Life Insurance Corporation's Future Prospects

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LIC - After IRDA Contd...

Over 98% of LIC's branches had begun providing software assistance that helped the policyholders track premium payments, loans and claims positions. Information kiosks were set up in over 50 places across the country. The company also started an Interactive Voice Response System, to help customers get details of various policies over the telephone. LIC planned to tie up with corporate agents to enable customers to buy insurance products at banks or financial services companies or while buying a consumer durable. LIC also intended to use the services of brokers once brokerage concerns were allowed to operate in India. LIC initiated measures to revamp its service network and to open 600 new training centers. The new centers were to have a new training modules in the curriculum which focused on marketing. It intensified its research activities in order to get market feedback and tailor its products according to customer needs. LIC also planned to offer new products and schemes and enter new markets, especially in the global arena. LIC began exploring the possibility of entering the Nepalese, African, Middle-East, Mauritius, US and UK markets.

Under Section 27 A of the Insurance Act, 50% of LIC's investments had to be in central and state government securities and 25% in the social sector (comprising power, telecom, ports, roads, bridges, housing etc.) LIC was free to invest the remaining 25% wherever it wanted. LIC was hoping that the 25% mandatory investment in social sector would be waived in the near future. LIC also decided to leverage its brand value to increase its presence into more lucrative areas like the equity markets. A major area of concern was retaining employees and strengthening the agency system, which was the backbone of the life insurance business. LIC had 8.5 lakh agents outside its payrolls who reported to its development officers in branch offices.

As 80% of the business was brought in by just 30% of the agents, the private competitors were likely to make an attempt to poach the good agents. LIC, however, believed that there was no danger of its agents leaving, as it had a more competitive commission structure. Moreover, since IRDA had prohibited agents from working for more than one insurance firm, LIC could afford to relax a bit. The issue of loss of actuaries³ was another issue to be addressed. Of the 40,000 qualified actuaries worldwide, only 150 were in India. Since, the IRDA had stipulated that insurance companies could only use actuaries who were of Indian nationality, a fight for actuaries would be inevitable. LIC had recruited 65 actuarial assistants, and planned to create 200 such jobs each year.

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3] Industry professionals who design the life insurance benefit programs.