance,
Investment Monitoring & Accounting, Investment Operations,
F&A, Marketing: Bancassurance, HRD etc.

Chief: There are 15 chief of the fields consisting same as

Executive Directors. They report to executive directors.

Secretary: There are 50 secretaries reporting to the Chiefs.

Many important verticals have more than one secretary for
faster work progress. Wherever there are more than 1
secretary for the same vertical, different zones reports to
different secretaries.

Zonal Managers: There are 8 zonal managers heading each of

the eight zonal offices.

Regional Managers: There are 15 Regional Managers in each

zone heading zonal functions like Marketing, IT, HRD,
Investment etc. Altogether the company has 120 regional
managers.

Divisional Managers: There are 105 divisional managers, who

heads the divisions and reports to regional managers of their
zone (all of them).

Sales Mangers, Branch Manager, Development Officer and the

Agents are the bottom level of the organisation.

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 Organisational Structure (Flow Chart)
Chairman

MD(Markt) MD(Invst) MD(HR)

Managing Director

ED ED ED(Inst) ED

Executive Directors (18)

Chief (15)

Secretary(50)

Zonal Manager(8)

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 Zonal Manager (Individual Zone)

Regional Manager (15 per zone)

Divisional Manager (10-12 per zone)

Sales Managers( 4-5 per division)

Branch Manager (around 20-25 per division)

Development Officer (Around 50 per division-no cap)

Agents (not on pay-roll)

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 Class-Room Learning Reflection

The Organisational Structure of LIC is a Mechanistic

Structure where rule book and norms decides most of the
action.

Task Force: Task Forces and Special Purpose Committee (SPC) is a

regular phenomenon in LIC. While most of the SPC are made to inquire
for things and events, there is larger purpose Task Force formation too.
While LIC was expanding in International Location, each time a Task
Force was made. While Chairman and the Managing Director were the
persons who had direct involvement and made strategy, but each time it
was implemented by a team which comprised of members from different
functions. LIC Bahrain office building team was looked after by Mr.
Mehrotra (currently he is Managing Director)

(*information as Shared by Mr. B. Pradhan, Divisional Manager,

Bhagalpur)

Vertical and Horizontal Differentiation

LIC due to its sheer size is high on Vertical Differentiation and the
Horizontal Differentiation.

There are as 3 major functional differentiations (horizontal) at the top,

which gets further sub-divided to as many as 18 sub functions. At the
same time there as as many as 12 hierarchical level in term of roles and
authority (vertical).

Strict Rules and Norms:

 LIC follows the set rules path, where every decision is cross checked
by the higher authority.

 Integration is not much of an issue in LIC as almost every action

is limited by rules, SOPs and norms.

 Helps in establishing co-ordination even in such a high vertical and

horizontal differentiation

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  The Performance measurement is done by the sales generated, and
only sales team get bonus.

Centralization/ Decentralization:

LIC is highly centralized, though it gives some limited decision making

authority to the Zonal/Regional Level Managers. It includes special case
approval for insurance offer acceptance, deciding on the local marketing
strategy, declaration of holiday under special circumstances (thrice a
year) and few others.

(*information shared by B. Pradhan, Divisional Manager, Bhagalpur)

As whole of the discussion above suggest, the organisation is high on

Standardization, with almost nil Mutual Adjustment.

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 Analysis as per Class Room Learning

Tall/Flat: The organisation has got a tall hierarchy (though its

international subsidiary has got a very flat structure).

Even being the tall organisation LIC has overcome the

communication gap issue through its technological
advancements.

All the 105 divisional offices of LIC is connected by its Wide

Area Network, which has also helped them to bring down the
policy approval time from 10-15 days to 3-4 days (realistic, not
the promised time).

Organisational Structure and Employee Number:

The Managerial Structure of LIC is diamond shaped, where the

managers narrow down while getting at top or bottom. It was a
surprise as the expected format was the pyramid structure.

On enquiring regarding the same, the information was revealed

that till mid 90’s it use to be pyramid structure. But the
increase in business and requirement of creation of function
sub-heads lead to change in the shape of the managerial
structure.

 Vertical Level has remained same since 15 years, though

the horizontal differentiation at many levels increased.
 So increase in the employee has not actually resulted in
increase of the vertical level, assuring that at higher level
of employees the change in the vertical level is not
required too often.

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Bureaucracy

With strict adherence to the rules and norms of the

organisation, LIC is high on bureaucracy.

The hierarchy is followed with every sub-ordinate reporting to

one higher authority.

Apart from the Managing Directors and Chairman selection,

every other appointment is through the set norms and
regulation. MD and Chairman’s selection procedure is in hand
of Government of India. Promotions are strictly on seniority,
and at times fixed promotion is there with minimum number of
years in tenure.

 The disadvantage of bureaucracy is that, the reclaim or

any complain issues take more time as compared to other
private insurance company.

Structure:

The structure of LIC, is a mix of functional and geographical

structure. While at the top differentiation is more on the cards,
while it traces down it adds the geographical end. Moreover it
also has a central team as in Multi-dimensional structure. The
Central Team is in form of in house Protocol Officer and
Vigilance officer.

So while we study about the individual structures, the real life

organisation even works with the amalgamated structure.

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Changes

Interestingly, change in the LIC is at times resisted even at the

higher level. LIC was reluctant to go from the traditional
method to the electronic method, and the resistance was even
at the higher levels and middle management level. Though it
took off late but finally in a bureaucratic organisation where the
employee has to stick to many policies, after a small level of
agitation the Electronic change was whole heartedly accepted
and now even the lower level employee are happy with the fact
that they are able to serve the client in much faster pace, as
compared to the traditional days.

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 Conclusion
LIC happens to be almost perfect bureaucratic
organisation, with the strict rules, SOP and norms.
Moreover the organisation adheres to smooth run even
with high differentiation just because the integration
provided by the bureaucratic norms and rules.

The exercise was a real eye opener and gave a first-

hand information regarding the organisational structure
of big organisation which could be at times different
from all the theory studied in the text.

No organisation can have everything in place, its the

managers who creates the mirage.

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 Bibliography

1. Mr. Jacob D. Vayakkil, Prof IIM Calcutta

2. B. Pradhan, Divisional Officer, Bhagalpur
3. Raman Chauhan, Development Officer
4. www.licindia.com
5. http://en.wikipedia.org/wiki/Life_Insurance_Cor
poration_of_India
6. Information God ‘aka’ www.google.com

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