LIC Case Study

PCET’S
S. B. PATIL INSTITUTE OF MANAGEMENT, PUNE
CCE 01
Case Study of LIC
Marketing Management
SUB TEACHER
Mr. Rishikesh Kumar Sir
GROUP D
Name : Mayuri Lonare

Roll No: 2022327
Life Insurance Corporation of India (LIC)
Case Study
Introduction
The Life Insurance Corporation of India (LIC), a public sector enterprise, is the
largest insurance company in India, selling insurance products and related
services.In March 2001, LIC had a total asset base of Rs 1936.2 billion and a
total premium income of Rs 342.07 billion. By April 2002, the total sum assured
under 23.2 million policies stood at Rs 1925.7 billion. LIC had a variety of
insurance plans to cater to various categories of people and their diverse
needs.
The company offered life insurance and group insurance. It also provided social
security schemes and pension schemes. Each of its business products offered a
variety of different plans to suit different customers and situations. Investment
in LIC was considered by a majority of its customers to be reliable and
secure.Housing loans were granted through its subsidiary and LIC sold its
market savings and investment products through its mutual fund subsidiary,
LIC Mutual Fund Ltd. To serve its 140 million policyholders (2001 end), the
insurance giant had 1.25 lakh employees and 6.51 lakh agents across the
country.
The company, which was based in Mumbai, had seven zonal offices, 100
divisional offices, and 2,048 branch offices that spanned the country. LIC's
penetration in rural areas was very high; 18% of its total business came from
rural areas.
Since LIC enjoyed monopoly status for over four decades, it emerged as one of
the key public fundraisers in India. However, things began changing in the mid-
1990s, when the Government of India decided to privatize the insurance
sector. The Malhotra committee's (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 licences to many private
insurance companies (starting November 2000).
To sustain its growth in an intensely competitive environment, the company,

on the recommendations of Booze, Allen and Hamilton, started initiated
organizational changes and became more customer-focussed initiatives.The
company's attitude towards the changing insurance scenario was summarized
by its Managing Director, N C Sharma, "The element of competition will bring
out the best (in us)."
Overview
In the year 1870, Bombay Mutual Life Assurance society, the main Indian
protection organization, appeared.The following most essential Indian life
office was set up on May 5, 1874. It was called as the „this organization had an
approved capital of Rs. 10 lakhs, of which 1.50 lakh were bought in capitals.
Subsidiary Companies
In the late 1980s, LIC established a few subsidiaries with a view to expanding
its services. These were LIC Housing Finance Limited, LIC Mutual Fund, Life
Insurance Corporation (International) E.C. and LIC (Nepal).
LIC Housing Finance Limited:
LIC Housing Finance Limited (LICHFL) was started in June 1989, to provide long-
term finance for purchase/construction of houses/flats, particularly to
policyholders of LIC. During the 1990s, the subsidiary grew into a premium
housing finance company, disbursing over Rs 50 billion of loans. Its loan
delivery system was the largest in the country
Products and Pricing
Insurance may be described as a social device to reduce or eliminate risk of
loss to life and property. A large number of people form an association that
shares the risks attached to individuals. The risks, which can be insured against,
include fire, the perils of sea, death, accidents and burglary. Any risk
contingent upon these may be insured against at a premium commensurate
with the risk involved. Thus, insurance is the collective bearing of risk. The
insurance business is broadly divided into two broad categories across the
world - life insurance and general insurance.
Technology
In the late 1950s, LIC began using Unit Record Machines (electro mechanical
machines) to process data punched into cards. Computers were introduced for
the processing of data in 1964. By the 1980s, the Unit Record Machines were
phased out and computers based on microprocessors were introduced for
back-office computerisation. During the 1990s, the software and hardware
infrastructure at the company was standardized. There was a tremendous
increase in the use of technology by LIC during the late 1990s. The company
launched its website, www.licindia.com, in mid-1995, to offer policyholders
basic services such as modifying policies (change of address, change of
nominee) and querying the status of the policy.
Marketing
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 Indian, 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 focused on providing better customer service to the
policyholders
Distribution
LIC had a large network of 8 lakh agents for distributing its products. The
company had several marketing personnel designated as 'Development
Officers' in each branch. These development officers, in turn, employed and
trained a number of agents, and received incentives for the business generated
by these agents, in addition to their regular salaries. However, this network
was not very cost-effective as LIC had to pay bonuses and commissions twice -
to the agents as well as the development officers - for every new policy and
every subsequent renewal. Despite the efforts of the development officers, the
retention of agents had become difficult.
Customer Service
In order to be able to serve its customers better, LIC had an well-organized
grievance redressed system. The grievance redressal system consisted of
Grievance Redressal Officers, complaint cells, a claims review committee,
policyholders' councils, an advisory board, a consumers' affairs committee and
a citizens' charter.
Future Outlook
LIC planned to enter into more alliances with banks and with leading
educational institutes for training. It would also increase offshore activities and
set up an exclusive technology company for sourcing software. Other priorities
were the setting up of special cells and single-window facilitation centers for
high-end customers, rapid introduction of innovative policies, and a renewed
thrust on mass and group business. The corporation also decided to offer
value-added services to high-end customers, besides special services. At a later
stage, it planned to have separate dedicated branches for high-end
policyholders. The decision to have its own separate IT set-up was driven by
the requirement of software for the sprawling network of LIC's branches and
other offices.

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PCET’S

S. B. PATIL INSTITUTE OF MANAGEMENT, PUNE

Name : Mayuri Lonare

To sustain its growth in an intensely competitive environment, the company,

LIC Housing Finance Limited:

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