MARKETING STRATEGIES OF THE LIC

OF INDIA
INTRODUCTION
“Effective marketing strategies are vital for the survival
and growth of companies in the rapidly changing business
environment of the 21st century1 ”. “The success or failure
in today‟s competitive market is depending on the
marketing strategies that they could adopt with all
effectiveness2 ”, Life Insurance is no exception to this rule.
The problem is still more serious with the Life Insurance
sector as they have to promote strategies to sell more
products. The entry of foreign players brings enormous
pressure on the profitable, efficient and socially
responsible public Insurance companies of India. Private
players have now created vast opportunity for the specific
category of professionals and the demand for qualified,
skilled, expertise knowledge actuaries have suddenly
increased.
Foreign and private Insurance players are ready to capture
the market by providing the products and services at
cheaper rates and also offering unbundled innovative
products (Pension market, annuity market etc.,) with a
variety of benefits leading to cut throat competition in the
existing India Insurance organization. (LIC and GIC). It is
observed that 80 percent of LIC‟s business is processed by
1
20 percent of its ill- trained agent force, whereas the
foreign players, with the domestic partner‟s strong brand
value, can test the unconventional distribution channels
like brokers, the internet, the banking distribution system,
etc. It is also observed that the public sector insurances
concentrate on sale of policies without concentrating much
on the service needs of their policyholders. As a result
many of the individuals remain under insured
The LIC of India has to compete with foreign and private
players by adopting effective marketing strategies. The
term strategy is used in business to describe how an
organization is going to achieve its objectives and mission.
Marketing strategies provide concepts and processes for
gaining competitive advantages by delivering superior
customer value. A successful organization requires to
develop competitive marketing strategies. Marketing
strategy implies development of an action plan to achieve
the marketing objectives. Marketing strategies involve skill
and concerted effort on the part of the management to
evolve tools and techniques, which are understood and
accepted throughout the organization in furtherance of the
marketing cause. It has been observed that most profitable
businesses have well thought out and well executed
strategies. Whereas the least profitable businesses have no
explicit strategy, a poorly conceived strategy, or a strategy
that the organization cannot successfully execute.
2
According to Granroos, marketing strategy in the case of
services may consist of 1. Traditional External Marketing
2. Internal marketing 3. Interactive marketing. Traditional
external marketing consists of the usual four „Ps‟ viz.,
Products, Price, Place and Promotion of marketing mix.
Internal marketing implies that the service firm must
effectively train and motivate its customer friendly
employees as well as all the supporting service personnel
to work as a team to provide customer satisfaction.
Interactive marketing emphasizes that the perceived
services quality is highly dependent on the quality of buyer
seller interaction. It describes the skill of employees in
handling customer contact and covers delivery of the
product in a most satisfying manner. Design an initial
marketing strategy for introducing the product into the
market, the marketing strategy statement consists of three
parts: a) the first part describes the target market; the
planned product positioning; the sales, market shares; and
the profit goals for the first few years, b) the second part
outlines the product‟s planned price, distribution and
marketing budget for the first year and c) the third part
describes the planned long run sales, profit goals and
marketing mix strategy. Marketing strategy is the set of
controllable variables and their levels that the life
insurance companies use to influence the target market
companies that can influence the level of customer respons

3
 Executive Summary
Life insurance in its modern form came to India from
England in 1818 with the formation of Oriental Life
Insurance Company. The Government of India
nationalized the life insurance industry in January 1956 by
merging about 245 life insurance companies and forming
Life Insurance Corporation of India (LIC), which started
functioning from 01.09.1956. For years thereafter,
insurance remained a monopoly of the public sector. It was
only after seven years of deliberation and debate that R. N.
Malhotra Committee report of 1994 became the first
serious document calling for the re-opening up of the
insurance sector to private players. The sector was finally
opened up to private players in 2001.
The Insurance Regulatory and Development
Authority, an autonomous insurance regulator set up in
2000, has extensive powers to oversee the insurance
business and regulate in a manner that will safeguard the
interests of the insured. Insurance is a federal subject in
India. There are two legislations that govern the sector-
The Insurance Act-1938 and the IRDA Act1999. The
insurance sector in India has come a full circle from being
an open competitive market to nationalization and back to
a liberalized market again. The objectives of the study are
to compare cost

4
efficiency and financial performance of Life Insurance
Corporation of India and private sector life insurance
companies in India, to understand the concept and
mechanism of insurance and to predict the volume of new
business and total premium of life insurance sector in
India. The study is divided into six chapters. The first
chapter is introductory in nature and deals with history of
insurance, meaning and concept of insurance principles of
insurance, functions of insurance, importance of insurance,
types of life insurance policies, features of life insurance
contract and duties, power and functions of IRDA.
The second chapter deals with literature review.
Research Methodology is dealth with in the third chapter
which includes research statement, hypothesis, objectives
of the study, tools and methods of data analysis, scope and
limitations of the study. The fourth chapter describes
profile of twenty two private life insurance Companies and
Life insurance corporation of India. The fifth chapter deals
with data analysis. Linear trend, percentage, ANOVA
(one-way) and DEA method were used. The sixth chapter
gives the conclusion of the study and gives suggestions
based on findings. Both Life insurance density and
penetration have increased from 2000-01 to 2009-10.
The prediction of new business and total premium for
both private and public sector life insurance companies in
India for the year 2015 shows an upward trend. This
5
signifies that there is a lot of scope for life insurance sector
to develop in India. The financial performance of Life
Insurance Corporation of India is better than private life
insurance companies in India. The private life insurance
sector has nearly grabbed 30% of the market share in terms
of total premium income. LIC’s new business premium has
fallen from 99.23% in 2000-01 to 65.08% in 2009-10.
Unless Life Insurance Corporation of India is alive to the
emerging trends, its performance may decline further.
Hence, Life Insurance Corporation of India has to work
with renewed vigor and enthusiasm so as to retain its
market share.
The findings show a significant heterogeneity in the
cost efficiency scores from 2000-01 to 2009-10.It can be
seen that Life Insurance Corporation of India has
consistently secured a cost efficiency score of 1 in all the
years from 2000-01 to 2009-10 and scored the highest rank
for all the years under study. Thus Life Insurance
Corporation of India has consistently been a cost efficient
organization. While in the case of the private life insurance
companies, the cost efficiency score has been inconsistent
except for SBI Life insurance company which has secured
a cost efficiency score of 1 in seven years out of ten years.

6
 OBJECTIVES OF THE STUDY
The objectives of the study are as follows: 
To understand the concept and mechanism of insurance.
To compare and analyze the financial performance of
private sector life insurance companies and Life Insurance
Corporation of India.
To predict the volume of new business and total premium
of life insurance companies in India.
To compare the cost efficiency of life insurance
companies in India.

Nature of data and sources -

Collection of the data is essential part of research. The
nature of data which is collected and used for this research
is secondary in nature. The relevant and required data has
been collected from journals, dailies, annual reports,
magazines, literature and websites of selected companies
and through various search engines.
TOOLS and methods of data analysis
The present study involves calculation of different
ratios to evaluate the financial performance of life
insurance companies in India from 2000-01 to 2009-10. It
7
also compares the cost efficiency of all life insurance
companies in India during the same period. Prediction of
new business and total premium of the life insurance
companies has also been done. Various statistical measures
like percentage, mean, ANOVA, Data Envelopment
Analysis and Linear trend are used in this study.
Data Envelopment Analysis
Data Envelopment Analysis (DEA) is a non-
parametric linear programming tool generally used for
performance evaluation of economic units through the
construction of an economic frontier. It was originally
developed for performance measurement. The advantage of
DEA is that it requires very few prior assumptions on
input-output relationship.
The DEA method enables extension of the single
input-single output technical efficiency measure to the
multiple output-multiple input case. In its constant returns
to scale form, the DEA methodology was developed by
Charnes, Cooper and Rhodes (1978). Banker, Charnes and
Cooper (1984) extended the approach to the case of
variable returns to scale. The DEA approach constructs the
production frontier from piecewise linear stretches
resulting in a convex production possibility set. The
principal advantage of the DEA approach stems from the
fact that the assumption of a specific functional form of the
8
underlying technology is not necessary. This makes DEA
particularly useful when dealing with service 56 industries,
since we have very limited knowledge about the
underlying production technology in such cases. Instead of
using any functional form, DEA uses linear programming
approaches to envelope the observed data as tightly as
possible. It only requires that the production possibility set
is convex and the inputs and outputs are disposable.
The data for analysis is basically derived from financial
statements. They are not adjusted for inflation.

9
 PROFILE OF LIFE INSURANCE
COMPANIES IN INDIA
All private life insurance companies and public sector
company operating in India during 2000-01 to 2009-10
were taken for the study. Life Insurance Corporation which
is the only public sector life insurer and twenty two private
sector life insurers, most of them joint ventures between
Indian groups and global insurance giants, were taken for
the study.

PUBLIC SECTOR
Life Insurance Corporation of India
Life Insurance Corporation of India (LIC) is an
autonomous body authorized to run the life insurance
business in India with its Head Office at Mumbai. About
154 Indian insurance companies, 16 non-Indian companies
and 75 provident fund societies were operating in India at
the time of nationalization. Nationalization was
accomplished in two stages; initially the management of
the companies was taken over by means of an Ordinance,
and later, the ownership by means of a comprehensive bill.
The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the Life
Insurance Corporation of India was created on 1 st
10
September, 1956, with the objective of spreading life
insurance much more widely and in particular to the rural
areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a
reasonable cost.
Under Indian conditions there are only two broad
classifications of insurance companies: life and non-life
insurance. The life insurance activities are solely managed
by Life Insurance Corporation of India in the public sector.
The Life Insurance Corporation (LIC) was established
about 55 years ago with a view to provide an insurance
cover against various risks in life. A monolith then, the
corporation, enjoyed a monopoly status and became
synonymous with life insurance.
At the industry level, along with the Government and
the General Insurance Corporation, it has helped establish
the National Insurance Academy. It presently transacts
individual life insurance businesses, group insurance
businesses, social security schemes and pensions, grants
housing loans through its subsidiary, markets savings and
investment products through its mutual fund. It has a very
wide range of business strategy all over India and abroad.
LIC of India has been one of the pioneering organizations
in India who introduced the leverage of Information
Technology in servicing and in their business. 1964 saw
the introduction of computers in LIC of India. Unit Record
11
Machines introduced in late 1950‟s were phased out in
1980‟s and replaced by 73 Microprocessors based
computers in Branch and Divisional Offices for Back
Office Computerization. Standardization of Hardware and
Software commenced in 1990‟s. Standard Computer
Packages were developed and implemented for Ordinary
and Salary Savings Scheme (SSS) Policies. LIC of India
had 5 zonal offices, 33 divisional offices and 212 branch
offices, apart from its corporate office in the year 1956.
Since life insurance contracts are long term contracts and
during the currency of the policy it requires a variety of
services, a need was felt in the later years to expand the
operations and place a branch office at each district
headquarter. Re-organization of LIC of India took place
and large numbers of new branch offices were opened.
As a result of re-organisation servicing functions were
transferred to the branches, and branches were made
accounting units. It worked wonders with the performance
of the corporation. Today LIC of India functions with 3250
fully computerized branch offices, 100 divisional offices, 7
zonal offices and the corporate office. LIC‟s Wide Area
Network covers 100 divisional offices and connects all the
branches through a Metro Area Network.

12
 LIC of India has tied up with some Banks and Service
providers to offer on-line premium collection facility in
selected cities. LIC‟s ECS and ATM premium payment
facility is an addition to customer convenience. Apart from
on-line Kiosks and IVRS, Info Centres have been
commissioned at Mumbai, Ahmedabad, Bangalore,
Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
other cities. With a vision of providing easy access to its
policyholders, LIC of India has launched its Satellite
Sampark offices. The satellite offices are smaller, leaner
and closer to the customer.

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 OBJECTIVES OF LIFE INSURANCE
CORPORATION OF INDIA:

(i) “Spreading life insurance much more widely and in

particular to the rural areas and to the socially and
economically backward classes, with a view to 72 reach all
insurable persons in the country and provide them adequate
financial coverage against death at a reasonable cost,

(ii) Maximizing mobilization of people savings by making

insurance linked savings adequately attractive

(iii) Investing 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 and

(iv) Meeting the various life insurance needs of the

community that would arise in the changing social and
economic environment through its Family Schemes and
Group Insurance Schemes.

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 MARKETING STRATEGIES OF THE LIC
OF INDIA
Marketing strategy is the set of controllable variables and
their levels that the life insurance companies use to
influence the target market. It means any variable under the
control of the life insurance companies that can influence
the level of customer response in a marketing mix variable.
A seven factor classification has been given to support this
concept namely product, price, promotion and place (four
P‟s). The study takes into account three more „Ps‟ namely
people, process and physical evidence besides the
traditional 4 „Ps‟ as there is a vital component in the
marketing mix of life Insurance companies.

In the backdrop of the above concept this chapter attempts

to review the marketing strategies adopted by the LIC of
India based on seven „Ps‟ which are explained below.

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PRODUCT STRATEGY
A Company‟s primary objective is to develop products that
satisfy the customer‟s needs. The company‟s existence is
in trouble if it does not deliver need satisfying product /
service. The concept of product extends the applicability of
marketing principles to insurance marketing. “A product is
anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want
or need. It includes physical objects, services, persons,
places, organizations and ideas.”

Philip Kotler describes insurance products as unsought

(consumer) goods. “These are consumer goods that the
consumer does not know about or knows about but does
not normally think of buying.” In the service industry
(including insurance), products are generally intangible in
nature. So service differentiation plays a key role in the
successful marketing of services.

Without the quality of service being recognized and sought

by customers, it is difficult to sell a product either to a new
customer or to an existing one. In the present competitive
environment, this service differentiation assumes greater
significance.

16
After the opening up of the life insurance to the private
sector, the LIC of India have been putting in more efforts
to continuously innovative products offered and the quality
of service rendered are going to dominate the market. In
insurance marketing, the differences between products and
services have to be considered before chalking out the
strategies. Services are quite different from product, where
it is any act or performance that one party can offer to
another that is essentially intangible and does not result in
the ownership of anything. In insurance marketing
products may or may not be tied to a physical product.
Banking, medical and professional services, health care,
private education, transportation, insurance are a few
examples of service industries.
There are certain characteristics of services such as
intangibility, inseparability, variability, and perishability
that pose special challenges for marketers.
Based on the product characteristics, marketers have
classified products on the basis of durability, tangibility
and usage (industrial or consumer). Each product type will
have an appropriate marketing mix strategy. The LIC of
India, over a period of 55 years, introduced several
innovative products. A few of them are traditional products
that have been continued from pre-nationalization days.
17
Life Insurance Corporation of India‟s product mix includes
whole life policies, endowment policies, term insurance
plans, money back policies, children policies, joint life
policy, women policy, plans for handicapped dependents,
pension plans, unit linked insurance plans, health plan &
health protection plus and micro insurance.

PRICE STRATEGY
Price is the mean of setting the exchange value between
two parties. Price, in marketing mix terms, covers all
aspects of pricing such as discount pricing, extended credit,
list price, and payment period (Woodruffe, 19951 ).
Kandampully (2002)2 describes ―Pricing in service
organizations is less influenced by cost, but more by
customer„s perceptions of quality, satisfaction, and value.
The actual pricing of a service is thus often determined by
matching the customer„s perception of value.
With this pricing method, pricing is considered as a
marketing mix variable, thereby considered together with
the other marketing mix variables before a marketing
program is put together (Nagle and Holden, 20023 ).
Zeithaml and Bitner (2003)4 defines three basic marketing
price strategies which service companies can attend, the
strategies are competition–based, cost–based, and demand–
based pricing strategies. Pricing in life insurance is
18
somewhat complex as compared to the pricing strategies of
other financial products.
The price (premium) for a life insurance product is
determined by expected claim costs, investment income,
administrative costs, and fair profit loading (Harrington
and Niehaus, 20045 ). The claims cost is based on the
mortality rate realized on different age groups. The
Actuary on considerations that depend on the experience of
the insurer in the past and his assessment of the trends in
the future decides the premium rates. Pricing in today„s
insurance business environment requires actuaries to be
knowledgeable in an ever-expanding group of issues
because of the nature of diversified products. In case of life
insurance, there is limited scope to use price as a strategic
weapon.

In pricing strategy, Premium charged, mode of premium

payment, grace period available to pay premium (extra
days allowed for remitting premium), interest for delayed
payment of premium, rebate/discount on premium for
annual and half yearly payment, single premium plan
(received by insurer in a lump sum), rate of interest
charged on policy loan, additional premium payment for
benefit of premium wavier and term rider and way of
premium payment were considered for this study.
19
PROMOTION STRATEGY
The „promotional mix‟ is a term used to describe the set
of tools that a business can use to communicate effectively
the benefits of its products or services to its customers.
Market communication performs three basic roles in
marketing–to inform, to persuade, and to remind.
Traditional promotion employs a variety of methods–
including advertising, sales promotion, public relation, and
personal selling–to attract the attention of existing and
potential customers, and to inform them of the products,
services, and special offers made available by the firm
(Peattie, and Peattie, 19941 ). Each of the categories of
promotion mix has now become familiar in many areas of
services marketing. In case of life insurance services,
promotion is done through a mix of advertising, personal
selling, and sales promotion.

Promotion communicates with the potential market so as to

persuade the prospective customers to try a new insurance
product (Periasamy, 20052 ). Online advertising is one
marketing tool that is worth the money. As the Internet
takes on more power and influence all of the time, having a
web presence will put an insurance company on the cyber
map and get it noticed. Block line advertising in trade
20
journals, industry publications and periodicals is the way to
go. Television ads and print ads are excellent forms of
insurance marketing.

All life insurance companies have started using PR tools

to make better image about them in the minds of general
public. Personal selling is extremely labour intensive but is
the best form as far as insurance is concerned, dealing with
one customer at a time.

In promotion strategy, effectiveness of advertisement (TV,

Radio, Newspaper, etc), personal canvassing of
development officers and agents, periodical agents and
policyholders meet, intimation of new policies through
various correspondence (premium Intimation letter, loan
intimation letter, intimation of maturity of policy),
reminders (premium intimation letter), educating
policyholders who visit the LIC branch offices (regarding
products, premium payments, savings, income, investment
etc.,) agent‟s approach to policyholders (more professional
approach, quickly handles queries, good communication
skills, solving problems) promotion of number of insured
under bancassurance were considered for the study.

21
PLACE OR PHYSICAL DISTRIBUTION
STRATEGY
Place is another important element of marketing mix. Place
refers to the location where the product or service is
available to the customer, including distribution channels.
Place contributes an important factor in the marketing of
services (Bitner, 19901 ). In case of life insurance, it is a
combination of decisions regarding channels of
distribution. The emerging new opportunity for life
insurance companies towards integration of the financial
services industry is bancassurance (Aggarwal, 20042 ).
Bancassurance prospects in India are really bright because
huge banking infrastructure across urban, semi–urban and
rural India (Neelamegam and Veni, 20083 ) and life
insurers are using this channel (Shukla, 20064 ). New
distributors like stockbrokers, financial planners, general
agents, and financial institutions etc. involve lower
distribution costs, variable as opposed to fixed expenses,
lower front–end commission costs, and the opportunity of
selling the products in conjunction with other investment–
related products (Chandler, 19945 ). Strategy of worksite
marketing is more useful in case of marketing of pension
and health plans.

22
The widespread diffusion of the Internet has created an
explosion in the growth of electronic channels, including
direct channels (that is, individual company web sites),
electronic markets, or electronic intermediaries over which
multiple buyers and sellers do business (Malone, Yates,
and Benjamin, 19871 ), and other cybermediaries (Sarkar,
Butler, and Steinfield, 19952 ). However, consumers have
not shown a marked preference for purchasing insurance
product via the Internet (Trembly, 20013 ).

The traditional system of ―agents is the dominating one in

India and this will continue to be a major distribution
channel for insurers, since this system has core roots in
rural sector. To study the place strategy, direct marketing,
individual agents, insurance brokers, bancassurance
(corporate agents banks), other corporate agents, e-
insurance/net marketing were considered for the study.

PEOPLE STRATEGY
People, process, and physical evidence are the three ―Ps,
which are especially applicable to services marketing mix
(Booms and Bitner, 19814 ). These three elements are
highly interrelated with each other. People are the main
critical resource in any organization, particularly service

23
organization. Because of the simultaneity of production
and consumption in services, the service staff occupies the
key position in influencing customer„s perceptions of
service quality. Woodruffe (1995) solely uses service
personnel in the ―People part of the services marketing
mix. Recruiting the right staff and training them
appropriately in the delivery of their service is essential, if
the service provider wants to obtain a form of competitive
advantage.

Life insurance companies have to give more attention in

training and development their employees and agents.
Building strong relationship with their agents as well as the
customers will help in meeting customer‟s needs and
serving them efficiently.
Satisfaction depends on the nature of interaction between
customers and the people representing insurance
companies. Training the employees and agents to introduce
new products and use of information technology for
efficiency both at staff and agent level are the key areas to
look into.
To study the people strategy, more frequent interaction by
agent, development officer, LIC officials to know
policyholders needs, wants, ideas and complaints,
uninterrupted service is being provided at all counters of
24
the branch office during working hours, answering queries
of policyholders over telephone/mobile phones by agents
regarding with policies, knowledge of branch employees
and officials about the insurance products, services and
details of policyholder profile, development of utmost
good faith between the LIC of India and policyholders by
employees, officials, agents, development officer, etc.,
servicing time in branch office for premium payment,
helpfulness of branch manager/officials to the
policyholders while facing any problem in surrendering,
claim settlement, maturity etc., customer friendliness of the
employees, officials, development officer, etc., were
considered for the study.

PROCESS STRATEGY
A process is the method and sequence of actions in the
service performance. Unlike goods, services are processes.
Services are the end results of deeds, acts, performances,
and activities performed by the firm„s employees alone or
in conjunction with various equipments, machinery,
facilities, and so on.
In assessing process, customers evaluate whether the
service follows a production–line approach or whether the
process is a customized one in which the customer is given
25
personalized attention (Bowen and Lawler, 19921 ).
Shostack (19842 ) points out that since services are
intangible and therefore described in words by people,
companies have to be really clear in defining the service
process.
The risks of relying on words alone in describing services
are the oversimplification of the service, incompleteness of
the description, subjectivity of different readers and the
biased interpretation of the words used to describe the
service (Shostack, 19873 ). This process involved in life
insurance industry should be customer friendly. The speed
and accuracy of payment is of vital important. The process
methodology of life insurers should be such that it provides
total ease and convenience to the customers. Badly
designed and poor processes lead to slow and inefficient
delivery and make it difficult for insurance employees and
agents to do their job well. Consequently it will result in
low productivity and service failures.

In process strategy (Procedural aspect is called as Process

Strategy), time taken for taking policy, getting policy
document, revival, getting loan, claim settlement and
surrender of policy, more information about various
products and services in branch office, essential services
offered for the first time without discomforting the
26
customer, effectiveness of grievance redressal mechanism,
improvement of quality of service of LIC through different
distribution channels to policyholders, premium paid
certificate for claiming tax benefits and customer-contact
employees (insurance surveyors, loss assessors, insurance
advisors, agents and brokers) interact with customer during
the service delivery were considered for the study.

PHYSICAL EVIDENCE STRATEGY

The physical evidence is defined as the environment in
which the service is delivered and where the service
provider and the customers interact, and any tangible
commodities that facilitate performance or communicate
the service. According to Zeithaml and Bitner (20031 ), to
evaluate services before its purchase and to assess their
satisfaction with the service after it is bought, customers
tend to rely on tangible cues, or physical evidence. The
appearance of building, landscaping, interior furnishing,
equipments, printed materials, and other visible cues all
provide tangible evidence of a firm„s service quality.
This sort of physical evidence provides excellent
opportunities for a service firm to send clear and consistent
marketing messages regarding the firm„s purpose the
intended market segment, and the nature of the service
(Bitner, 19922 and 19963 ). In case of insurance business,
27
apart from office environment, materials such as
brochures, policy documents, and periodic statements are
the tangibles, which will influence the customers.
Insurance companies and intermediaries need to manage
all these physical evidences carefully as they can have a
profound impact on the impression of the customers.
Although all insurance companies provide similar essential
service, the differences that do exist are the physical
evidence.
In physical evidence strategy (it brings tangibility to the
invisible service and helps customers to understand what
they are buying and why they should buy it), exterior
facility (buildings, exterior design, parking, surrounding
environment, signage, landscape) in the LIC of India,
interior facility (interior decor (or) design, layout, signage,
equipment, lifts, ventilation, proper seating, sidewalks for
every movements , etc.,) in the LIC of India, location of
the LIC of India branches, appearance of personnel
(agents, officials and employees of the LIC of India),
details of policy document, physical attributes (brand
name, logos, consistent standards, the LIC diaries,
calendars, magazines), insurance agent for the first time
relies on tangible clues such as information brochures,
agents behavior, identity proof etc., service standards,
guarantees and testimonials by company‟s experts were
considered for the study.
28
INSURANCE BROKERS :
An individual or firm, whose full-time occupation is
the placement of insurance business with insurance
companies isknown as an insurance broker. The broker
receives brokerage as a percentage of premium from the
insurer. There are two main differences between an agent
and a broker. First, an agent represents the insurer but a
broker represents the customer. He advises the customers
about the choice of the product and the insurer without
charging any amount from them. Secondly, an agent
cannot hold at one time the agency of two insurers, but
there is no such restrictions on the procurement of business
by a broker for different companies. The IRDA allowed
Insurance Brokers to operate in the Indian market from
2003. The IRDA (Insurance Brokers) Regulation 2013
have fixed a capital requirement of Rs. 50 lakh for direct
insurance brokers, Rs. 200 for reinsurance brokers and Rs.
250 lakh for composite brokers. The insurance broking is
steadily gaining popularity with result that the number of
insurance brokers increased to 419 since 2003 (as on 31-
03-2015).

29
MICRO INSURANCE (MI) CHANNEL :

Micro insurance facilitates the penetration of

insurance to the lower income segments of population. The
IRDA has allowed NonGovt. Organisations (NGOs), Self-
Help Groups (SHGs), Correspondents of Scheduled
Commercial Banks, District Cooperative Banks, Regional
Rural Banks, Urban Cooperative Banks etc. to improve
penetration of Micro insurance.

COMMON SERVICE CENTRES (CSCS):

The Department of Electronics and Information
Technology, Govt. of India, has implemented the Common
Service Centres (CSCs) on a Public- Private Partnership
(PPP) model as a part of National e-Governance Plan
(NeGP). M/s CSC e-Governance Services India Ltd., a
Special Purpose Vehicle (SPV) was formed to enable
delivery of services through the CSC network. At present
there are 6142 CSCs running across India. The CSC
Special service Vehicle signed agreements with 33
insurance companies including LIC for distribution of their
products through this network.

30
DIRECT MARKETING:
Direct Marketing Channel was established in August,
2009. The purpose of the Channel is to bring a culturally
different approach to the marketing of life insurance
products. The initiative was aimed at creating new systems
for Business Generation, Sales Process Monitoring and
Business Process with a view to reach out to untapped
markets and provide new and improved buying experience
to the customers, especially to today’s young, tech Savvy
Executives and High Net Worth Individuals. The Channel
is currently operating through 124 Units spread across the
length and breadth of the country. The Channel is driven
by the values of passion, performance and professionalism
as promoted through a committed professional sales force,
providing excellent buying experience to customers with
enhanced use of technology. The Channel also sells two
products online, viz. LICs e-Term and Jeevan Akshay VI.

(PERSONAL SELLING
Personal selling is a major promotional method used
to increase profitable sales by offering want satisfaction to
the market over the long run. It consists of individual,
personal communication in contrast to the mass,
impersonal communication of advertising, sales promotion
and the other promotional tools. The main advantage of it
31
is the flexibility in operation as the sales people can design
their sales presentations to fit the needs, motives and
behaviours of individual customers. Sales people can see
the customer’s reaction to a particular sales approach and
make necessary adjustments on the spot. The 144 sales
people can collect information, identify consumer attitudes,
and post complaints to management. Although advertising
and publicity can be used to develop awareness, and
consciousness about life insurance, personal selling is the
most effective means of promoting business, especially in
insurance, as promotion of the insurance requires personal
contact with the prospective customer. An equity to needs
of customer, financial capacities, etc. is a prerequisite and
essential part of persuading the prospect to take an LIC
policy. In all insurance services, including life insurance,
personal selling is the most widely used method of
promoting sales because of the fact that life insurance has
to be sold and not bought. Agents are the most important
medium of promoting personal selling by life insurers.

SPONSORSHIP
Events and experience or sponsorship is another
marketing communication tool comprising company-
sponsored activities and programmes designed to create
daily or special-related interactions. A company can build
32
its brand image through creating or sponsoring events. The
LIC sponsors many sports events, health programmes,
academic exercises like seminars, etc., that are helpful in
creating a positive image on it.

33
DATA ANALYSIS
Life Insurance Density and Penetration in India The
potential and performance of the Insurance sector is
universally assessed with reference to two parameters. 1.
Insurance Density 2. Insurance Penetration The measure of
Life Insurance penetration and density reflects the level of
development of life insurance sector in a country.

OBSERVATION:
The Indian life insurance market is drawing intense
attention, fuelled in part by the fast expansion of its
insurance markets and the fact that this growth potential is
now available to all (subject to the regulatory restriction on
foreign equity holding).India is the second most populous
country of the world with more than one billion population.
The economic growth record is strong (more than 6%
during the past one decade). Inspite of these positive
developments, the life insurance market in India is
extremely under-penetrated.
The life insurance penetration of India was 2.15
percent in the year 2000- 01when the private sector was
opened up. It increased to 4.90 percent in 2009- 10.Since
opening up of Indian Insurance sector for private

34
participation, India has reported an increase life insurance
penetration.
But compared to UK, France, South Korea, Japan and
South Africa, India is way behind.
Among developing counties it stands second to South
Africa. There is much scope for the life insurance sector to
develop in India.

35
 LIC’S CHALLENGES

India opened its insurance market to the private sector

in 1999 when Parliament passed a new law establishing an
independent regulatory body to oversee the insurance
market. The law opened the door for participation of
private insurance companies and a limited participation of
foreign insurance companies through joint ventures with
Indian companies. Since then, the life insurance markets
have grown impressively. Since 1999, IRDA has licensed
22 new private Indian insurance companies, who have
global insurance companies as their partners. Due to
globalization of financial services and liberalization of
economy, the Life Insurance Corporation of India has been
facing intense competition from the new entrants. The new
private players with their aggressive penetration strategies
are creating insurance consciousness in the minds of a
wide cross-section of customers.

The twenty two private insurers in the life insurance

market have already grabbed nearly 30 percent of the
market in terms of premium income. The new business
premium of the twenty two private players was 34.92
percent in 2009- 10.Meanwhile, LIC's new premium
business has fallen from 99.93% in 2000- 01 to 65.08% in
36
2009-10.Unless Life Insurance Corporation of India is
alive to 148 the emerging trends, its performance may
decline further. Hence, Life Insurance Corporation of India
has to work with renewed vigor and enthusiasm so as to
retain and improve its market share. In this regard, Life
Insurance Corporation of India has to focus on key result
areas such as improving the productivity of agents;
marketing high sum assured policies and also the
introduction of customer friendly plans or products. Also
Life Insurance Corporation of India has to focus on unit
linked plans, which are fast becoming popular in the
current life insurance market.

The financial performance of Life Insurance

Corporation of India is better than private life insurance
companies in India. In a business driven by competition,
the high rising costs is due to huge commission expenses
by private life insurance companies. Most of the private
life insurance companies are making losses. It is necessary
for them to cut their operating costs. Also private life
insurance companies have to improve their actuarial
efficiency, liquidity position and long term solvency
position.

37
CUSTOMER EDUCATION
Insurance is a unique service industry. The key
industry drivers are related to life style issues in terms of
perceiving insurance as a savings instrument rather than for
risk cover, need based selling, quality of service and
customer awareness. In the present competitive scenario, a
key differentiator is the professional customer service in
terms of quality of advice on product choice along with
policy servicing.

PRODUCT INNOVATION
Innovative products, smart marketing and aggressive
distribution-That's the triple whammy combination that has
enabled fledgling private insurance companies to sign up
Indian customers faster than anyone ever expected.
Indians, who have always seen life insurance as a tax
saving device, are now suddenly turning to the private
sector and snapping up the new innovative products on
offer. The private companies are coming out with better
products which are more beneficial to the customer.
Among such products are the Unit Linked Investment
Plans which offer both life cover as well as scope for
savings or investment options as the customer desires.

38
 The growing popularity of the private insurers shows
in other ways too. Life Insurance Corporation of India is
still dominating segments like endowments and money
back policies which are traditional plans. But in the annuity
or pension products business, the private insurers have
already wrested over 30 percent of the market. While in the
popular unit-linked insurance schemes they have a virtual
monopoly, with over 90 percent of the customers. The
private insurers also seem to be scoring big in other ways.
They are persuading people to take out bigger policies.

DISTRIBUTION NETWORK
While companies have been successful in product
innovation, most of them are still grapping with right mix
of Distribution Channels for capturing maximum market
share to build brand equity, building strong and effective
customer relationship and cost effective customer service.
In India Insurance is sold and not bought.

The agents / Advisors by using various strategies sell

the product by convincing the customers. Moreover, they
push policies with the highest premium to pocket a higher
commission. The consultative approach to selling is the
modern approach, which helps customers and prospects to
39
buy. While the traditional channel of tied up advisors or
agents would be the chief distribution channel, insurer
should innovate and find new methods of delivering the
products to customers.

Corporate agency, brokerage, Bancassurance, e-insurance,

co-operative societies and panchayats are some of the
channels, which can be tapped by the insurers to reach the
appropriate market segments.
Now days, the urban masses are tapped with the new
150 techniques provided by Information Technology
through internet. Rural masses should be attracted by the
consultative approach adopted by the Insurers.

New private insurers have used innovative distribution

channels to reach a broader range of the population. Private
insurance companies are also using banks, microfinance
institutions and co-operatives to increase their market share
and compete with well-entrenched state-owned insurance
company.

There is huge potential in the largely undeveloped

private pension market. Insurers have to develop new
products addressing the new challenges in society.
40
Companies will need to constantly innovate in terms of
product development to meet ever-changing consumer
needs. Understanding the customer better will enable
Insurance companies to design appropriate products,
determine price correctly and to increase profitability.
Since a single policy cannot meet all the insurance
objectives, one should have a portfolio of policies covering
all the needs. Product development is made possible by
integrating actuarial, rating, and claims. Moreover, with
increased commoditization of insurance products, brand
building is going to play a vital role.
The rural sector has potential for life insurance. To
realize this potential, designing suitable products is
important. Insurers will need to pay special attention to the
characteristics of the rural labor force, like the prevalence
of irregular income streams and preference for simple
products. Legislation now allows insurance carriers and
other financial institutions, such as banks and securities
firms, to sell each another’s products. More insurance
carriers now sell financial products such as securities,
mutual funds and various retirement plans. This helps
access each other's client base and geographical markets.

41
FOREIGN DIRECT
Investment Insurance is a capital-intensive industry. It
is also a long-gestation business. India's insurance industry
needs capital, and a major source of capital would be from
foreign investors, who are now limited to 26 percent
ownership. India 151 needs to raise the cap on Foreign
Direct Investment (FDI) to attract capital for the industry.
For some time there has been an understanding that the
FDI cap will be raised to 49 percent, and many companies
entered the Indian market with this expectation. Leading
foreign companies will bring in more capital to the
insurance industry if the cap on FDI is raised.

ROLE OF IRDA
IRDA should also seek to create a regulatory regime
that promotes the most efficient use of capital, eliminates
avoidable micro-management of business practices, allows
companies to price their products prudentially, and level
the playing field between private and state-owned
insurance companies. When markets are competitive and
responsive to consumer demand and preference, it is the
consumer that benefits in terms of lower cost and increased
ability to manage risks.

42
INFORMATION TECHNOLOGY
Private Insurance companies have discovered that the
Internet is a powerful tool for reaching potential and
existing customers. Most carriers use the Internet simply to
post company information, such as sales brochures and
product information, financial statements, and a list of
local agents. New technology gives the policyholders /
insured better, wider and faster access to products and
services.
The impact of Information Technology in Insurance
business is being felt at an accelerating pace. In the initial
years IT was used more to execute back office functions
like maintenance of accounts, reconciling broker accounts,
client processing etc. With the advent of “database
concepts”, these functions are better integrated in an
administrative efficiency. The real evolution has however
emerged out of Internet boom. Internet has provided brand
new distribution channels to the Insurers. Technology has
enabled the Insurer to innovate new products, provide
better customer service and deeper and wider insurance
coverage to them. Insurance companies should give
customers a distinct claim id to track claims on-line,
entertaining on-line enrollment, eligibility review, financial
reporting, billing and electronic fund transfer to benefit
clan customers.

43
In addition to individual carrier-sponsored Internet sites,
several “leadgenerating” sites which have emerged in the
developed countries should also be used in India. These
sites allow potential customers to input information about
their insurance policy needs. For a fee, the sites forward
customer information to a number of insurance companies,
which review the information and, if they decide to take on
the policy, contact the customer with an offer. This
practice gives consumers the freedom to accept the best
rate.

QUALITY SERVICE
In the global era, Insurance companies are increasingly
willing to spend more on the customer satisfaction and
brand building exercises. Though it is one of the highly
regulated industries, it still provides lot of scope for
creativity and innovations. As this industry is
predominantly dominated by personal selling and
personalized services, many a time the service standards
vary based on the intermediary involved in the process. In
order to achieve the competitive edge over others, it is
necessary to standardize the process and bring about
quality improvement and get feed back from the customers
regarding the quality of services rendered. This will result
44
in customer satisfaction, customer retention, customer
acquisition, employee retention and cost reduction.
Servicing focuses on enhancing the customer’s experience
and maximizing his convenience. This calls for effective
Customer Relationship Management system, which
eventually creates sustainable competitive advantage and
enables to build long lasting relationship.

45
 RESEARCH METHODOLOGY

The core concept underlying research is its

methodology. The methodology controls the study, dictates
the acquisition of the data, and arranges them in logical
relationships, sets up a means of refining the raw data,
contrives an approach so that the meanings that lie below
the surface of those data become manifest, and finally issue
a conclusion or series of conclusions that lead to an
expansion of knowledge. The entire process is a unified
effort as well as an appreciation of its component parts.
According to J.W.B. est, “Research is considered to be
formal, systematic, intensive process of carrying on the
scientific method of analysis. It involves a more systematic
structure of investigation usually resulting in some sort of
formal record of procedures and report of result or
conclusions.”

According to P.M.Cook, “Research is an honest,

exhaustive, intelligent searching for facts and their
meanings or implications with reference to a given
problem. It is the process of arriving at dependable
solutions to problem through planned and systematic
collection, analysis and interpretation of data. The best
research is that which is reliable, verifiable and exhaustive
46
so that it provides information in which we have
confidence.”

RESEARCH STATEMENT
The research statement studied is entitled, “A
comparative study of Life Insurance Corporation of India
and Private Life Insurance Companies in India”. The
present study focuses on the analysis of the performance of
public 52 and all private life insurance companies in India
with the help of mean, percentage, ratios, ANOVA, Data
Envelopment Analysis and linear trend.

RESEARCH DESIGN
A Research design is a plan of action to be carried out
in connection with a research project. It is the conceptual
structure within which research is conducted and it
constitutes the blue print for the collection, measurement
and analysis of data. It is the specification of methods and
procedures for acquiring the information needed for
solving the problem. Decisions regarding what, where,
when, how much, by what means concerning an inquiry or
a research study constitute a research design.

47
 CONCLUSION

In this chapter an attempt has been made to bring out the

marketing strategies of the LIC of India with the mixture of
the seven „P‟s namely Product, Price, Promotion, Place,
People, Process and Physical Evidence. Marketing strategy
implies development of an action plan to achieve the
marketing objectives. Marketing strategy is a composite of
Insurance services, widely known as marketing mix,
suitable to the people of India and capable of meeting
institutional objectives in the light of fast changes in the
requirements of life insurance policyholders of different
socio-economic profile. Thus it is concluded that the
strategy of the insurance companies needs to be regularly
monitored and reviewed to keep the life insurance effective
and viable.

The intense competition brought about by deregulation has

encouraged the industry to innovate in all areas; from
underwriting, marketing, policy holder servicing to record-
keeping. The existence of stringent licensing requirements
ensure that only adequately capitalized and professionally
managed companies are eligible to carry out insurance and
reinsurance. The Insurance Regulatory Development
Authority of India’s (IRDA) emphasis on quarterly
48
reporting/monitoring of insurer solvency has enhance
capital adequacy and transparency.

Aggressive marketing strategies by private sector

insurers will buoy consumer awareness of risk and expand
the markets for products. Competition in a deregulated
environment will allow market forces to set premiums that
are appropriate for exposure and push insurers to
differentiate their products and services. Innovations in
distribution and improvements in market penetration will
follow as public and private insurers compete to market
their products. Allowing insurers to issue their own policy
wordings and set their own rates will enable underwriters
to tailor products to meet client needs. Range of available
products will increase because foreign companies bring
with them a wide range of products and product
development expertise.
Licensed brokers are very much part of the
intermediary structure and only those with adequate
capital, professional experience and expertise will be
licensed by IRDA . Capital structure of entire insurance
industry will improve as foreign companies bring fresh
capital with them. Market efficiency will improve due to
information dissemination, global operating knowledge
and increased competition. Management efficiency will
49
increase because foreign companies bring with them global
experience and management innovation. Customers’
service will improve competition. which will finally
benefit the consumers. Globalization will also improve
Regulatory and Governance system. It will also improve
market conduct and Ethical Business Standard.

50
 WEAKNESSES/CHALLENGES OF INSURANCE
INDUSTRY –
Premiums rates will remain under pressure due to
intense competition on more profitable lines.
Falling premium income without a corresponding
reduction in claims is likely to drive down profits. Public
and private sector insurers’ greater reliance on their
investment portfolios to generate sufficient income and
gains for net profits would subject them to the volatility of
the financial markets.
Private insurers need to raise more capital otherwise
growth could be constrained since reliance on reinsurance
for capital relief is not always viable or available.
Traditional distribution channels, especially tied agents,
need to improve to match the new product offerings. 146
There is general lack of transparency as financial and
operational data for insurers are not readily available as
none of India’s insurers are directly listed on stock
exchanges.

Like all developing economies on a fast track, the

shortage of trained insurance professionals and technicians
at all levels cannot be remedied in the short term.
51
 Natural catastrophes will always be present; the Indian
sub-continent is vulnerable to cyclones, floods, hurricanes
and earthquakes, and until there is a national capacity
(similar to the terrorism pool) to manage losses,
dependence on overseas reinsurers will continue.

52
 SUGGESTIONS
The life insurance density of India was 9.1 percent in
the year 2000-01 when the private sector was opened up. It
increased to 52.2 percent in 2009- 10.India’s life insurance
density is very low as compared to the developed countries
and developing countries, inspite of India being the second
most populous country in the world. This shows that there
is much scope for life insurance sector to develop in India.
The life insurance penetration of India was 2.15 percent in
the year 2000- 01when the private sector was opened up..
It increased to 4.90 percent in 2009- 10.Since opening up
of Indian Insurance sector for private participation, India
has reported an increase in both life insurance density and
penetration. But compared to UK, France, South Korea,
Japan and South Africa, India is way behind. Among
developing countries it stands second to South Africa.
There is much scope for the life insurance sector
to develop in India. The prediction of new business and
total premium for both private and public sector life
insurance companies in India for the year 2015 also shows
an upward trend which signifies that there is a lot of scope
for life insurance business in India.

53
 For over a century, the United States has been the
largest economy in the world but major developments have
taken place in the world economy since then, leading to the
shift of focus from the US and the rich countries of Europe
to the two Asian giants India and China. Economic experts
and various studies conducted across the globe envisage
India and China to rule the world in the 21st century. India,
which is now the fourth largest economy in terms of
purchasing power parity, may overtake Japan and become
third major economic power within 10 years. Life
insurance will grow very rapidly over the next decades in
India. The major drivers include sound economic
fundamentals, a rising middle-income class, an improving
regulatory framework and rising risk awareness.

54
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NEWSPAPERS –

The Business World -13th February, 2006

Gujarat Samachar -4 th May, 2006
Divya Bhaskar -18th May, 2006
Times of India -8 th June ,2006
Gujarat Samachar - 9 th July, 2006

57
The Economic Times of India -6 th October, 2006
The Economic times of Mumbai - 28th November,
2006
Gujarat Mitra -23rd March, 2007
Divya Bhaskar -29th March, 2007
The Financial Express -9 th July ,2007
Divya Bhaskar -30th August, 2007
Divya Bhaskar -14th September, 2008
Sandesh -27th December, 2008
Sandesh - 4 thJanuary,2009
Times of India -15th January, 2009
The Business World -5 th June, 2009
The Business World -17th August ,2010

WEBSITES

www.cea.assur.org
www.licindia.com
www.bimaonline.com
www.irdaindia.org
www.insurnaceinformatics.com 
www.provressive.com
www.tac.org .in
www.gicoi.com
www.easylifeindia.com.
www.transportersindia.com.
www.trade-india.com.
58