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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 as
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, political
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 take
deep 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. Publicity
and 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. Advertising
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 not
properly 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 promptly
collected. 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 employee’s
participation in development process. When employees are laggard and
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 after
proper attitude change, perception, formation, learning practices, personality
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.