?India has, according to 2001 census, 65. 38% literacy rate. The literacy rate varies across rural (59. 4%) and urban (80. 3%) India. These contrasts in literacy levels are significant and have important implications for insurers. ?Literacy and education increases employability of the person in higher earning jobs and also brings about a change in perception about need for insurance. ?The median age in country was . Education level Political and legal environment IRDA Act 1999 ? The Bill allowed for up to 26% foreign equity participation in the insurance sector.
? The minimum paid up equity capital, excluding required deposits with the RBI and any preliminary expenses in the formation of the country, requirement of an insurer would be Rs 100 crore to carry on life insurance business ? Insurance business in Rural Sector: After the commencement of the IRDA Act, 1999, (Malhotra committee) every insurer would have to undertake such percentage of life insurance business in the rural sector as may be specified by the IRDA in this behalf.
It is mandatory for the new companies to meet the obligations relating to the rural and Economic environment Inflation rate: Inflation can also be one of the causes to change the scenario of the insurance sector. High inflation for instance, would tend to reduce the insurance business, particularly life, because the real value of the money paid back to the policyholder on maturity of the policy would go down and would, therefore, lose its attraction for the investor. Impact of income on insurance: Income level significantly affects the demand for life insurance. Life insurance becomes more affordable when income increases((Rubayah and Zaidi (2000)).
Socio-Cultural and technological environment ?Decline of joint family structure has added to need for insurance. ?New channels like Bancassurance, corporate agents and websites selling life insurance products are ubiquitous testaments to how the channels have grown in terms of not only selling, but also increasing awareness about life insurance. ?More innovative channels like a supermarket, a bank, a post office, an ATM, an internet kiosk or a departmental store could be introduced in the future.
. For example MetLife India, a subsidiary of global insurance giant, entered into a strategic tie up with Viswas, a Hyderabad based retail chain, to offer life insurance and other financial products in the rural areas. Company- LIC ? Life Insurance Corporation was formed as a government regulated monopoly in September 1956 by an Act of Parliament, (LIC Act 1956) with a capital contribution of Rs. 50 million. ? The total life insurance market can be judged on two parameters – premium collected and number of new policies underwritten. It can be seen that LIC has a market share of 53% which roughly amounts to Rs.
20000000 crores out of a total market of 4. 3 crore crores. ? The number of players in this segment have increased to 30 (15 in private sector), with Life Insurance Corporation (LIC) being the dominant player (market share of over Objectives • When The Life Insurance Corporation of India was set up in 1956, its primary objective was to propagate the idea and practice of life insurance in rural areas among financially backward people so that their risks were covered in the event of death. • The Life Insurance Corporation of India intends to increase the mobility of individual savings to the maximum extent possible.
• The Life Insurance Corporation of India seeks to employ the investments of its customers in the best possible manner while at the same time prioritizing matters of national importance. • The company aims at meeting the dynamic expectations of its investors by adding innovative schemes and products to its portfolio. Culture • LIC has had many problems relating to the efficient use of its human resources since the time it was set up. • Many of these problems related to the fact that it was a public sector organization. The corporation’s managers were too bureaucratic. • The work culture in the organization was sloppy.
• Strong trade unions made it difficult for managers to get the work done. • The corporation’s development officers focused on their own earnings and incentives, rather than on customer Product line • Schemes: money back plans, whole life plans, and term assurance plans, several special insurance plans for children, women, physically challenged dependants, and high net-worth individuals. • Pension plans – Jeevan Nidhi, Jeevan Akshay, Jeevan Dhara, and Jeevan Suraksha. • The company has 3 Unit plans – Market Plus, Profit Plus, and Fortune Plus. • Group schemes – Gratuity Plus, Group gratuity Scheme, and Group Leave Encashment Scheme.
• New plans- ULIP, health insurance • In 2005-06 , LIC added as many as Competitors of LIC ?Private players allowed in the market in 2000 ? Currently, close to 30 public and private firms in India dealing in life insurance Competitors of LIC Source: IRDA annual report 2008 An overview of the competitive life insurance/ Comparisons between the trio Distribution Network vLIC 8 zonal offices, 100 divisional offices, 2048 branch offices. Agents over 10 lakhs and 26 bancassurance partners vICICI Prudential 2100 branch offices, agents over 2. 9 lakhs, 18 bancassurance partners vBajaj Allianz 1200 branches, agents over 2. 5 lakhs, tie-ups with 5 co-operative banks Comparisons between the trio (contd) ?Grievances?
Grievance settlement ratio was 90% for ICICI Prudential, 81% for Bajaj Allianz and 12% for LIC • Promotion expenditure O LIC – Rs. 116 crore in 2008 O Bajaj Allianz – Rs. 17. 7 crore in 2008 O ICICI Prudential – Rs. 15. 4 crore in 2008 Financial comparisons with competitors Bajaj Allianz – S. W. O. T. ICICI Prudential – S. W. O. T. LIC – S. W. O. T. Comparison of similar policy of competition Market Size and Growth ?205. 9 million households ? 61. 4 million urban households ? Rs 1. 5 lakh crore premium collected (industry) in 2006-07 (19. 9% growth vs 2. 9% growth in world market) ?
Life Insurance penetration ? 3 % Consumer Behaviour ?Cultural Factors ? Unnatural events ? Sub culture (Urban-Rural divide) Awareness, Per Capita Income Middle class – for protection & savings Upper class – for investment, tax benefit & savings ?Social Factors ? Reference group, family, status ? In joint families less stress on buying insurance ? Women factor ?Personal Factors ? ? ? ? ? ? Buyer’s age Stage in Life cycle Occupation Economic Circumstances Personality Life style Consumer Behaviour ?Benefit that consumer is seeking Consumer Behaviour ?Where are the present investments?
Factors Influencing final choice of life insurance Type of Insurance preferred by consumers Major factors influencing decision to purchase insurance 10% 7% 4% 12% advertisement agent friends and nieghbours family co workers 55% others 12% preference for mode of payment of premium 2% 2% 28% 8% single premium annual half yearly monthly Quaterly 60% Major decision maker in buying the policy 17% 1% policy holder 15% 67% spouse parents children Short term objectives ?To invest an additional Rs. 4000 crore in the stock market ? It would employ 11 lakh more agents to double its field workforce Long term objectives ?
Spread life insurance to the rural areas and socio-economically backward classes ? Maximize mobilization of people’s savings by making insurancelinked savings more attractive ? Involve all people working the Corporation to the best of their capability in furthering the interests of the insured public.
References ? ? ? ? ? ? ? ? ? ? ? ? ? ? www. irdaindia. org http://www. mouthshut. com/review/Life_Insurance_Corporation-129119www. licindia. com The Marketing Whitebook 2009-2010 Marketing Management – 13th Edition, Kotler, Keller, Koshy & Jha Life Insurance in India : Emerging Issues (Indira Gandhi Institute of Development Research).
http://www. financialexpress. com/news/lic-to-hike-advertising-spend-to-t http://www. business-standard. com/india/news/insurers-miss-outrural-so http://www. financialexpress. com/news/pvt-players-snuffing-life-out-of-m http://www. rediff. com/money/2005/dec/19guest1. htm http://en. wikipedia. org/wiki/Tertiary_education_in_India http://www. licindia. com/objectives. htm http://www. icmrindia. org/casestudies/catalogue/business%20strategy5/ http://www. topnews. in/lic-invest-rs-4000-cr-stock-markets-march-2009- THANKYOU!!.