Life Insurance Corporation's Future Prospects

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Background Note Contd... After August 2000, private licenses were given to HDFC-Standard Life, ICICI Prudential and Max New York. International companies that entered the sector included Lombard, Zurich, Allianz, Royal & Sun Alliance, Chubb Insurance, AIG, ING and CGNU, while ICICI, Hero Honda, Dabur, the Tatas, the Birlas, SBI, HDFC and Reliance were the major Indian players. With the opening up of the insurance sector, media reports predicted tough times ahead for LIC. A report revealed that LIC was 70% over-staffed, which meant that its competitors would have substantial labor-cost advantages. The report also predicted that LIC might find it difficult to retain and protect its extensive agent network and, in particular, to ensure that the most talented and influential agents stayed with it. LIC was also expected to face fierce competition on the new product development front. LIC - After IRDA In November 1999, even as the IRDA Act was being debated in Parliament, LIC begun preparations for meeting the threat posed by private players.

The company appointed consultants Booz, Allen and Hamilton to do a scenario-building exercise, suggest areas for process re-engineering, and recommend ways to sharpen customer focus. LIC gave top priority to introducing over-the-counter (OTC) facilities that would help it serve its customers better. By 2000 it had computerized and locally networked all its 2,048 branches. The speed of service delivery, particularly in the case of claims-settlement, had also improved. The total outstanding claims were brought down to 2.74% in 2000 from 3.47% in 1995.

LIC realized that to be able to retain its position, it would have to be match the technological sophistication of the multinationals. LIC extended its Metropolitan Area Network (MAN) system from Mumbai, Delhi and Bangalore to Ahmedabad, Pune, Hyderabad, and Calcutta. This enabled LIC customers to pay premiums and get status reports from any of its branches in these cities. LIC planned to eventually connect upto 27 cities in a Wide Area Network (WAN). E-mail and Internet facility were introduced at over 600 additional branches. A mechanism was put in place to facilitate insurance premium payment over the Internet in cities that were covered by the WAN.

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