| Escape from LIC - Escape to Victory? |
In 1956, the Life Insurance industry was nationalized under the Life Insurance Corporation (LIC) of India. Now, LIC has a network of 7 zones, 100 divisions and over 2,000 branches across the country with over 550,000 agents. But it covers only 22 percent of Indian insurable population and private players are inching towards the ‘quality service’ fight with LIC now. LIC may not be the master decider of the fate of life insurance sector in India in near future.
Al Bundy, a character on "Married with Children," a US Television show once commented that "Insurance is like marriage. You pay, pay, pay, and you never get anything back". This exactly contradicts the traditional Indian approach towards life insurance. For us, insurance pays pretty well, it is a better tax-saving tool than a good security to life. And LIC, the insurer of over 100 millions lives in India, needs to be appreciated for its vibrant positioning of insurance sector in a different platform of tax-savings.
LIC customer had a tough time in 70’s and 80’s. They have experienced how one government-run industry can dominate the mainstream management practices to prove organization is the king, not the customer. A well-paced practice of monopolistic attitude forced LIC customers to swing their lives in a basket of bad-old services. Although, they had variety of insurance plans to cater to all categories of people and to their diverse needs, quality and quick customer service were absent throughout.
The payment of premiums was a pain that day in the absence of centralized payment mechanism. The disbursement of money after one’s death used to take often half-a-year after voluminous red-tape formalities, going through hundreds of regulatory systems and loss of enough calories after running around the LIC officials. You can not blame, if one tries to justify the increasing popularity of Horlicks during that time, the nutrition drink from SmithKline Beecham as it was quite essential to restore the energy of LIC customers to win the hazardous battle of insurance. There are complicated features in policy lapsing, grievance redressal and poor bonus in contrast to the Western service management.
Moreover, lack of marketing ability, poorly trained agents and absence of uniqueness in service offerings were enough to force the Indian government for a second thought, for a whole new generation insurance system and welcome private players. The virtual monopoly of LIC, which reflects a lack of innovation and marketing in the pension plan field, has also ensured that pensions remain a very underdeveloped sector in India.
Insurance policyholders lost their voice for last two decades and in the new millennium now, private insurance players are here in India. What do you expect from them - a clear service balance in customer orientation and profit orientation, an attitude to value customers and swift settlement of policy matters. And a scientific approach to insure your life at the backdrop of mainly two events- a social change in family planning in India that led to give birth to a number of nuclear families from broken-up joint families and an increase in life-expectancy of average Indian people.
And we would not be surprised to see some innovative marketing offerings like credit card comes at free of cost from HDFC for those who buy (arguably LIC sells insurance) policy from them or a surprise gift of one Mutual Fund unit with your Royal Sundaram insurance package. A whole new era of cross-selling game is waiting for Indian life insurance customers backed by a trained group of agents. Almost all the new insurance firms are ready with a swelling army of 250-300 marketing agents to ensure their policies are bought.
How would you get benefited with this foreign penetration? Some obvious answers are: you will face a wider choice of insurance programs tailored to your particular need, lower insurance prices; and you will receive higher quality services as competitors bid for customers. You have got exposure to wide insurance products and better services.
But, is LIC’s position at stake? Perhaps no, at least not now. The reasons behind it could be: It will take several years for private players to develop a healthy, vibrant and competitive insurance environment as LIC, which has to manage a wide network right across the country. Secondly, the awareness and familiarity of LIC are bound with the trust, build over a period of three decades. Thirdly, foreign insurers may not want to extract corporate dividends for at least 15 years - as it may take six to ten years before new operations show profits. Furthermore, these profits may be required to fund further growth. And at last, LIC has shown a growing inclination towards quality services for last five years - like online-premium payment mechanism or simplified relapsing of policy that could slow-down its defeat to the private baby insurers.
Now LIC seems to be in deep practice of what William Faulkner once said - "Don't bother just to be better than your contemporaries or predecessors. Try to be better than yourself".
Deepanjan Banerjee
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