Introduction:
The development of mankind from Adam and Eve is customized to change. The change is a common phenomenon that originates from the destruction of one living being and ends with the introduction of another.
The principle of destruction leads to becoming always a state of becoming rather than a state of being. It not only affects the future development of the greatest living being of this planet i-e Mankind but also leads to living under unpredictable uncertainty. The risk factor started to trigger up due to uncertainty which could not be predicted.
The advent of insurance paved way for not only to offload the risk composition of life of the living beings but also to maintain the phase of the development through the destructive stumbling blocks which are on the way. The purpose of the insurance took place by undertaking the risk of the living being through the payment of small consideration to the underwriter who in turn extends assurance.
The life insurance industry in India emerged through the establishment of a life insurance company during the early part of the year 1818, through the establishment of an Oriental insurance corporation in Calcutta. The role of private participation in the life insurance industry during the nascent stage was quite remarkable but the companies were not able to satisfy the insured, then later liquidated. During the year 1956, the government has considered the welfare of the people and finally given shape for the separate entity exclusive for insurance by synergizing all individual companies through the process of nationalization.
That nationalization process led to a gathering of 245 Indian and foreign Insurance companies for the development of LIC, in the year 1956. In due course, LIC has become and emerged as a state-owned monopoly in the industry through the establishment of 2048 branches, 100 divisional offices, 7 zonal offices, and a corporate office which illustrated the metamorphic status of the organization not only as giant insurance corporate player in India but also across the globe.
The problem of the study :
The wide range of economic reforms was initiated in the year 1991 through the advent of LPG, which not only brought forth drastic changes in the functional set up of a country but also in the structure of the insurance sector, routed through the examination carried out by the Malhotra Committee. The recommendations of the committee were mainly fostered to open up the sector for private players initially through the legal framework of IRDA, to enhance the insurance penetration in India to the Global standards, to promote the variety of new products, to afford better service and to reduce the intervention of the role of Govt in the public sector units.
The opening up of the battlefield, elevated the life insurance industry to have 16 insurers, led to a change in the market characteristics of the industry from monopoly to perfect competition which embeds not only the cause of market pressure to LIC but also fostered to undergo a legal framework of IRDA. Due to the invasion of new private players during the nascent development of industry, the growth in the volume of annual premiums of LIC has come down from 564% to 109% between 2000-01 and 2002-03 respectively.
In addition to the above, due to metamorphic developments in the industry during the first five years, the biggest entity which has more than 10 lakh man selling agents, lost its market share by 22%. It is an order of the day, to revamp the marketing strategies of the giant entity not only to overcome the private combatants in the industry but also to expand the market share further by capturing the untapped market potential of 70%. The above enlisted could be achieved through the renovation of Marketing Mix, through the introduction of Right “Ps” to address the intricacies of LIC as well as to enhance the standards of performance.
In this paper, an attempt is made through the following marketing mix of Right product, Right Premium charge, Right Place, Right Promotion, Right people and Right process to address the various issues of the modern insurance industry.
Objectives of the study:
To develop the innovative products for LIC through value addition, to address the ultimate needs of the policyholders.
To fix the righteous premium charge on every policy to the tune of modern actuarial tables and regular consumption pattern of the households
To identify the ideal market place or region to exploit untapped opportunities.
To sell the most suitable schemes of any kind to the prospective policyholders, require appropriate sales promotion strategies by installing the principle of AIDA( Attention, interest, desire, and action)
To identify the right individuals not only for the sale of insurance products but also to maintain the terms of insurance contracts throughout the term.
To render the best quality of service to the policyholders not only during the moment of sale of policies but also at every juncture through the installation of TQM
Right Product: It is an order of the day for LIC to design new products through the financial engineering department, to cater to the vibrant needs of the divergent classes of people.
i) Products for Rural Population :
It is imperative to note that 75% of our population is living in the rural belts of the entire country. The major product line of LIC mainly depends upon the per capita income of the urban and semi-urban areas but not to the tune of rural potential, though the savings to income ratio of the rural households are 30% more than the urban population. LIC should aim at the savings pattern of rural households through specific needy savings products at first along with an insurance cover rather pure insurance product.
ii) Products for farmers :
It is the most important juncture to develop life insurance products for rural farmers and farmworkers. The design of the insurance products should be able to address the plight of farmers in making the regular payment of premiums due to fluctuations in the agricultural income due to unpredictability of monsoon which drastically affects the maintenance of the insurance contract with the insurance giant. During the year 2,000, in Andhra Pradesh, more than half a million number of policies were lapsed due to the inability of the farmers during the periods of famine and drought. The product should facilitate the poor farmer to maintain the insurance contract through flexible structure payment of premiums.
iii) Products for school children and teachers:
During the year 2004, In Kumbakonam, the fire accident took place in the school massacred the lives of 99 budding children due to the defective design of the building. During recent days, work-site policies are preferred by not only the teachers but also office goers to evade the risk of terrorism more specifically out of homicide.
iv) Products for Phone/ Cellular Subscribers:
Due to the advent of LPG, the telecom industry has also changed its mask from the monopoly to perfect competition. This led to the induction of many private players in the industry and permitted Foreign equity participation with Indian private players (Bhartitel & Odafone), put forth stiff competition among the industry. The developments in the telecom industry reached a nook and corner of this subcontinent, which greater market potential like the insurance industry.
The BSNL, MTNL, etc are not only renowned entities for the promotion of landline but also cellular connections. The state-owned entities are outperforming through many competent schemes during the able leadership of the Minister for Information and Technology. The market potential of the state-owned entities could be considered jointly for the promotion of either a phone connection with life insurance package or insurance product with telephone connection, through a win-win situation, to grab the potential of two different industries, through a conglomerate merger in between them.
v) Products for the oil industry:
The state-owned entities are offering the smart card for the consumption of oil products at their retail outlets. LIC should develop a righteous product for the smart cardholders who regularly purchase /consume oil products through the development of any kind of tie-ups. The payment of premiums could also be facilitated through the retail outlets, through E-Network.
Righteous Premium charge:
During the modern days, the premium of the policies could be found out through the premium calculator of the web portal of LIC only by the computer literates, not by all. The fixation of the premiums normally done by the agents who do the major volume of sale of policies for LIC.
The premium of the policies are normally fixed by the agents only following the actuarial tables, to the tune of 90s’, are not verified but simply accepted by the administrators who at the helm of affairs to issue the policy documents. Nowadays, the awareness among the policyholders/ prospective policyholders have gone up due to disclosure norms of IRDA, which elevated them to compare the various best possible rates of substitute products of the other private insurers.
i) Premium payment Vs Consumption :
According to the Income theory, the consumption expenditure and investment or savings of the individuals are mutually exclusive out of the total incomes earned by them. During the globalization era, the consumption expenditure of the individuals has gone up due to the invasion of Americanization which drastically inflicted the behavior of savings or investment of the individuals. The consumption of the population is to be maintained not only for the welfare of industries but also to attain a growth rate of 9% during the year 2010, to the tune of our PM’s expectation.
The premium payment of the policyholders should not put them in trouble to meet out the consumption expenditure, to be collected by the insurance giant during the moment of purchase through the introduction E- Network across the country, which not only facilitates the business establishments to join under one family to enhance the volume of sales with the policy-holders but also facilitating them to make the payment of premiums as a certain percentage of purchase without any hassle to the insurer.
ii) Premium calculators at regional languages:
The premium calculator, now available in the web portal should not be a stumbling block, instead, it should pave the way as a user-friendly system, overcome the linguistic barrier and so on.
Right place :
The place of demand for insurance products should be identified. In India, the untapped potential amounts to 70 % in the insurance industry ( Yojana, April 2006., p.21). To grab the market potential, the place of reaching the insurance contract only should be at the doorsteps of the prospective policy-holders during the initial periods, to install the principles of Customer relationship management.
Right promotion:
It is inevitable for the insurance giant to coin new promotional strategies to penetrate the prospects of the private players. The sales promotion of insurance policies is to be recast to the modern environment, at the doorsteps of the prospective policyholders.
Every player in the industry is very keen to mop up the untapped rural market potential 72% of the total population, which warrants not only a different strategy for the public sector but also private sector players in the industry. Though LIC sells the insurance policies through 6 different nationalized banks and 2 District level co-operative banks under the category of corporate agents, which further requires more sharpened tools of promotion, to overcome the threats of private players.
i) Orphanage Houses/Homes:
In this country, more than 10,000 listed orphanage and old age houses are existing, could be made use of further promotion of insurance policies, paves way for them to earn marginally through the sale It not only portrays the concern on the above-mentioned houses but also to partake in the insurance Olympiad.
ii) Self Help Groups:
To tap the rural market potential as well as to reach the nook and corner of the rural belts of the entire sub-continent, the Self-help groups are the better entities to sell the insurance policies across the country, to reach the prospective policyholders at their doorsteps and to serve better to the tune of their requirements. To have the wider coverage to the tune of Public sector insurer, 4.6 lakh SHGs are the righteous and an appropriate tool of promotion of life insurance policies.
iii) Non Governmental Organisations:
The third better entity classification for the promotion of the sale of insurance policies in India is NGO, which is 2,155 in strength, mainly focusing on the rural development, to uplift rural India in line with industrial sectors. The NGOs are the better network, who can serve as smart as possible not only to the tune of the rural population but also to the insurer.
iv) Petro assurance:
Nowadays, the petrol pump agent business doesn’t attract many business people due to frequent fluctuations in oil prices, due to fluctuations in international oil prices. Recently, most of the petrol pump owners are unhappy due to lesser profit margins where the heavy gathering is normally taking place. This will be identified as a better opportunity for LIC to sell the policies at the doorsteps of the consumers of oil products, through an establishment of tie-ups, to serve better not only to the tune of LIC’s mission but also to the tune of the mission of Petro corporation.
v) Departmental stores assurance:
During the era of LPG, there is an immense growth in the sector of departmental stores, where consumables alone available for resale, opened for MNCs. In India, there are many branded chain stores available for consumables viz Pantaloon, Reliance fresh could be utilized for the promotion LIC policies, where salaried people normally assemble during the first and second week at a greater proportion than other classes. The hike of FDI% in this sector, as well as metamorphic developments among the domestic players, will pave the congenial way for the promotion of insurance policies more specifically to the middle-income group.
vi) Right People:
Whoever related to the life insurance business of LIC, should work together under the principles of WIN-WIN, not only to grab the opportunities but also to win over the confidence of the market. Due to stiff competition, LIC is warranted immediately to develop a three-tier system to penetrate the marketing strategies of private insurers. The three-tier system of relationship should prevail as follows :
The above system should be mooted through the reduction of Govt holdings and by admitting the common public as investors through initial public offerings, which will certainly enhance the morale of the above enlisted.
Right process:
Due to acute competition, better service at a faster rate/phase to the policyholders are required to attain the delight among themselves. By keeping the above objective, the following are inevitable processes
i) E- redressal system for complaints:
The complaints are to be immediately taken into consideration by the insurer in the context of Rule 5, IRDA compendium,2002, to protect the interests of the policyholders. The public sector entity alone has 992 complaints during March 2005, greater than the volume of other private players in the industry. Though the complaints received are negligible in numbers in terms of volume of business, the market structure necessitates LIC to incorporate a separate wing for speedy and smart redressal of complaints of the policyholders.
It is an essential juncture to induct the technology to aggravate the speed of the redressal system of complaints, through which delight among the policyholders could be attained. The system that is going to be introduced should facilitate the aggrieved to express their grievances in their regional language, to overcome the linguistic barriers.
E- Payment system: The E- payment system has to be introduced across the country through not only banking companies but also through retail outlets of chain stores, petroleum bunks and so on. The E-payment system could be introduced through a smart card system, in which the leading business establishments could be enrolled as partners not only for the marketing of policies but also to the moot new system of intermediary, to replace the threats attached with the traditional system of marketing of policies.
The smart card system has to be introduced not only for the payment of premiums but also to know about the process of remittance, which promotes the transparency of transactions of the individual policyholders in the context of Malhotra committee recommendations.
Conclusion:
The giant player in the insurance which is estimated to lose its market share further by 50% within the year 2010, through the process of speedy and dynamic developments among the private players. The above enlisted unexplored marketing strategies are expected to penetrate the combatants in the industry one way or another, not only to retain its market share but also to win over the confidence of 110 cr populated nation, through ” We know India better” than any other private players.
By Prof Dr. Manickavasagam, Prof & Head, and Mr. M.P.Pandikumar, Research Scholar, Department of Corporate Secretaryship, Alagappa University, Karaikudi,
Published in Life Insurance Today, May 2007
