Emerald Emerging Markets Case Studies

Improving customer satisfaction by increasing the reach: Life Insurance Corporation of India
Prashant Raman
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Prashant Raman , (2016),"Improving customer satisfaction by increasing the reach: Life Insurance Corporation of India",
Emerald Emerging Markets Case Studies, Vol. 6 Iss 2 pp. 1 - 21
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 Improving customer satisfaction by
increasing the reach: Life Insurance
Corporation of India
Prashant Raman
Prashant Raman is an
Associate Professor at
FMS – WISDOM,
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Banasthali University,
Jaipur, India.
Disclaimer. The Authors
prepared this case solely as a
basis for class discussion and
not as an endorsement, a
source of primary data or an
illustration of effective or
ineffective management.
Although based on real
events, and occasional
references to actual
companies, this case is
fictitious and any resemblance
to actual persons or entities is
coincidental.
DOI 10.1108/EEMCS-05-2015-0080
Introduction
In the present times of global competition and busy schedules of individuals, it is expected
that companies provide service with security, sincerity and flexibility keeping pace with
changing global scenario of marketing. Service receiver expects competitive and optimum
facilities with ease while sitting in any corner of the world at any time of the day. It implies
that the service provider should be available at all times/all places for satisfying the needs
of the customers. A daunting task ahead of Life Insurance Corporation of India (LIC) was
to change its conventional approach and work toward a newer, user-friendly one. The top
management, i.e. the Board of Directors, took up the task of identifying a quicker but
securer approach to provide optimum facilities to the policyholders.
Insurance sector at a glance (pre-reform and post-reform scenario)
Insurance industry in India has been on a rollercoaster ride and has gone full circle right
from the privatization of the insurance companies to the formation of Government monopoly
and again getting back to privatization and liberalization. The emerging insurance sector in
India has gone through three phases: pre-nationalization phase (before 1956), nationalized
period (1956-2000) and liberalization phase also known as the post-reform period (2000
onwards). The first stage comprised many insurance companies coming into the market
and exiting as well. It was a long growth phase for the industry as a whole. The number of
Indian life insurance companies grew from 30 in 1912 to 116 in 1939 and reached 154 in
1955. In the second stage, the complete sector became monopoly of the state. The
government took over the life insurance businesses of all national and foreign companies
in India and nationalized the life insurance in India. LIC came into existence and took over
all the insurance companies under its realms. The third phase, post-2000, was a period of
liberalization of the sector. It was associated with opening up of the economy to foreign
investments and operations. It was characterized by numerous new players competing with
the large public sector giant, i.e. LIC. The life insurance market was opened to private
players because of low penetration of life insurance in India, non-availability of
customer-oriented products, low level of customer satisfaction, higher premium rates and
lack of professionalism on the part of the insurer. Further, signing of the General Agreement
on Tariff and Trade paved way for the entry of global players.
Types of life insurance in India
Life insurance companies offer various products keeping in view the demands and needs
of people and different types of investors. Given below is a list of major life insurance
products offered:
VOL. 6 NO. 2 2016, pp. 1-21, © Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
  Term insurance policies: The main aim of this policy is to provide immediate relief to the
nominees or beneficiaries in case of sudden death of the policyholder. The policyholder
himself is not eligible for any financial gains after the maturity of the term policy.
However, in case of the demise of the policyholder, the beneficiaries are paid the sum
assured. The term insurance policies are cheaper than the other policies offered by the
insurance companies.
 Money-back policies: They are variants of endowment plans where the policyholder
gets specific amounts at fixed intervals until the maturity of the policy. On the death of
the policyholder, beneficiaries are entitled to receive the sum assured.
 Unit-linked investment policies: These policies give the holders the twin benefits of
investment and insurance. A part of the premium paid secures the insurance cover,
while the other part gets invested in various debt and equity instruments.
 Pension policies: These policies allow the policyholder to receive a fixed income after
retirement. This is a retirement investment policy where the monthly payment or the sum
assured depends upon the invested money, the period and the retirement age of the
holder.
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Life Insurance Corporation of India

The LIC was established on July 1, 1956, and started functioning from September 1, 1956
(Life Insurance Corporation of India, 2014). Large amounts of insurance premiums are
deposited with the LIC, which it further invests in different spheres of the economy like the
public, private, co-operative and joint sectors. At present, LIC is one of the largest term
lending organizations of the country. The main aim of introducing LIC was to propagate the
message of life insurance among the masses and direct their savings to projects involved
in nation-building schemes. Due to its efficient operational ability, LIC has vastly developed
and increased its clientele and distribution network. LIC has been able to educate the
people about the importance of life insurance and garner money from the masses to be
used for their own welfare. Till date, LIC is the leading company in the market with maximum
market share, despite the emergence of many private insurance companies. The total
premium income for LIC is Rs 2,36,798 crores (US$36.26 bn) with a profit Rs 28,727 crores
(US$4.4 bn). The company has an estimated asset value of US$270 bn as on 2014.
The LIC has its central office in Mumbai and seven other zonal branches at Mumbai,
Kolkata, Delhi, Chennai, Hyderabad, Kanpur and Bhopal. It has more than 110 divisional
offices, about 2,100 branch offices and 1,200 satellite offices. It also has more than 1 lakh
employees and about 13 lakh agents across the country. LIC has entered the international
insurance market with joint ventures/fully owned businesses in ten countries outside India.
It has branch offices in the UK, Mauritius and Fiji and joint business endeavors in Bahrain,
Qatar, Kuwait, UAE, Oman, Kenya, Saudi Arabia, Nepal and Sri Lanka. A fully owned
auxiliary unit, LIC (Singapore) Pvt Ltd, has been established in Singapore.

Product portfolio
The LIC offers a number of products according to the requirements of the consumers. The
main aim of an insurance policy is primarily to provide monetary help to the family members
who have lost their breadwinner through accident or death by natural causes. Following are
some of the products offered by LIC:
 life insurance;
 investment management;
 health insurance; and
 mutual fund.

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016

 In addition to this, LIC also offers different pension plans, annuities, group schemes,
special plans and unit-linked plans. Customized plans are also offered particularly for
children, senior citizens, women and handicapped persons.

Distribution network
The LIC operates in a service industry and the distribution of its products and services is
done through various channels. Different methods are adopted to reach the prospective
customers. “LIC Agents” have been the most essential and fundamental channel
component till today. They either work independently in career agent branches or work
under development officers who train these agents and set business targets for them – also
known as minimum business guarantee – in conventional branches. Other than the
“Agents”, the channel of distribution comprises brokers, branch offices, allied banks and
distributors. Currently, the LIC has more than 110 divisional offices, about 2,100 branch
offices, 1,200 satellite offices and about 13 lakh agents. It also has a network of 242
corporate agents, 89 referral agents, 98 brokers and tie-ups with 42 banks seeking life
insurance business from the consumers.
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Value for money product

An appropriate pricing strategy is extremely important for the successful operation of an
insurance company, as it is the pricing policy that influences the sales level of a company.
In life insurance business, the policyholders have to pay the premium on yearly,
semi-annually, quarterly or monthly basis. The board sets the premium price of all the
policies for a stipulated period.
The LIC does a comprehensive market study and collects information about different facts
such as purchasing ability of a consumer, prevailing economic financial situation in the
market, etc. This information helps the board of directors to design rational and realistic
pricing policies. The Board also decides the methods of paying premium and expected
rate of return on policies. The Central Government of India offers a sovereign guarantee to
the LIC. This gives its investors an assurance that the money they pay is in safe hands, and
the company is bound to deliver irrespective of vicissitudes in financial markets. The rising
popularity of the LIC is because the company keeps implementing new schemes, products
and plans according to the needs of the people. This has made a large number of LIC
products popular among the masses. The LIC also has the highest claim settlement ratio
of 98.14 per cent in 2013-2014 for which the figure is computed by dividing the number of
claims disbursed in a year by the number of claims received (Table I). Its customers thus
get the advantage of insurance cover and other benefits at a low premium. LIC’s main
objective is to provide better life insurance cover to help people in times of changing social
and economic environment.

Table I Insurance companies claim settlement ratio in 2013-2014

Claim settlement ratio 2013-2014
Claims Claims Claims settlement Claims Claims
Insurance company received paid ratio (%) repudiated (%) pending (%)

Life Insurance Corporation of India 760,344 746,212 98.14 1.10 0.52

ICICI Prudential Life Insurance 13,398 12,608 94.10 4.98 0.92
HDFC Standard Life 7,259 6,824 94.01 4.70 1.29
SBI Life Insurance 14,233 12,960 91.06 5.23 3.71
Bajaj Allianz Life Insurance 23,724 21,658 91.29 6.30 2.41
Max Life Insurance 9,478 8,896 93.86 6.10 0.04
Birla Sun Life Insurance Company Limited 9,197 8,071 87.76 9.57 2.67
Source: IRDA annual report 2013-2014

VOL. 6 NO. 2 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 Promotion strategies
LIC promotes its products in a very uncomplicated and simple manner. The main objective
of LIC’s promotional strategy is to create awareness about its products and services and
about its brand. The various communication tools that LIC uses to promote itself are
exhibitions, trade fares, advertisements on televisions, newspapers and billboards, etc. To
promote LIC in rural areas, a van is used to travel to remote villages to spread information
about the company. The greater part of LIC’s promotional campaign is driven toward
promoting insurance schemes which can be easily bought by ordinary people. This
strategy enhances the reach of the company and increases the sale of the insurance
policies. LIC has a Facebook page with detailed information of its objectives and products.
LIC also has a YouTube channel which promotes their advertisements and sponsored
activities. The advertisements generally feature non-professionals who are presented as
brand spokespersons. The idea of using ordinary people as spokesperson is a novel
strategy used by the organization. LIC’s Facebook page and YouTube channel was
merged so that the subscribers to this page had access to the uploaded videos. In the year
2010, LIC organized a photo contest named “Happy Family”, where the members were
asked to upload photographs of their families, and the most appreciated one was to be
declared as winner (LIC to expand alternative distribution channels, 2010).
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Key players in India

Among 88 countries having life insurance businesses, India occupied the 11th position in
the year 2014, having 2 per cent share of the world’s insurance sector. The life insurance
industry evolved from US$10.5 bn in financial year (FY) 2002 to US$52.14 bn in FY 2014.
From 2002-2003 to 2014-2015, life insurance premiums expanded at a compound annual
growth rate (CAGR) of 14.28 per cent. Insurance penetration and insurance density are two
vital pointers that portray the scale of development of insurance industry in a country. Life
insurance penetration which indicates the growth of insurance industry in a country is
computed as a ratio of total insurance premiums to gross domestic product (GDP),
increased from 2.2 per cent in 2001-2002 to 3.1 per cent in 2013-2014 (Figure 1). The
insurance density on the other hand is described as the ratio of total premium to the total
population in the country and is stated in currency units, also increased from US$9.1 in
2001-2002 to US$41 in 2013-2014 (Figure 2). Despite numerous problems, the life
insurance industry has the capacity to double its size by the year 2020. In the life insurance
sector, a range of unit-linked investment policies (ULIPs) have been launched by the
private players to compete against the dominance of LIC and to create a customer base

Figure 1 Insurance penetration of life insurance in India

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016

 Figure 2 Insurance density of life insurance in India

which is only interested in choosing these plans for investment purpose. ULIPs have
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become very popular since inception, as they were created with an objective to satisfy the
investment requirements of the customers. Post liberalization, the chief factors driving the
growth of private life insurance companies in India were due to the immense popularity of
the ULIPs. As a result, more than 50 per cent of the premium income of private companies
in the life insurance segment was contributed by these unit-linked plans. These plans thus
form an integral part of a large number of private players’ product portfolios. However, the
recent downturn in the global economy and unpredictable stock market condition has
resulted in a decline in the share of ULIP funds in the Indian insurance sector. The share
of ULIPs went down by 2.69 per cent in the year 2014 as compared to the year 2013.
In the year 2003, life insurance sector had only four private companies, but the number
increased to 29 by 2014. LIC still holds the leading position in the market with 75 per cent
share as on FY 2014, pursued by ICICI Prudential which has 4 per cent share (ICICI
Prudential Life, 2014) (Figure 3).

Figure 3 Total market share of leading insurance companies in terms of life insurance
premium collected in FY 2014

VOL. 6 NO. 2 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 ICICI Prudential Life Insurance
ICICI Prudential Life Insurance Company Ltd which is a joint enterprise set up by ICICI
Bank and Prudential Plc was one of the first insurance companies to start operating in
December 2000 after the approval from Insurance Regulatory and Development Authority
of India (IRDA, 2015). Prudential Plc is a major financial syndicate having its headquarters
in the United Kingdom. ICICI Prudential Life was having a capital of Rs 4,796 crores
(US$730m) as on March 31, 2014, with ICICI Bank and Prudential Plc having 74 and 26 per
cent stakes, respectively. By the end of the FY 2014, the company had amassed a
whopping Rs 12,429 crores (US$1.8 bn) on premium renewal and new businesses. As of
February 2015, the company had accumulated assets of over Rs 1,00,000 crores (US$15
bn). All this has been possible by their hard work and easy premium payment options such
as instant online payment, bill desk/bill junction, electronic clearance system (ECS)/Direct
debit system, credit card, easy bill, post-dated cheques, payment through SMS and
Skypak drop boxes. ICICI prudential life has also selected Federal Bank in Kerala and
Karnataka Bank in Karnataka to accept cash, cheques, etc., at their branches from policy
holders of their regions for payment of premium amounts (refer to Exhibit 1 for description
of payment options).

HDFC Standard Life

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HDFC Standard Life Insurance Company which is a joint venture between HDFC and
Standard Life Plc of United Kingdom is a major private life insurance company that offers
a variety of insurance policies to both individuals and groups. HDFC Ltd and Standard Life
Plc have 74 and 26 per cent stake, respectively, in the joint venture. HDFC Standard Life
has more than 400 branches 6,000⫹ partner branches (banks, corporate agents and
brokers) and is present in about 1,000 cities in India (HDFC Standard Life, 2014). The
company’s assets under management (AUM) reached Rs 50,258 crores (US$7.6 bn). The
total premium collected was Rs 12,063 crores (US$1.8 bn), and it posted a profit of Rs 725
crores (US$111m) as of March 31, 2014. The company also provides easy payment modes
such as net banking, credit card, debit card, bill pay, drop boxes, automated voice-guided
payment system, sending cheques through post, common service center (CSC), i.e.
payment of premium at any of CSC outlets, etc. Other than this, they have premium paying
partnering outlets in the Indian states of Madhya Pradesh, Andhra Pradesh and
Maharashtra through MP online, AP online and Maha online outlets, respectively.

SBI Life Insurance

SBI Life Insurance is a joint undertaking between State Bank of India (SBI) and BNP Paribas
Cardif (SBI Life, 2014). SBI which is the largest state owned bank in India has 74 per cent
stake in the venture, while BNP Paribas Cardif has 26 per cent stake. SBI Life Insurance
company’s authorized capital is Rs 20 bn (US$300m), and its paid-up capital amounts to
Rs 10 bn (US$150m). It is a point of mention that CRISIL Ltd, a subsidiary of the global
rating agency Standard and Poor’s awarded AAA/Stable/P1⫹ rating to this joint venture.
The company has a distribution network of close to 800 branches, 9,000⫹ employee base
and around 1,00,000⫹ Insurance Advisors and certified insurance facilitator. The AUM of
the company is Rs 58,480 crores (US$8.9 bn). The company also collected a total premium
of Rs 10,739 crores (US$1.6 bn) and posted a profit of Rs 740 crores (US$113m) for the FY
2013-2014.
SBI Life Insurance company also provides easy payment facilities such as direct
remittance at SBI Life branch, payment by post, ECS, direct debit by issuing standing
instructions from VISA or Master credit card, online payments through net banking via SBI
and its partnering banks, payments through State Bank group automated teller machines
(ATMs) and bill pay. In addition to the above, SBI Life also offers to its customers the option
to make payment of their renewal premiums through point of sale terminals provided by the
company at a few SBI Life branches. At present, this facility is available in 204 cities.

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016

 Another option offered by SBI Life is payment of renewal premiums by using their mobile
applications. Other than this, the policy holder is entitled to pay the premium in cash up to
a certain limit through any of the CSC in India. In Madhya Pradesh and Andhra Pradesh,
policy holders are entitled to pay cash at MP/AP online outlets.

Bajaj Allianz Life Insurance

It is a joint venture between Allianz SE and Bajaj Financial Service (Bajaj Allianz, 2014).
Globally, Allianz SE is seen in about 80 countries and has 119 years of experience in the
financial sphere. During 2013-2014, the company collected a total premium of Rs 5,843
crores (US$895m) and earned a profit of Rs 649 crores (US$99m). The AUM of the
company is Rs 38,780 crores (US$5.9 bn).
It collects its premium via its branch offices, through standing instructions via credit card,
through direct debit and net banking, etc. It is also possible to pay the premium at any of
Axis bank branches. Customers in Madhya Pradesh are also enabled to pay their
premiums at MP online outlets.

Max Life Insurance

It is a joint venture between Max India Ltd which is a multi-business Indian company and
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Mitsui Sumitomo Insurance Co Ltd which is a member of MS&AD insurance group, a

general insurer. In all, three million customers have benefited from Max Life Insurance
company’s retirement and long-term saving schemes (Max Life, 2014). It has a widespread
distribution system which involves India’s leading agents and advisors. The company has
more than 8,000 employees and around 40,000 agents working for them. It has 287 offices
in India and has also tied up with Axis bank for selling its products and services. With total
revenue of Rs 7,279 crores (US$1.1 bn) and a profit of Rs 436 crores (US$66m) for the year
2013-2014, the company is deemed to be one of the rapidly growing life insurance
companies in India. The company boasts of a share capital of Rs 2,127 crores (US$325m)
with a solvency margin of 485 per cent. The company’s AUM is Rs 24,716 crore (US$3.7
bn) as of March 2014.
The company also offers a variety of payment options such as online premium payment by
phone, direct debit by issuing standing instructions from customer’s credit card, ECS and
electronic bill payment process, payment by cheque at branch offices, CSC, premium
payment at any of the Axis bank branch and ATMs. To enable the customer make payment
comfortably, Max Life Insurance has provided about 1,000 drop boxes in India. The
company has also provided cheque pick-up facility as well.

Birla Sun Life Insurance Company Limited

It is a joint venture between Aditya Birla Group, a widely established Indian consortium, and
Sun Life Finance Inc., one of the major financial institutions of Canada. Birla Sun Life
Insurance has been in the field for the past many years and is largely responsible for the
growth of Indian insurance industry (Birla Sun Life, 2014). The company is having more
than two million customers. It has a wide variety of policies for all the sections of the society.
It has an extensive network of about 500 branches in 500 cities. Birla Sun Life Insurance
has more than 85,000 advisors enlisted on its panel and over 140 tie-ups with banks,
dealers and agents. The company has an asset base of Rs 26,813 crores (US$4.1 bn) and
capital worth Rs 2,170 crores (US$332m) as on 30 June 2014. It has easy payment options
such as CSC, net banking, ECS, direct debit, bill junction and bill desk, credit and debit
card.

Global scenario in marketing and distribution channels in emerging economies

The insurance companies presently use several distribution channels to get in touch with
the customers. The conventional means of selling the insurance products is generally
through agents and brokers, but distribution channels like Bancassurance, internet, mobile

VOL. 6 NO. 2 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 and call centers are swiftly gaining strides. With the growing customer awareness,
technological advancements and increasing competition, there is an emergence of
low-cost distribution channels in the insurance industry worldwide. Advancement in
technology has helped in reducing the customer response time and explanation of the
product in a more efficient way while catering to more than one customer simultaneously.
These new channels allow the customers to evaluate more than one insurance product at
the same instance without any hassles and select the best policy that suits their needs.
These channels are more common in mature economies like Western Europe, but emerging
economies like Latin America and Asia-Pacific are gradually endorsing their effectiveness.
Selling of insurance policies using internet is very high in European countries. However, the
success of this channel is largely dependent on the internet infrastructure and
the households’ access to the internet. In European region itself, there are differences in the
internet penetration. In United Kingdom, for example, the internet penetration is higher as
compared to a country like Poland. In some sections of the insurance markets, agents have
a strong foothold, particularly in the USA, Europe and Asia, which suggests that they are
still an important cog in the insurance industry. Another important distribution channel
which is gaining popularity in Europe is “Bancassurance”. It is generally a partnership
between the insurance company and the bank where insurance company uses the bank’s
sales channel to sell its products. In North America, insurance companies are developing
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alternate channels by tying up with supermarkets to sell their products. These kinds of
partnerships result in reaching a broad customer base at a lower cost and leveraging the
brand value of the reputed stores in attracting the customers.

Customer servicing in insurance sector

Insurance companies have now realized that there is cut throat competition in this sphere
in the market. There is a great need to provide good customer service and devise concrete
plans to enhance and develop the existing marketing strategies to retain its existing
customers. As the insurance market is getting stronger and spreading its wings to reach
new customers in different parts of the country, the customers expect improved services
from them. The companies can gain a stronghold in the market if they adhere to the four
keys mentioned below:

1. Allocating more power and knowledge to the agents: Necessary business intelligence
should be provided to the agents and brokers. They have to be familiar with the
problems of the customers, their needs and their capacity to invest and the number of
policies needed by them. They also need to concentrate on valuable customers and
spend more time on them than deliberating on inconsequential customers.
2. Develop alternative premium collection channels: Diverse channels should be evolved
to target different kinds of customers. They have to be cost effective but not at the cost
of customer service. With an aim to target different types of customers, the agents and
brokers can use specific channels to reach them.
3. Computerization of daily mundane chores: The daily routine business work should be
automated and the agents and brokers be allowed more time to concentrate on
servicing customers.
4. Increased insurer and insured communication: Agents and brokers are not able to
provide the customers the sort of experience they now expect from an insurance
company. A major key to success is to increase the communication between the
customer and the insurance company. Communication channels need to be evolved
and developed according to the new trends. There is a gradual transition from
face-to-face communication to sharing of information through e-mail. Usage of
innovative channels like social media, Skype, Twitter, mobile applications and
interactive TVs are growing in prominence and are now a crucial part of communication
mechanisms used by different insurance companies.

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016

 When LIC was the lone insurance provider in the country, it had the monopoly to organize
and develop the market at its own whims and fancies. After the entry of private insurance
companies, the consumers were exposed to a variety of products and services. They
became aware of the benefits of insurance in their lives and opted only for the best offer
available in the market. This compelled LIC to focus more on customer-centric initiatives.
The private companies aggressively promoted their products and services which led to the
transformation of the customer from a docile, ignorant individual to an alert and
knowledgeable consumer demanding better products and services.

The problem
Since the opening up of the sector in 1999, there has been greater competition in the Indian
LIC business segment. Radical developments are taking place in this sphere, and with new
entrants of global insurers in this field, there is more competition in the Indian Life Insurance
business. Retaining market share and delivering good quality customer service was a huge
challenge. In a big organization like LIC, meeting the needs and desires of millions of
customers is a huge challenge. Sometimes, grievances of customers do crop up and to
redress these complaints, the Board of Directors has established a highly structured
grievance redressal mechanism. Some of the notable measures are:
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 Grievance redressal officers: Customers can get in touch with the nominated grievance
redressal officers and request for redressal of their complaints.
 Claims review committee: In some cases where claims are not paid by the organization,
the claimant can make a representation for consideration by the review committees.
Based on the genuineness of the case, suitable decisions are taken. This has facilitated
in improving the transparency and assurance in the operations of the LIC and has
resulted in greater satisfaction among the customers.
 Policyholder councils and zonal advisory boards: Policyholders’ councils and zonal
advisory boards have been established where the representatives of the policyholders
put forward their issues to the management.
 Citizens’ charter: LIC has embraced a charter which promises its customers a high
degree of operational standards.
Although LIC is doing very well in solving the grievances of the customers, the Board of
Directors wanted to improve the customer service so that the grievances do not arise at all.
The Board of Directors felt that there was a drastic need to improve the customer
satisfaction level. They analyzed that the customers were not happy with growing
congestion in the LIC offices to pay the premium for their policies. The long queues and
wait at the counters alarmed and agitated the customers. After a long brainstorming
session between the board members, some key issues were prioritized. These issues were
to be addressed swiftly and effectively.

Increased insurance penetration

Expansion of business by private life insurance players in the untapped market has been
the main reason behind India’s increased insurance penetration. The premium percentage
of GDP in the Life Insurance sector in India was 1.5 in the 1990s, and the percentage was
not much better in the mid decade. Private insurance players were gradually moving up the
ladder and reaching areas where LIC had never operated before. The need of the hour was
to reach as many people as possible.

Anywhere customer service

Premium collection is an important and a major servicing activity. Customer expectation
was increasing as WWW not only meant World Wide Web but also Whatever Whenever and
Wherever or AAA which meant Anytime, Anywhere and Anything. In the existing setup, the
branch offices were not in a position to fulfill these expectations.

VOL. 6 NO. 2 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 The Board of Directors of LIC observed that:
 the cash counters at the branches were getting extremely congested;
 long queues at the counters were resulting in agitated policyholders;
 customers were demanding quick and most importantly a very secure method of
premium collection;
 non-receipt of notices and absence of any proper mechanism to remind the
customers, resulted in non-deposit of the premiums in time; and
 the increase in lapse of policies.
The retention of the existing policyholders was a priority, and some innovative channel had
to be devised at the earliest. The growth of competitive private players and the increasing
grievances of customers were becoming a relentless worry for the management. Private
companies in the market were devising inventive methods to cut costs by introducing cost
Keywords: effective strategies. The new companies were expending in technology to computerize
Insurance, their processes to provide better service at lower costs.
Customer satisfaction,
The think tanks got to work to identify suitable and probable channels of reaching the
Marketing mix,
masses quickly and economically and at the same time the transactions remaining secure
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Customer service,
Competitive advantage/
gaming,
Distribution channels
in the process.
With these burning issues in mind, the Board of Directors had their task cut out and faced
a tough job of identifying efficient and quick solutions.

References
Bajaj Allianz (2014), Annual report 2013-2014, available at: www.bajajallianz.com/Corp/aboutus/life-
insurance-annual-report.jsp (accessed 30 September 2015).
Birla Sun Life (2014), Annual report 2013-2014, available at: http://mutualfund.birlasunlife.com/Pages/
Individual/About-Us/Financial-Reports.aspx (accessed 30 September 2015).

HDFC Standard Life (2014), Annual report 2013-2014, available at: www.hdfclife.com/iwov-resources/
pdf/financial/2013-14/public/HDFCLife-Annual-Report-2013-14.pdf (accessed 30 September 2015).

ICICI Prudential Life (2014), Annual report 2013-2014, available at: www.iciciprulife.com/public/pdf/
Investor-Relations/Investor%20Relations/ICICI_Prudential_Annual_Report_FY_2014.pdf (accessed 30
September 2015).

Insurance Regulatory and Development Authority (2015), available at: www.irda.gov.in

Life Insurance Corporation of India (2014), Annual report 2013-2014, available at: www.licindia.in/
annual_report.htm (accessed 30 September 2015).

Life Insurance of India, available at: www.licindia.in

LIC to expand alternative distribution channels (2010), “Business line”, available at: www.
thehindubusinessline.com/todays-paper/lic-to-expand-alternative-distribution-channels/article100166
6.ece (accessed 1 October 2015).

Max Life (2014), Annual report 2013-2014, available at: www.maxindia.com/ar2013-14/max-life-

insurance.php (accessed 30 September 2015).

SBI Life (2014), Annual report 2013-2014, available at: www.sbilife.co.in/sbilife/content/37_6442

Further reading
LIC eyeing new distribution channels for growth. (2004), “Times of India”, available at: http://
timesofindia.indiatimes.com/business/india-business/LIC-eyeing-new-distribution-channels-for-
growth/articleshow/828977.cms (accessed 2 October 2015).

Re, S. (2010), “World insurance report”, Sigma, Vol. 2.

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016

 Exhibit 1

Premium collection channels and description

Bill desk and Bill junction – Online website through which one can pay his bills.
ECS and Direct debit system – Enables automated debiting of the premium amounts
regularly from the customers’ accounts after registering with the bank.
Debit card and Credit card – Making payment via Master Card/Visa/American Express.
Easy Bill – Enables customers to pay premium through cheques at Easy bill outlets across
select towns.
Post-dated cheques (PDC) – The customer has the choice of making premium payments
by submitting a minimum of 6 post dated cheques. The cheques are later submitted for
clearing on relevant due dates.
Payment through short messaging service (SMS) – The customer is also able to make
payment by sending SMS after authorization through his Master/Visa Card issued by any
bank.
Skypak drop boxes – Another option for the customer is to drop his premium cheques at
any of the authorized Skypak drop boxes.
Common services centers (CSC) – The customer has also the convenience to pay
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premiums at his convenience at any of the CSC outlets opened by government of India as
part of e-services initiative.
AP Online – The consumer in Andhra Pradesh may pay his premium at his convenience at
any of the AP Online outlets in the state of Andhra Pradesh, India.
Maha Online – Likewise the consumers in Maharashtra may pay their premiums at their
convenience at any of the Maha Online outlets in the state of Maharashtra, India.
Internet banking/Net banking – Enables customers to perform financial transactions on a
website operated by a bank.

About the author

Prashant Raman has an overall 10 years of working experience. He is currently working as
an Associate Professor (Marketing Management) at Banasthali University, Jaipur. Prior to
this, he was working as a Relationship Manager at Mahindra Satyam, Hyderabad for
around 7 years. He has a sound knowledge in resourcing, internal talent management,
employee relations/engagement and management. He was also involved in demand
forecasting, employee re-skilling and training programs for many clients. Prashant Raman
can be contacted at: prashantraman5@gmail.com

VOL. 6 NO. 2 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11