Life Insurance Marketing in India (C) The Changing Product & Pricing Norms

LIC Rejigs its Portfolio Contd...

LIC also launched a new 'Bima Kiran' policy, which had an accident benefit and extended term cover beyond maturity period in addition to risk cover during the term of the policy. In addition to the new launches, LIC also made changes to its product portfolio by withdrawing certain schemes and bringing down returns on some others. In March 2002, the company withdrew 'Jeevan Sanchay,' its children's growth scheme and the children's money back policy due to the falling yield on investments.

It also brought down the assured returns on its newly launched schemes following a 0.5% rate cut by the Reserve Bank of India and the depressed sentiments in the market. Initially, Bima Nivesh offered about 10.5% assured return and it was reported that newer schemes would assure returns lower than 9.3% (Refer Exhibits III, IV & V for a comparison between the policies of LIC and other players).

In late 2001, LIC launched a special campaign to revive people's interest in its policies, which now carried customer-friendly incentives. A 30% waiver on late fees was offered (subject to a ceiling of Rs 250) during the period of this campaign. Additional incentives were allowed relaxation in the procedures for mandatory self-declaration of good health and offered spot revival facilities.

Future Implications

The issue of bonus rates on policies emerged as an important factor that could determine the future prospects of various players in the insurance industry. LIC was criticized for offering low bonus rates⁵ traditionally. However, many private players were apprehensive that, by increasing the bonus rates on its policies in the future, LIC could strangle them. Coincidentally, LIC announced a guarantee of minimum bonus and additional loyalty bonus on some of its policies. The company also offered attractive bonuses on its endowment policies.

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5] Insurance companies give policyholders a share in the company's profits in form of bonuses. Generally there are two
types of bonuses. Reversionary bonus is a guaranteed addition to the insured amount and is paid when the policy
matures (that is, when the sum assured becomes payable) or when the life assured died. Cash Bonuses are paid out
at periodical intervals.

Case Details

Case Code : MKTG028
Themes: Pricing
Case Length : 14 Pages
Period : 2000-2002
Organization : ICICI Prudential, Max New York Life, ETC
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Insurance

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