Case 2

Life Insurance Corporation:

Restructuring for Growth*Till the year 2000, Life Insurance Corporation (LIC) held a monopoly in the
life insurance market by virtue of being India's only life insurance company in India. With the opening of
the insurance sector to private players, LIC's hold on the market was threatened. Big players such as Tata
AIG, ICICI Prudential, Max New York Life, and Bajaj Allianz entered the sector based on the expertise
of their foreign partners and the brand equity the Indian company enjoyed with Indian customers. These
private players, aided by aggressive marketing and better customer service, started eating into LIC's
market share. This prompted LIC to revamp its marketing strategy to take on the competition. In 2000,
LIC hired the leading consulting company Booz, Allen & Hamilton to suggest the best modalities to
restructure the company and cope with the changing environment in the insurance sector.

Some key recommendations made by the consultants were:

 To undertake product improvements that offers a mix of good returns and bonus
 To launch variable products that appeal to specific customer groups
 To create brand identity that reflects the company's strengths of solidity and Indian-ness
 To make zonal offices autonomous and the corporate office focus on policy making and strategy
formulation
 To differentiate service standards to high value agents and customers

On the basis of these recommendations, LIC took various measures. LIC focused on increasing marketing
strength through the recruitment of more agents. LIC also doubled its agency network from 550,000 in
2000 to 1.1 million in 2004. The company laid special emphasis on training and development. Agents
were given free professional training, mandatory under Insurance Regulatory & Development Authority
rules. Apart from this, the company also trained its own personnel. For this, LIC tied up with IIM
Bangalore for imparting IT skills to its managers and IIM Lucknow to train its staff in marketing.
Development officers were sold laptops at concessional rates.

LIC tried to improve its customer service levels through some major customer relationship management
(CRM) initiatives. It launched a Wide Area Network (WAN) to interconnect its branches spread across
various cities. This offered customers the flexibility to pay the premium or check the policy status at any
branch connected to the WAN. At present, 91 cities with 1966 branches have been covered under this
network. Another technology initiative LIC undertook was the launch of the Interactive Voice Responsive
system (IVRS) that enabled customers to obtain information on their policies through the telephone or
fax. This facility is now available in 58 cities. The company also started offering online premium payment
services, using which customers can pay their premium online. LIC also concentrated on regaining lost
customers. It launched special campaigns to revive lapsed policies to add more customers to its customer
base.

LIC also speeded up various service delivery processes. It launched a special drive to clear outstanding
claims faster. In the year 2003, LIC set a record by reducing its outstanding claims to just 0.13%. Some
divisions even achieved zero per cent outstanding claims. For example, 52 divisions in the South Central
Zone achieved zero per cent outstanding claims. Commenting on this, Mr R. N. Bhardwaj, Chairman, LIC
said, “It sends a very positive signal to our policy holders that LIC delivers on its promises. Many of them
received cheques before the date of maturity.”2

On the branding front, the company aggressively promoted the LIC brand through successful advertising
campaigns like “We know India better” and “Zindagi ke saath bi, Zindagi ke baad bhi” Talking about the
success of the advertising campaigns and its impact on the brand, Bhardwaj says, “They have played a
positive and important role. Our creative slogans that have become catchphrases among the people have
been developed by ad agencies. For instance, ‘Zindagi ke saath bhi, Zindagi ke baad bhi’ and ‘We know
India better’ helped perpetuate the philosophy of life insurance and its trust among people.”

LIC reduced the number of advertising agencies it worked with from 45 to four for better execution of
communication strategies. It allocated INR 1 billion towards advertising in the year 2004–05. LIC's
present advertising strategy emphasizes strengthening the brand and enhancing its appeal to the younger
generation.

Though its market share was eroded by 20% due to the invasion by private insurers, LIC stills holds 80%
of market share with 160 million policies in its fold. According to a survey conducted by Taylor Nelson
Sofres in March 2004, LIC enjoyed a 75% mind-share among customers. It registered an income of INR
1,000 billion for the financial year 2003. LIC was adjudged number one in the Most Trusted Service
Brands survey conducted by The Economic Times for 2004.

QUESTIONS FOR DISCUSSION

Q1.The changing perception about a company among customers is a challenging task for any service
provider. To what extent has LIC succeeded on that front?

Q2.What kind of branding strategy should LIC adopt, given its increasing product mix and the aggressive
brand building measures of private insurers?