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Case Study: Life Insurance Corporation of India

Corporate management has become an essential feature of any organization. It

involves corporation strategies particularly marketing strategy, financial strategy.

The Life Insurance Corporation has failed in corporate management although it has

theoretically considered its importance.

Corporate Strategies:

The LIC has formulated corporate objectives in 1974 to spread life insurance

business much more widely particularly in rural area, maximize insurance linked

savings, investing insurance funds for the best advantage of investors, conduct

business with utmost economy act a business of the insured public, meet the

various life insurance needs, involve people of the Corporation to the best of their

capability, promote sense of participation and job satisfaction. The LIC has failed to

achieve the objectives, as it has not formulated proper strategies to achieve them.

It has not properly analysed the impacts of environmental factors. The economic,political, cultural, social and geographical factors have been accepted

constraints.

The SWOT analysis has not been applied. The threats have been accepted as

blocked barriers. No attempt has been to convert the threats into opportunities.

Similarly, the weakness of LIC has not been identified for its conversion into

strength. It is smoothly sailing in the ocean of abundant market opportunities. Many

untapped resources are lying idle. The poverty need of insurance, p

unawareness, demographic segments natural vagaries and competition have been

taken as accepted parameters of non-development. Strategic audit is native idea in

the corporation although it is essential for success of a Corporation.

Marketing Strategy:

The LIC has several attractive schemes of insurance but they are least utilized.

Many field force personnel are unaware of the scheme. They do not have adequate

knowledge of the insurance plans. The agent and development officers are working

with the routine knowledge. They have become merely sellers of insurance product

from door to door; Insurance is sold and not brought has been accepted by them.

The L.I.C. only pushing them to increase their sale from time to time through

organizing seminars of Chairman club, Divisional Manager club and Branch

Manager strategies club. The practice of organizing such seminars and do not takedeep interest for their knowledge of the only strategy of pushing up business

without caring the upgrading of their knowledge of the product, pricing, promotion

and placement. There is only pushing strategy after putting their shoulders. There is

no clear guidance to accomplish the objection, no positioning strategy, no customer

research and no lest marketing. After 15 year of establishment, the L.I.C. has been

unknown of market penetration strategies; product line strategies, reformulation

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strategies and market extension strategies; product line strategies, concentric

diversification strategies and so on.

Product strategy:

The LIC depends on market stretching by increasing usage of product among

current users and not creating new users for the new product. The field force is

more traditional and is unaware of the new insurance policies. New products are not

adequately known to them. The agents who are the only business-procurers are not

adopting psycho-graphic techniques of product-expansion, product modification

change marketing strategy and product elimination and adoption strategy. The

Central Office of LIC has done some jobs of market research but its findings have

not been used by the field force.

Pricing Strategy:

Pricing strategy is rigid in the LIC. It has recently given some concessions in non-

payment of regular premium. Pricing is not used for enhancing business. It believes

that people have to purchase policies on the highest rate of premium because

insurance is their needs. But the LIC has forgotten that insurance business has not

reached to the level of being brought by purchasers. Only few policies and their

rates of premium are known to the agents. The agent-manuals are not available to

many agents who can understand the premium rates on their own. They totally

depend on the development officer. The time lag between initiation of proposal

talked and meeting with D.O. reduces the business prospects. Interest rate has

been increasing till the end of the twentieth century. Morality has declined and

expenses have to be curtailed to reduce the premium rates for attracting potential

prospects of insurance.

Promotion Strategy:

The mass communication has been absent till 2000 in LIC Recently. It has started to

educate people about its products, but it is merely half promoted. The terms and

conditions of the policies are not advertised. They are left to be told by field force

who not oftenly know them. Market targets and position strategy, effective

advertising, creative strategy successful personal selling are absent in LIC. Publicityand public relations are inadequate and less appealing Message, media and method

of promotion are not properly selected to make people aware, create desire,

increase interest and behave for adopting insurance policies. Adverti

effectiveness has not been measured.

Place Strategy:

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The objective of the LIC has been to increase insurance business of rural areas but

the LIC ha not adopted any dynamic place strategy. Unlike Regional Rural Bank, the

LIC officers are present only in district headquarters or telsil places. RRBs have

benefited the masses at the maximum through their braches almost in every village

of the country. The LIC has only theoretically decided to enhance business in rural

and hitherto neglected area. The link of people with LIC is only agents who are notproperly trained. Many agents are totally unaware of LIC products and marketing

techniques, channel strategy is in adequate and tardy

Financial Strategy:

The cast benefits analysis is used in the LIC for launching new products but the

income and outgo strategic management in inadequate. Premium income has

increased significantly but its collection is incurring float cost and opportunity-cost.

Premium collected by the agents are not received by the LIC the same day because

of inadequate collection staff. It is a matter of pure mathematics that if crores of

rupees are lined up in float per day, the interest thereon will be not less than the

rate of bank deposit. The problems of salary saving scheme are more acute. It has

been observed that the premium so collected by the employers is lying with them

usually for six months. The LIC argues that the employer must submit its premium

in time. If LIC is not very serious about collection of its own money, how the

employers would be serious for remittances. It is the greatest fault of LIC corporate

management. Similarly, premium is put in only in transit. More than a crore is lost

per day in float and opportunity return; similarly, interest income is not promptlycollected. The problem of float lies here too.

The expenses per policy in force continue to rise without any control and restrain.

My study on LIC for 1957-1986 has revealed it. It has increased recently, too. No

cost control is exercised similarly advances to agents have been rising rapidly. The

financial management is very poor in LIC.

Human Resource Development:

The specific strategy of HRD has been adopted by the LIC. The agents and the office

staff are never trained on the corporate management. They are routinely motivated

on money which is obsolete strategy. The recognition, learning and personality,

perception and attitude development are totally absent in the LIC. The only

traditional HRD is conferences of ZMs, DMs, and BMs at some costly hotel. It is

purely bureaucratic strategy of development. Unless the shop floor level employees

are developed, HRD is impossible. Management must involve employ

participation in development process. When employees are laggard

management is leader, the gap creates conflicts. The product and people oriented

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leadership cannot function effectively unless people are learnt about organizational

belongingness. Employees are afraid of function and management is suppressed off

under top management pressure. Job involvement is satisfaction that must be

known by the employees.

The office staff and agents should be actuated to function on job satisfaction afterproper attitude change, perception, formation, learning practices, personalit

development and self-motivation. The LIC of India has to adopt dynamic strategies

of marketing, finance and HRD to become successful corporate model in insurance

industry.