The RISE & RISE of LIC

1)    Definition of Globalisation. LPG--Liberalisation, Privatisation & Globalisation

World has become boundaryless. Mingling of cultures & customs of different regions.

Winds of change blowing somewhere can affect other countries as world has become so interdependent. License Raj removed, barriers to trade gone, controls diminished, more transparency shown. Trade, commerce & industry are coming under sharp focus. World trade negotiation still half way through. Divide between developed & developing countries have come to the fore. Full freedom for other countries to establish their companies etc on others soil with that country’s rules & restrictions to be followed, this is reality.

2)    Slogan today —Think Global, Act Local.  Do at Rome as Romans do. So, today, we say,

Globalisation = Globalisation + Localisation. Difficult to transplant & pursue same practices elsewhere as lifestyles, fashions, standards of living, per capita income, affordability, purchasing power all count a lot.

Market exploration, market analysis, penetration, are vital steps.

Level of sales, profits, economies of scale & viability will be important indices.

3)    Insurance :Malhotra  Committee Report on Insurance Reforms was considered by Govt after long delay. Debated in Parliament. 26% foreign participation with Indian company was the ultimate answer. IRDA Regulations promulgated in 1999 .Life & general Insurance came under focus. Windows opened after laws, procedures, rules, regulations were put in place for smooth transition without any jeopardy.

LIC –Public sector monopoly started facing the wind of competition from Oct 2000. Slowly & steadily licences were granted to more & more applicants with stringent provisions. Capital adequacy Rs.100 cr minimum, with 26% maximum foreign capital infusion. Some cos started with higher capital & proportionate 26%.

Now 23 Private Insurers operate  in the market side by side the giant LIC.

4)    Regulations are strict as public have to be taken care, savings properly invested, promises in policy documents to be honoured etc .Safety margins, portion of premium income to be kept as Catastrophe Reserves, audit & inspection by IRDA, transparent declarations, Monthly Report, Actuary submission for each new plan or product with data, assumptions, yield & approval by IRDA etc

Several salutary provisions of  tightening controls are as crores of Rs are sunk by policyholders. Rules in respect of Protection of Policyholders’ interests, Assets & Liabilities & Solvency margin prescribed, Obligations of insurers to Rural & Social sectors, regulating Insurance Brokers & Corporate agents, Insurance Advertisements & disclosures, Sharing of Database for history of insurance products-all these were designed to guide the right path without deviations for orderly progress of insurance industry.

Many Cos have opened in metros, towns, increasing agents/advisors etc, education of public ,arousal of interest in term assurance risk plans with cheap premium,variety of new plans with varying provisos,riders & options, critical illness provisions, ULIP modified  by IRDA from time to time, pension plans,& other  flexible policies etc in vogue

5)    LIC faces the competition bravely. Elephant knew the breeze will become hurricane.

 

1. Vision 2005 sessions LIC held even in 1997 itself, Board meetings, CO, Restructuring, Reengineering, high phases of advanced computerisation, Front-End Operations, OIC (Organisation Improvement Cell), decentralisation of functions to branches, Triveni-PHs, Field Force, Customers meet, mix  &  mingle.
2. The decade after 1980 saw the dawn of a new work culture, it picked up momentum, the thrust was visible, walk became a run, became a gallop & then no stopping .In its ability to take on competition, LIC Reinvented itself through constant IT upgradation. IVRS-Interactive Voice Response Systems,Kiosks, Touch screen facility, Toll-free phones, WAN/LAN/MAN-MetroArea Network came into vogue connecting branches. Even in IT scenario, where experts felt private insurance companies will be ahead, LIC became a model as a forerunner of new technology. LIC is ready with its largest Corporate Active  Data Warehouse(CADW), & is probably the world’s  largest digitalization project. Data mining tools,product development, value-added services, CRM can thus be still accelerated., when competition has hotted up. It has implemented Enterprise Document Management System(EDMS) to digitize the customer & office records,to enable the concept of Anywhere Anytime services through electronic files.
3. Servicing standards greatly improved. Claim settlement phenomenal, world record. Citizens Charter, benchmarks, Claims Review Committees in vogue. Policy Holders Council ,Customer Relationship Manager, Grievance Officers for quick attention & disposal of complaints.
4. Responsiveness & Sensitivity, modifications, liberalizations & relaxations in procedures in New Business underwriting, Green Channels for prompt proposal to policy issue, & servicing enabled LIC to secure Awards for the Most Preferred Company, Most Trusted  Service  Brand award.
5. LIC settles the largest number of claims, for 2009-10, a total of 2,11,82,489 maturity & death claims amounting to Rs.53,955 cr. nearly 80,000 claims per working day to the tune of Rs.203cr, remarkable, a Social Security Wonder, we may truly admire .
6. 30cr policies in force, Worlds largest Insurance Company in terms of volume of policies, serves more people than the population of several countries, mind-boggling indeed.
7. LIC Brand No1 ambassador, visible in Market surveys. Ads, Publicity, stills, PR great, Communication crusade goes on. High level & quality of manpower resources, assorted  Britannia cream biscuits like, rich & multi-skilled, through series of training, Induction, Refresher, Advanced, Workshops, at Centres  at all levels, MDC/ZTC/DTC/ STC/ATC
8. LIC embarked on wide diversification, in tune with economic developments & emerging environment-LIC Housing Finance Ltd, LIC HFL  Care Homes Ltd, LIC Mutual Fund AMC Ltd, LIC Pension Fund Ltd,LIC Card Services Ltd
9. Widest Marketing network with tremendous reach. Apart from CO,8 ZOs,112 Divisions, 2048 BOs,1169 Satellite Offices,70 customer zones,25 MASHcentres,17,287 premium points, 25000 Development Officers &13.37 lac agents,& easily the largest network in the world. Market intelligence is the sheet-anchor of market leadership. Various Club Member agents, Million Dollar Round Table (MDRT) Agents setting up some distinct professional standards, earning decent income & privileges, bring glory to LIC.

 

6)

 

• Year after year., market share of LIC dwindling, presenting a seesaw during the course of the year, LIC retains lions share, ranging from 60-65 % in Premium & 70-75% in Policies.
• LIC is solid, stable, solvent, Undeclared Navarathna, Economic Tajmahal indeed. Total Premium Income for 1957, 1970, 1990, 2000, March 2010 stood at Rs.88cr, 260cr, 4,489cr, 27,462cr & 1,85,985cr ,what a staggering performance.
• TPI for 2010-11 stood at Rs.2,03,385cr showing a rise of 9.3%
• The Gross Total Income of the Corporation for FY 2009-10 rose to a mammoth Rs 2,98,721 crore showing a phenomenal growth of 49.15% over FY 2008-09.
• Total Income for 2010-11 was Rs.2,99,272.63 cr which was a marginal increase of 0.18%
• The First Year Premium Income of the Corporation rose to Rs 70891 crore from Rs 52954 crore, representing a growth of 33.87%.
• LIC  declared a Valuation Surplus of Rs 20,586 crore for 2009-10 of which Rs 1029 crore represented dividend  to the Central Government
• For 2010-11, the surplus stood at Rs.22,717cr. & Govt’s share is Rs.1136 cr
• Life Fund umbrella indeed for public for rainy days ,for the same period jumped from Rs 410cr, 1,611cr, 23,472cr, 1,54,044cr  & 1017098 cr in 2010 indeed faith of the public is reassured by this vitality .
• This rose to Rs 1169066cr in 2010-11 valuation
• Assets rose from Rs.24,419cr in 1990 to Rs1,60,936cr in 2000 & to Rs.11,52,057cr in 2010, showing an increase of 31.9% over earlier year.
• This further rose to Rs.1317416cr in 2010-11 showing 14.4% rise
• LIC emerged as a $100 billion Super Financial Power during Golden Jubilee year 2006 ,when assets crossed Rs.4,40,043cr .
• During the FY 2009-10, the Corporation settled a total of 6,64,619 Death Claims amounting to Rs 7033.68 crore and 2,05,17,870 Maturity/Survival Benefit claims amounting to Rs 46921.22 crore.
• Death claim payments figure for 2010-11 is Rs.8010cr &  maturity claim payments Rs.49548cr
• The Overall Expense Ratio of the Corporation during the year was 13.10%, which was well within the prescribed limit. It shot up to 14.89% for 2010-11
• The New Business Performance of the Corporation for the year ending 31 March 2010  showed very positive results. The Corporation  sold a record number of 3.88 crore policies during the year by collecting Rs 42,960 crore in First Premium with a growth rate of 8.21% on number of policies and 21.63% in First Premium Income. In Pension and Group Schemes, the Corporation sold 18,573 schemes covering a total of 2,37,57,262 lives, showing a growth of 17% in schemes and 15% in lives. For the FY ending  31st March 2011, LIC could achieve only 3.70cr Policies, & FPI Rs.44,064.55 cr with growth rate -4.7% in policies & 2.6% in FPI.
• One of the major highlights was that during this period, the market share of the Corporation rose from 60.79% to 64.86% in First Premium Income and from 70.52% to 73% in policies. The trust,faith & confidence  of more than our 30 crore policy holders coupled with  proven track record in prompt settlement of claims and efficient servicing provided by our huge state-of-the-art IT inputs has enabled LIC to continuously deliver greater value to our customers.
• Peoples’  Money for Peoples’  Welfare– Bahujan Hitay Bahujan Sukhay , LIC  as a nation-builder touches peoples life in all spheres, through sound investment in power,water supply, transport, housing, infrastructure, industry, agriculture, land mortgage banks, & Regional Rural banks. LIC rural spread is significant & spectacular.
• LIC contribution to Five Year Plans has been phenomenal, a mere Rs.184cr for 2nd 5 year plan to Rs.7140cr for 6th Plan to a staggering Rs 5,28,390cr for 11th plan. One can easily judge the magnitude of the Corporation’s contribution to nation building activities
• LIC earned an image of concern for the weaker, under-privileged sections,the poorest of the poor, through Group Schemes, Social Security schemes, Janashree Bima Yojana,scholarship & pension to millions of people below poverty line,IRDP & hence unparalleled. It will take decades to percolate to these areas by private insurers.

 

7)    No other organization could have secured as many awards as LIC. Best Overall Insurer Award from CNBC TV18, Good Corporate Citizen award by Bombay  Chamber of  Commerce & Industry, Most Trusted Brand in the  LI Category award from ET Brand     equity,ranked 1st in terms of Total Income in the list of India’s  Top PSUs 2011by Dun  & Bradstreet, India

8)    Out of the 23 life insurers in operations during 2009-10,  8 companies have reported profits viz. LIC, ICICI Prudential, Kotak Mahindra, SBI, MetLife, BajajAllianz, Sahara India and Aegon Religare. LIC Rs.1,061 cr  ICICI Prudential Rs.258 cr after incurring losses for eight consecutive years, after setting up operations.

Kotak Mahindra Rs.69.22 cr for the  second year in a row; it reported profit for the first time in 2008-09. SBI Life  Rs.276 cr,as against a loss of Rs.26.31 cr in 2008-09. SBI Life reported net profits for three consecutive years prior to this from 2005-06 to 2007-08. MetLife has reported a profit of Rs.25.06 cr The insurer has been reporting profits continuously in the last three financial years.

Sahara India reported a profit of Rs.36.15 cr as against a loss of Rs.18.15 cr during 2008-09. SaharaIndia had reported profits for the first time in 2007-08. .Aegon Religare reported profits for the second year in the row from inception in 2008-09. The company reported profit of Rs.3.82 cr in 2009-10 (4.08 cr in 2008-09). BajajAllianz  Rs.542 crore in 2009-10. Shriram Life after reporting profits for four years in a row, registered a loss of Rs.18.06 crore during 2009-10, the first in its five year of operations

The cumulative losses of the life insurance industry as at 31st March, 2010 stood at Rs.20,143 crore, as against Rs.17,304 crore as at 31st March, 2009.

9)    The potential and performance of the insurance sector is universally assessed with reference to two parameters, viz., Insurance Penetration and Insurance Density. Insurance penetration is defined as the ratio of premium underwritten in a given year to GDP. Insurance density is defined as the ratio of premium underwritten in a given year to the total population  The insurance penetration was 2.32 % (Life 1.77 % and Non life 0.55 %) in the year 2000 when the sector was opened up for private sector. It had increased  to 5.20% in 2009 (Life: 4.60 % and Nonlife: 0.6 %). The insurance density stood at USD 54.3 in 2009 (Life USD 47.7 and Non-life USD 6.7) from USD 9.9 in 2000 (Life USD 7.6 and Non-life USD 2.3),remarkable on life insurance front.

10)  Life business is booming,New Products continue unabated with polished names, glossy brochures.ULIPs, Pension plans,Health Care products,many more,First Premium Income  rising fast & faster.

Distribution Channels vital for growth. Regular Agents/advisors, Direct Marketing, Corporate Agents,  web-enabled sales points, go global through webblogs, word of mouth marketing, Alternate Channels like Brokers, Bancassurance, tieups with Regional Rural Banks, any other agencies,eg ITC e-chaupal for rural, Micro Insurance Agencies like Voluntary bodies, Self Help Groups etc

10 years of competition, see the spectacular developments. Number of Branches galore, cities, towns, urban centres, rural areas, all tier cities, offices spreading. Number of agents many top insurance cos crossed 8/9 lacs, others lesser. Solvency margin stipulated by IRDA scrupulously implemented & complied with.

Capital infusion going on in regular phases,cos waiting for Govt to allow increase in foreign co participation from 26% to 49% .

11)  Born on 1st Sep,1956, LIC, from an infant grew to boyhood,then adulthood a Giant,celebrated the Golden Jubilee on 1/9/2006, has earned ever so many accolades,  ‘ a jewel in the crown, a world-class organization’ from FM & PM. Its Logo & Emblem-Yogakshemam Vahamyaham-Thy Welfare is Our Responsibility–became household memory. ‘In the humblest of homes, our flame burns bright & Hands that protect, Hands that serve’ ,are no idle boasts.

12)  Live your Dreams, don’t dream your life ,Convert Dream into Vision. Insure & be Secure, We know India better, Zindagike sath bhi, Zindagikebadbhi Dream without Task=UTOPIA; Task without Dream =Drudgery  Dream +Task =Performance

LICians dream, they envisage vision, LIC itself is an ensemble of Raga, Bhava, Thala of employees, field force & policyholders/stakeholders. Privatisation & competition have only added grit & determination enabling LIC to emerge stronger & be adored as a respectable & undisputed  Market Leader. As a multi-dimensional organization, LIC has the potential, power & potency to don  this new Avatar, don it must & don it will.

The country’s largest insurer LIC has recorded about 37 per cent growth in its new business premium to Rs. 67,135.32 crore during the April-January period this fiscal.

In comparison, in the 10 months ending January 31, of the previous fiscal (2009-10), LIC’s premium collections from new business stood at Rs. 49,019.49 crore, the data from sectoral regulator Insurance Regulatory and Development Authority (IRDA) said.

Overall, 23 life insurers in the country collectively mopped up Rs. 95,000 crore as new first-year premium during the period, a 26 per cent increase from Rs. 75,347 crore in the year-ago period.

Out of this, the 22 private life insurers together accounted for Rs. 27,864.73 crore worth of new business in the April-January period, compared to Rs. 26,327.81 crore in the year-ago period, a growth of about 6 per cent.

Among the private life insurance players, SBI Life saw its premium collections from new business grow by 9 per cent to Rs. 5,274.97 crore during the period, while Reliance Life saw a dip of 10 per cent to Rs. 2,171.38 crore.

ICICI Life’s premium collections from new business grew to Rs. 5,130.23 crore in April-January, 2011, from Rs. 4,290 crore during the same period last year.

Meanwhile, the non-life insurance industry witnessed a 24.57 per cent growth in premium collections in the April-January period to Rs. 14,394.69 crore.

The segment had registered a gross premium income of Rs. 11,555.89 crore in the April-January period of 2009-10, as per the IRDA data.

Nearly 70 per cent of the gross premium income in the non-life insurance sector was accounted for by PSUs.

In the April-January period, the four public sector general insurers collected Rs. 20,112.59 crore, compared to Rs. 16,606.08 crore during the corresponding period last year.

The maximum premium was mopped up by New India Insurance, which saw a 18.01 per cent growth in collections to Rs. 5,850.54 crore.

Among the private players, ICICI Lombard’s premium collections grew 29 per cent to Rs. 3,511.35 crore during the first four months of the current fiscal.

*Life Insurance Corporation of India (LIC), India’s largest life insurer, has announced its audited figures for the financial year ended March 2010. LIC has declared a Valuation Surplus of Rs 23,478 crore, of which Rs 1029 crore is given to the Central Government as dividend.

The Total Premium Income of the Corporation for the year rose to Rs 185985 crore from Rs 157186 crore, showing an increase of 18.32% over the previous year. The Gross Total Income of the Corporation rose to a mammoth Rs 298721 crore showing a phenomenal growth of 49.15% over FY 2008-09. The First Year Premium Income of the Corporation rose to Rs 70891 crore from Rs 52954 crore, representing a growth of 33.87%.

During the FY 2009-10, the Corporation settled a total of 6,64,619 Death Claims amounting to Rs 7033.68 crore and 2,05,17,870 Maturity/Survival Benefit claims amounting to Rs 46921.22 crore.

The Overall Expense Ratio of the Corporation during the year was 13.10%, which was well within the prescribed limit. The Total Assets of the Corporation amounted to Rs 11,52,057 crore, showing an increase of 31.88% over the previous year.

The New Business Performance of the Corporation for the year ending 31 March 2010 has also shown very positive results. The Corporation has sold a record number of 3.88 crore policies during the year by collecting Rs 42,960 crore in First Premium with a growth rate of 8.21% on number of policies and 21.63% in First Premium Income.

In Pension and Group Schemes, the Corporation sold 18,573 schemes covering a total of 2,37,57,262 lives, showing a growth of 17% in schemes and 15% in lives.

One of the major highlights was that during this period, the market share of the Corporation rose from 60.79% to 64.86% in First Premium Income and from 70.52% to 73.02% in number of Policies.

The performance of the Corporation during the first quarter of the current year has been stupendous. The First Premium Income of the Corporation has zoomed 107.57% to Rs 18740 crore. The market share of the Corporation in First Premium Income has risen to 73.43%.

Commenting on the results, T.S. Vijayan, Chairman, LIC of India, stated “We attribute this fantastic performance to the trust of more than our 28 crore policy holders. This coupled with our proven track record in prompt settlement of claims and efficient servicing provided by our huge state-of-the-art IT inputs has enabled us to continuously deliver greater value to our customers.”

By: R. B. KISHORE, ED (Retd), LIC, Published in Life Insurance Today, May, 2012