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Marketing Strategies Adopted by LIC
of India
In order to facilitate their consumers expediently LIC of India has adopted wide-ranging
marketing strategies to acquire reach, frequency and impact onto the panorama of life insurance
coverage. This section of the research study will focus on the diverse marketing strategies
adopted by LIC of India to reduce the competitive pressure and uphold their first position in the
Indian life insurance market.

“Individual satisfaction leads to Group
satisfaction”

Facilities to their existing
employees
LIC of India believes and functions on the principle that if they have to continue as a market
leader then it is imperative that the employees of the organization should be satisfied. LIC of
India have worked thoroughly and introduced many new strategies as a part of marketing tool
to satisfy their employees. LIC of India provides amenities to their employees such as:

Housing Loan to Agents
LIC of India offer home loans to the agents of the corporation under the Agents Housing
Scheme. LIC of India has a separate sister concern working under LIC- HFL from where many
housing schemes are transferred for better throw.

Meal Coupons to employees
In Sep. 2010, LIC of India has launched a very unique facility to their employees at every
level. The amount of Meal coupon is decided depending upon the hierarchical position of every
employee. The organization is also planning to introduce petrol/Diesel/CNG coupons for their
employees very soon.

Sports
The employees of LIC of India are encouraged to take part in several sports activities for
physical fitness and overall personality development. The employees of LIC of India have also
represented the corporation at various national and international echelons. With a view to retain
competitive excellence in the field of sports and to compete on equal footing with other
organizations, LIC of India has recruited many employees from their Sports Recruitment Quota.

Employees’ Training
LIC of India has started providing training to their employees at every hierarchical position.
LIC of India has formed a separate Human Resources Development / Organizational
Development (HRD/OD) Department focusing on building and strengthening competencies,
commitment and building learning and performance centered culture in the organization. For
this purpose training sessions are conducted in a big way across all zones using in-house as
well as National / International Training Institutions of repute. LIC of India has organized
training programs at IIM‘s, MDI Gurgaon, certificate AWI program by CII England and many
others.

Increasing the number of individual
Agents
LIC of India is the number one service provider and agents are a pioneer field force in the
procurement of the LIC‘s business. LIC of India have more than 23378 authorized Agents
across the country, which can collect the premium (including ULIP but excluding HI Policies) in
CASH or CHEQUE and can issue a valid receipt instantly.

Introduced Life - Plus
Offices
LIC of India has introduced a new and unique system in May 2009 as Life- Plus office to lower
down the heavy rush on Branch offices cash centers. Life- Plus office is being maintained by
LIC of India and managed by the top Development officers of the corporation known as Senior
Business Associates (SBAs). At Life – Plus counter one can deposit premium, new policy
insurance, I. T. certificate, loan / surrender value policy status etc. which has become a most
successful channel and reduce burden of Branch offices and somehow working as Mini Branch
offices of LIC of India.

Increase in Women
employees
LIC of India was finding difficulty in providing services for women especially in rural and
semi urban locations. Henceforth, LIC of India has planned to recruit many women employees
in the organization. At every stage in the Corporation, women officers/employees have
contributed significantly. In the Corporation, Committees for prevention of sexual harassment
are formed at the workplace. These committees are functioning effectively at Central Office,
Zonal Office and Divisional Office level so that the working of female employees must not get
affected and can thoroughly contribute towards economic development of LIC of India and also
for the country as a whole.
Category Employees Total Number No. of Women
Class-I Officers 28417
Development Officers 25638
Class III/IV employees 65712 18059
Total 119767 24295


Table3 gives information regarding the strength of women employees in the various
categories at different levels in the organization till 31st March 2012.

Table3: Number of Female Employees in LIC of India








Source: 55
th
Annual Report
of LIC of India

The total population of women in India is 614.4 million in comparison to the total men
population 655.8 million. It is very essential to have a separate marketing strategy for
such a huge populace. Table3 put in force to have new marketing strategies to be adopted
by LIC of India to capture the female market and the present need for women
empowerment.

Bancassurance and
Alternate Channels
There are many Banks who work as the corporate agents for the corporation and have
contributed in the Bima Bank campaign and has encouraged New Business performance.
Dena Bank and Corporation Bank are few examples of corporate banks. The
Bancassurance & Alternate Channels share to total businesses 1.66% in Number of
Policies (NOP) and 4.17% in First Premium Income (FPI).

Corporate
Communication
LIC of India always has a thrust to fortify ―Brand LIC‖ and to reinforce the brand
connect with emerging market segments. In order to achieve that LIC of India has made a
consistent media presence in national and regional media. LIC of India has also sponsored
many programs of National and International regimes. LIC of India has conducted many
activities such as campaigns in newspapers, consistent coverage of products in several
magazines, Radio jingles on FM channels and radio stations on All India Radio, TV
channels and on websites like Facebook, Orkut, Twitter, You tube etc. Recently, LIC of
India have reinforced the theme ‗Why go anywhere else‘ to have a strong appeal in
customer‘s mind.

International Joint
Ventures
LIC of India demeanor its operations not only within the country but also have
established its various operations outside the country. LIC of India has opened its first
branch in 23rd July, 1989, in Bahrain to cater the life insurance needs of Non-Resident
Indians (NRIs) and local population in the Gulf by issuing life insurance policies in US
Dollars. LIC of India directly operates through its branch offices in Mauritius (Port
Louis), Fiji (Suva & Lautoka) and United Kingdom (Wembley). LIC of India also has its
branches in Nepal, Lanka and Kenindia. LIC of India have recently finalized a joint
venture company in Saudi Arabia and is now planning to foray into New Zealand.
Marketing strategy of max life insurance

 Financial strength
 Safety of our policyholders and shareholders money
 Consistency of returns to policyholders, shareholders and distributors
 Ability to offer feature rich products
 Balanced distribution touching more customers




Quality of Advice

 Customer relationships build on the foundation of 'Trust'
 Need and Risk profile based customer solutions
 Enabling customers to take informed decisions
 Through well trained and knowledgeable team

 Service Excellence

 Caring mindset at all customer touch points
 Bias for long-term customer relationships
 Responsive service
 Continuous improvement in customer processes


 Superior Human Capital

 Great place to work
 Inclusive meritocracy
 Opportunities for development and growth
 Direct and open communication

 Corporate Governance

 Honest organization that always does what is right
 Bias for win – win actions
 Predictable outcomes and delivery of promise
 No compromise on compliance

 Value Driven Culture

 Caring, Credibility, Collaborative, Excellence
 Integrity in all what we do








New IRDA regulations
Over the past couple of years Insurance Regulatory and Authority had been driving the
agenda of customer centricity in Indian life insurance industry. While the regulator has
brought about several regulatory changes, life insurers have taken several steps to enhance
customer focus. Regulations related to products have been undertaken not only to change
product design but to also bring a positive change in sales practices.



The new guidelines issued by The Insurance Regulatory and Development Authority (IRDA)
for life insurance products specially traditional products, is an attempt at making life
insurance true to its core value, more transparent and customer friendly. Most of the new
guidelines require noteworthy changes in processes, systems, as well as fundamental changes
to product design and offerings.

Keeping in view the quantum of work on designing a new product portfolio and training of
distribution intermediaries, the regulator has also decided to postpone the implementation
date of the guidelines by 3 months to January 2014.

Steps in the right direction

The guidelines follow overarching themes of providing 1. Transparency 2. Protection 3.
Customer centricity 4. Long term focus

1. Transparency

In order to bring transparency, the regulator has ensured that all insurance products provide
the prospective policyholder a customised benefit illustration on guaranteed and non-
guaranteed benefits at gross investment returns of 4% and 8% respectively for all products.
Currently, this is mandatory only for ULIPs. This benefit illustration should be signed by the
customer and the agent as a part of the policy contract. This will give policyholders an
indicative idea of the benefits they can expect not only at maturity, but also every year of the
policy term as well.

Another step to ensure transparency in the requirement to set up a "With Profit Committee",
at the board level of every insurance company. This committee will approve asset mix and
expense allocated for and investment income earned on the fund. This in turn will lead to
improved and more transparent corporate governance in the administration of participating or
'with profit' policies.

2. Protection Orientation

The regulator has directed that the minimum sum for all policies will now be 10 times of the
annual premium for people below 45 years and above 7 times for 45 years and above. At any
point the death benefit will have to be at least 105% of all premiums paid till date. Through
this the regulator aims to promote life insurance for its core value of protection.

3. Customer Centricity

As per the new norms, traditional policies will now have better surrender value after the
completion of 5 years. If the policyholder has to exit their policy before completion of policy
tenure, he/she will be entitled to a higher surrender value especially in early part of the policy
tenure. Currently, there are no preset rules. In the new regime the minimum guaranteed
surrender value will be 30% of all premiums paid going up to 90% of the premiums paid in
the last two policy years. Through this step the regulator has acted in the larger interests of
the consumer by providing liquidity for sudden emergencies that may occur. Thus with these
new regulations customer retention and need based selling becomes even more important by
the day.


4. Long term focus

In order to re-emphasize the long term nature of the life insurance business the guidelines
have also correlated agents' Compensation to the policy terms. Short-term policies will now
have a lower commission than traditional products with a policy term of 12 years or more. In
case of regular premium insurance policies, a policy with a premium paying term (PPT) of
five years will limit commissions to 15% in the first year, 7.5% in the second and third year
and 5% subsequently. Products with PPT of 12 years or more will have first year
commissions up to 35% in case the company has completed 10 years of existence and 40%
for the company in business for less than 10 years. This will incentivize intermediaries in
selling long-term life insurance products espousing benefits for disciplined savers.

























Slr reqirement for insurance




IRDA norms for reinsurance
In exercise of the powers conferred by section 114A of the Insurance Act, 1938, sections 14
and 26 of the Insurance Regulatory and Development Authority Act, 1999, the Authority, in
consultation with the Insurance Advisory Committee, hereby makes the following
regulations, namely:
Short title and commencement
1. (1) These regulations may be called the Insurance Regulatory and Development Authority
(General Insurance – Reinsurance) Regulations, 2013.
(2) These Regulations replace the Insurance Regulatory and Development Authority (General
Insurance – Reinsurance) Regulations, 2000.

(3) These regulations shall come into force on the date of their notification in the Official
Gazette.

Definitions

2. In these regulations, unless the context otherwise requires:

(a) ‗Act‘ means the Insurance Regulatory and Development Authority Act, 1999 (41 of
1999);

(b) ‗Authority‘ means the Insurance Regulatory and Development Authority established
under sub-section (1) of section 3 of the Act;

(c) ‗Cedant‘ is an insurer who enters into a reinsurance contract or a reinsurer who enters
into a retrocession contract;

(d) ‗Cession‘ means the part of insurance passed to a reinsurer by the insurer which issued a
policy to the original insured or part of contract ceded by a reinsurer to a retrocessionaire;

(e) ‗Cover note‘ is a written document issued by the reinsurer or the reinsurance broker
authorized by it, detailing the contract terms and conditions of the contract and the details of
the percentage of risk placed with each reinsurer;

(f) ‗Facultative‘ means the reinsurance of a part or all of a single policy in which cession is
negotiated separately and that the reinsurer and the insurer have the option of accepting or
declining each individual submission;

(g) ‗Indian reinsurer/s‘ means the insurer/s who carry on exclusively reinsurance business
and is notified in this behalf by the Authority under section 101A of Insurance Act.

(h) ‗Pool‘ means any joint underwriting operation of insurance or reinsurance in which the
participating insurer/s or reinsurer/s assume a predetermined and fixed interest in all business
written;

(i) ‗Retrocession‘ means the transaction whereby a reinsurer cedes to another insurer or
reinsurer all or part of the reinsurance it has previously assumed;

(j) ‗Retention‘ means the portion of the risk which an insurer assumes for his own account;

(k) ‗Reinsurance contract‘ is the legally binding document on all the parties that provide a
complete, accurate and definitive record of all the terms and conditions and other provisions
of the reinsurance contract;

(l) ‗Treaty‘ means a reinsurance arrangement between the insurer and the reinsurer, usually
for one year or longer, which stipulates the technical particulars and financial terms
applicable to the reinsurance of some class or classes of business;

(m) Words and expressions used and not defined in these regulations but defined in the
Insurance Act, 1938 (4 of 1938) or the General Insurance Business Nationalisation Act, 1972
(57 of 1972) or Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),
rules made thereunder shall have the meanings respectively assigned to them in those Acts or
rules as the case may be.

CHAPTER II

3. Procedure to be followed for Reinsurance Arrangements

(1) The Reinsurance Programme of every (re)insurer shall be guided by the following
objectives to:

(a) Maximize retention within the country;

(b) Develop adequate capacity;

(c) Secure the best possible protection for the reinsurance costs incurred;

(d) Simplify the administration of business.

(2) Every (re)insurer shall maintain the maximum possible retention commensurate with its
financial strength, quality of risks and volume of business. The Authority may require an
(re)insurer to justify its retention policy and may give such directions as considered necessary
in order to ensure that the Indian (re)insurer is not merely fronting for a foreign insurer.

(3) Every insurer shall cede such percentage of the sum assured on each policy for different
classes of insurance written in India to the Indian reinsurer/s as may be specified by the
Authority in accordance with the provisions of Part IVA of the Insurance Act, 1938.

(4) The reinsurance programme of every (re)insurer shall commence from the beginning of
every financial year. Every (re)insurer shall submit to the Authority, his reinsurance
programme for the forthcoming year, 45 days before the commencement of the financial
year. Notwithstanding what is stated above, the Authority, if it considers necessary, may
direct the (re)insurer to carry out changes to the reinsurance programme filed with it and the
(re)insurer shall incorporate such changes forthwith in their reinsurance programme.

(5) The (re)insurers shall ensure that the reinsurance arrangements in respect of catastrophe
accumulations, using various realistic disaster scenario testing are adequate and approved by
their Board of Directors before filing the same with the Authority along-with their
reinsurance programme.

(6) Within 30 days of the commencement of the financial year, every (re)insurer shall file
with the Authority a copy of every reinsurance treaty contract wording and excess of loss
cover covernote in respect of that year together with the list of reinsurers their ratings and
their shares in the reinsurance arrangement. All reinsurance arrangements must be
documented and filed with the Authority within 30 days of commencement of the financial
year.

(7) The Authority may call for further information or explanations in respect of the
reinsurance programme of an (re)insurer and may issue such direction, as it considers
necessary.

(8) Every (re)insurer shall file with the Authority any new reinsurance arrangement, giving
full details, documentation, reasons for such an arrangement together with the approval of the
Board of Directors within 15 days of holding the Board meeting. The (re)insurer shall further
ensure that the renewal of such a reinsurance arrangement coincides with financial year.

(9) (Re)Insurers shall place their reinsurance business outside India with only those
reinsurers who have over a period of the past five years counting from the year preceding for
which the business has to be placed, enjoyed a credit rating of at least BBB (with Standard &
Poor) or equivalent rating of any other international rating agency. The (re)insurers shall
consider past claims performance of the reinsurers while accepting their participation in the
reinsurance programme. Placements with other reinsurers shall require the approval of the
Authority. (Re)Insurers may also place reinsurances with Lloyd‘s syndicates taking care to
limit placements with individual syndicates to such shares as are commensurate with the
capacity of the syndicate.

(10) The Indian Reinsurer shall organise domestic pools for reinsurance surpluses in fire,
marine hull and other classes in consultation with all insurers on basis, limits and terms which
are fair to all insurers and assist in maintaining the retention of business within India at such
percentages as the Authority may specify from time to time. The arrangements so made shall
be submitted to the Authority within three months of the formation of such pools, for
approval.

(11) Surplus over and above the domestic reinsurance arrangements class-wise can be placed
by the (re)insurer independently with any of the reinsurers complying with sub-regulation (7)
subject to the following limits of the total reinsurance premium ceded outside India being
placed with any one reinsurer:

Rating of Reinsurers (as per Standard & Poor and applicable to other equivalent international
rating agencies) Limit of cession allowed under Regulation 3(11)
BBB of Standard & Poor 10%
Greater than BBB and upto & including AA of Standard & Poor 15%
Greater than AA upto & including AAA of Standard & Poor 20%
Where it is necessary in respect of specialised insurance to cede a share exceeding such limit
to any particular reinsurer, the (re)insurer may seek the specific approval of the Authority
giving reasons for such cession.

(12) Every insurer shall offer an opportunity to the Indian Reinsurer to participate in its
facultative and treaty surpluses before placement of such cessions outside India. The Indian
reinsurer shall set up appropriate market-wide reinsurance arrangements for this purpose.

(13) Every (re)insurer shall be required to submit to the Authority information and returns
relating to its reinsurance transactions in such forms as the Authority may specify or require
together with its annual accounts.

Inward Reinsurance Business

4. (1) Every (re)insurer wanting to write inward reinsurance business shall have a well-
defined underwriting policy approved by its Board of Directors for underwriting inward
reinsurance business.

(2) The (re)insurer shall file with the Authority, at least forty five days before the
commencement of each financial year, its underwriting policy stating the classes of business,
geographical scope, underwriting limits and profit objective.

(3) The (re)insurer shall ensure that decisions on acceptance of reinsurance business are made
by persons with necessary knowledge and experience.

(4) The (re)insurer shall also file any changes to the underwriting policy as and when a
change is made duly approved by its Board of Directors.

Outstanding Loss Provisioning

5. (1) Every (re)insurer shall make outstanding claims provisions for every reinsurance
arrangement accepted on the basis of loss information advices received from Brokers/Cedants
and where such advices are not received, on an actuarial estimation basis.

(2) In addition, every (re)insurer shall make an appropriate provision for incurred but not
reported (IBNR) claims on its reinsurance accepted portfolio on actuarial estimation basis.











Salient features of IRDA norms for insurance
The new guidelines issued by IRDA aim to make insurance policies more customer friendly
The Insurance Regulatory and Development Authority (IRDA) has notified changes made to
the guidelines on design of life insurance products in the gazette in February 2013. All
existing group products will stand withdrawn from 1 July 2013 and all individual products
from 1 October 2013.
These guidelines, effective October 2013, aim to make insurance policies friendlier. Listed
below are some salient features of these guidelines.
The new guidelines have introduced three broad categories of products—Traditional
insurance plans, variable insurance plans (VIPs) and unit-linked insurance plans (ULIPs).
Traditional plans: According to the guidelines, the product design of traditional plans would
remain almost the same. These plans would continue to come in two variants: Participating
and non-participating plans.
For participating polices the bonus is linked to the performance of the fund and is not
declared or guaranteed before. But, the bonus once announced becomes a guarantee. It is
usually paid in case of death of the policyholder or maturity benefit. This bonus is also called
reversionary bonus.
In case of non-participating policies, the return on the policy is disclosed in the beginning of
the policy itself. In both cases, a policyholder should calculate the net return to assess the
total costs.
New traditional products will have a higher death cover. For regular premium policies, the
cover will be 10 times the annualised premium paid for those below 45 and seven times for
others. The minimum death benefit in case of traditional plan is at least the amount of sum
assured and the additional benefits (if any).
ULIPs: In case of ULIPs, life insurers will now have to inform policyholders of the reduction
in yield of their ULIPs on a monthly basis. Reduction in yield—difference between gross and
net yields (expressed in %)—refers to the lowering of investment growth within a fund due to
various charges.
The net yield can be arrived at after deducting all prescribed charges from the gross yield.
Insurers will also issue annual certificates mentioning the premiums paid, charges and taxes
deducted from the fund value, and the final payments made.
Variable insurance plans: The guidelines have mentioned that VIPs will guarantee a certain
minimum rate of return at the beginning of buying a policy—though they are linked to an
index. As VIPs will be treated at par with ULIPs, those products will follow the same
commission package for ULIPs. Under linked products, agents are entitled to commission of
up to only 10%. The charge structure and discontinuance norms of VIPs will be in line with
ULIPs.
This basic minimum rate of return is also called floor rate. Additional benefits depend on the
type of the policy. In the case of a non-participating VIP, the additional benefit will be
mentioned at the time of buying the policy and may accumulate in the policy at specified
intervals.
Participating VIPs normally provide a regular non-guaranteed bonus, which will be
guaranteed once declared. Each policyholder will have a policy account in which the
premiums—net of charges—will get credited. The minimum floor rate and additional rates
will apply to this balance. On maturity, the policyholder will get the value in the policy
account.
Reduced commissions
The IRDA guidelines have reduced commissions on short-term policies and have linked the
quantity of commissions to the premium paying period for all products.
Agents of single premium non-pension products will receive remuneration of up to 2% of the
premium paid. In case of regular premium insurance policies, a policy with a premium paying
term of five years will pay up to 15% in the first year, 7.5% in the second and third year and
5% subsequently. As the premium paying term increases to 12 years and above, the
commissions payable in the first year increases up to 35% in case the company is at least 10
years old and 40% in case the company is less than 10 years old. The regulator has framed
the entire format on the basis of tenure of the policies
In case of direct sale of products, such as the online mode, there will be no commissions and
this benefit will be passed on to the policyholder.
Death benefit & surrender value
The minimum death benefit in case of VIPs and ULIPs is the policy account value or higher
of the two. The minimum guaranteed surrender value for traditional plans has been increased.
For traditional plans, with a premium paying term of 10 years or more, there will be a
guaranteed surrender value after three years. For premium paying terms of less than 10 years,
the guaranteed surrender value will accrue after the second year. This guarantee surrender
value will be 30% of total premiums paid.
Currently, the guaranteed surrender value is usually 30% of all the premiums paid minus the
first-year premium and is paid only if premiums have been paid for three years. According to
the new guidelines, the surrender value becomes 50% between the fourth and the seventh
years, after which the insurer would have to file a surrender charge that needs to be cleared
by the regulator.
Health insurance
The IRDA in February 2013 has also issued guidelines to standardize health insurance in
India. Now, all health insurance policies would be renewable for lifetime and will have an
entry age of at least 65 years. All policies except customised ones will be renewable for life
time. Insurers have to settle claims within 30 days after the receipt of all the documents. The
IRDA has introduced 15 days free-look period—A period where a new insurance
policyholder is able to terminate the contract without penalties such as surrender charges.
In case of a claim, no-claim bonus can be reduced proportionately, however it won‘t be zero.
In a health insurance policy, when a renewal is made without any claims in the preceding
period of the policy, the insurer offers a bonus to the policyholder. This bonus is usually in
the form of a discount in the premium around 5% for every claim-free year. The bonus can go
up to 50%, provided no claim is made for 10 consecutive years. Any discount or loading in
the renewal premium will be mentioned to the policyholder at the time of policy renewal.