Services Marketing, LIC

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Services Marketing, LIC

NATURE OF INSURANCE

Insurance means Spreading of Losses or Sharing of Risks:

Life is full of risks. For property, there are fire risks; for shipment of goods,

there are perils of sea; for human life there are risks of death or disability;

so on and so forth. The risks are uncertain-may or may not occur. People

facing common risks come together and give their small contribution to the

common fund. While it may not be possible to tell before, which persons

will suffer, but it is possible to tell how many persons on an average out of

the group will suffer loss. If any case risk occurs, loss is made good out of

common fund. In this way, common risk is shared by all. Insurance thus

broadly be understood as the process of spreading of losses of an

individual over the group of individuals or the process of sharing of risk by

those who face common risk. People who suffer loss get relief because

their loss is made good out of common fund. People who do not suffer loss

get relief because they are free of any worry of loss. Following 2 exampleexplain the above concept of insurance.

Example-1 :

In a village, there are 400 houses, each valued at Rs. 20,000. Every year 4

houses get burnt, resulting into a total loss of Rs. 80,000. If all the 400

owners come together and contribute Rs. 200 each, the common fund

would be Rs. 80,000. This is enough to pay Rs. 20,000 to each of the 4owners whose houses got burnt. Thus the risk of 4 owners is spread over

400 house-owners of the village.

Example 2 :

There are 1000 persons who are all aged 50 and standard lives. It is

expected that 10 persons out of the group die during the year. If the

economic value of the loss suffered by the family of each dying person istaken to be Rs. 20,000, the total loss would work out to Rs. 20,000/-. If

Puja, Rajat & Leena, PGP98-2000 1


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each person of the group contributes Rs. 200/- a year, the Common Fund

would be Rs. 2,00,000/- This would be enough to pay Rs. 20,000 to the

family of each of the ten dying persons. Thus the risks in cases of 10

persons are shared by 1000 persons.

Classification of Insurance Business :

The insurance is broadly classified as (i) Life Assurance business, and (ii)

General Insurance or Non-life Insurance Business.

Life Insurance Business :

It is the business of effecting contracts of Insurance upon human life,

including any contract whereby the payment of money is assured on death

(except death by accident only) or the happening of any contingency

dependent on human life and any contract which is subject to the payment

of premiums for a term dependent on human life and shall be deemed to

include -

(a) The granting of disability and double or Triple Indemnity accident

benefits, if so provided in the Contract of insurance.

(b) The granting of annuities on human life, and

(c) The granting of Superannuation Allowance and annuities payable out

of any fund applicable solely to the relief and maintenance of persons

engaged or who have been engaged in any particular profession, tradeor employment or of the dependents of such persons.

Non-Life Insurance or General Insurance :

Even though conventional classification of General Insurance has been, in

the past in the three branches (i) Fire Insurance, (ii) Marine Insurance

and (iii) Miscellaneous (accident) Insurance, in modern times it is classified

as follows :



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(i)Insurance of person -

Personal Accident and Personal Accident and Sickness

Insurance are included under this classification.

(ii) Insurance of Property -

buildings, machinery, aircrafts, steamers, stock of business, cash,

securities come under the heading property and therefore Fire Insurance,

Marine Hull Insurance, Marine Cargo Insurance, Burglary Insurance,

Engineering Insurance, Crop Insurance and Aviation hull Insurance fall

under this classification.

(iii) Insurance of interest -

Fidelity guarantee insurance and the Guarantee Insurance fall under this

classification.

(iv) Insurance of Liability -

Public (third party) liability insurance, Professional Indemnities fall under

this classification.

Comparison of Life Assurance with other forms of Insurances :

While the basic concept of insurance of spreading the loss over many, the

basic principles of insurable interest and utmost good faith apply equally to

all classes of insurance, Life Assurance differs from other forms of

insurance in following way :



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(i) Risk is certain under Life Assurance :

Each person has to die sooner or later. Risk of death is certain under life

Assurance. However, under non-life Insurances risk is not certain. There

fore, the mathematical value of risk under life Assurance can be found our

with more degree of accuracy.

(ii) Life Assurance is a long term Contract :

Since Life Assurance Contracts are long term contracts Service to the

Policy holders assumes great importance. Investment of funds and interest

yield are also, therefore, vital. Non-life Insurance are one year contracts.

(iii) Difficulty in determining value of human life :

It is not difficult to determine value of the subject matters of insurance

under non-life insurances like properties,

(iv) Contracts of Indemnity :

while non-life Insurances are contracts of indemnity, Life Assurance and

personal accident insurances are not.

(v) Principle of Subrogation :

Under non-life insurance, when the insurer makes good the loss, sufferedby a person, he acquires the rights and remendies of that person. This

does not apply to life Insurance.

Insurer, Insured, Premium :

Even though people who face common risk are ready to pay contribution

for security, they are very busy in their own affairs. Somebody has to take

responsibility of making arrangements of collecting the contributions and ofmaking good the loss. The Life Insurance Corporation of India or General



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Insurance Corporation of India take the responsibility and are called

Ìnsurer. The person who pays monetary contribution for security is called

the Ìnsured or Àssured Consideration paid by the Ìnsured or Àssured

is called `Premium.



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QUEING FOR THE INSURANCE PIE

Foreign firm

Already engaged: Indian partner

Allianz AG of Germany Alpic Finance

Prudential Life of UK ICICI

American International Group of US The Tatagroup

Commercial Union of UK The Hindustan Times group

General Accident of UK Bombay DyeingSun Life of Canada The Aditya Birla group

Chubb Corp of US Kotak Mahindra

ING Group Vysya Bank

Standard Life HDFC

CIGNA of US IL & FS

Canada Life Centurion Bank

GIO Australia Holdings Sanmar

All State Dabur

Guardian AXA Cholamandalam Finance

Zurich CK Birla group

Metlife of US MA Chidambaram group

AMP Likely with UTI

Looking for partners :-

Legal & General Undecided

Manulife of Canada Undecided

Royal & Sun Alliance- Undecided

Yasuda Fire UndecidedTokio Fire & Marine Undecided

Aegon Undecided

Sumitomo Undecided

Mitsui Marine Undecided

GE Capita Undecided

New York Life International Undecided

Swiss Re Undecided

Munich Re Undecided



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BRIEF HISTORY OF LIFE ASSURANCE IN INDIA

Origin of Insurance: The Idea of insurance was born out of a desire of the

people to share loss of an individual by many. Originally it restricted to

forms other than life assurance. It started with Marine Insurance, where the

losses on account of perils of sea were shared by all who were engaged in

trade. Reference to some forms of insurance, is found in the codes of

Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema is

used in the Rig Veda suggesting that some form of community insurance

was practiced by the Aryans in India over 3000 years ago. In India during

Buddhist period burial societies existed which were mutual in their

character and used to help a family by building a house, protecting the

widow, marrying the girls.

Origin of Life Asurance :

Life Assurance was born in England when the first policy providing

temporary cover for a period of 12 months was issued as easy as 1583

A.D. The Amicable Society started granting fluctuating sum on death since

1705 and a fix sum since 1757, With the development of mortality tables,

the life Assurance acquired a scietific character. The Equitable Society

founded in 1762 was the first Society established on scientific basis.

In India, after failure of two British companies, the European and the Albert

in 1870, which attempted writing business on Indian lives, first Indian LifeAssurance Society was formed in the same year called Bombay Mutual

Assurance Society Ltd. It was followed by the Oriental Life Assurance

Company Limited in 1874, Bharat in 1896 and Empire of India in 1897.

The Swadeshi Movement of 1905 provided impetus to the formation of

several companies such as the `Hindustan Cooperative, the `United India,

the `Bombay Life, the `National. Further in the wake of freedom movement



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number of companies such as the `New India, the `Jupiter the `Lakshmi

emerged.

The Government began to exercise a certain measure of control on

Insurance business by passing the `Insurance Act in 1912. For controlling

investment of funds, expenditure and management, a comprehensive Act

was passed known as `The Insurance Act 1938. For controlling the affairs,

the office of Controller of Insurance was established. The act was

extensively amended in 1950.

In the year 1955, approximately 170 Insurance Offices and 80 Provident

Fund Societies had been registered for transacting Life Assurance

business in India. There was, however, no full guarantees to the

policyholders. The concept of trusteeship was lacking. Many insurance

companies went into liquidation. There were malpractices in insurance

business. For achieving the following purposes it was felt necessary to

nationalize the insurance business in India.

(i) To provide security to the policyholders

(ii) To utilise the funds for nation-building activities.

(iii) To avoid cut throat competition

(iv) To abolish mal-practices

(v) To spread the insurance message to the rural areas.

The first step in this direction was taken by the Government of India by

issuing the Life Insurance (the Emergency provisions) Ordinance, 1956 on

19th January, 1956. The then Finance Minister, Shri C. D. Deshmukh

mentioned the purpose of nationalisation as reaching the goal of socialistic

pattern of society, rendering genuine service to the people in the rural area.

The Life Insurance Corporation Act (Act XXXI of 1956) was passed by the



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Parliament in June 1956 which came in force on 1st July 1956. The Life

Insurance Corporation of India came into existence on 1 st September 1956.

Outstanding Advantages of Life Insurance :

1. It is superior to an ordinary saving plan : The risk of death is covered

under insurance scheme but not under ordinary saving plan. In case of

death full sum assured is payable unner insurance but under ordinary

Saving Plan only accumulated amount is payable.

2. Insurance encourages compulsory saving and forces thrift : Aftertaking insurance if the premium is not paid, the policy lapses. Therefore,

the insured is forced to go on paying premium or in other words it is

compulsory. A saving deposit can be withdrawn very easily but not the

amount under insurance.

3. Easy settlement and protection against creditors : Once nomination

or assignment is made, claim under insurance can be settled in a simple

way. Under M. W. P. Act, the policy moneys become a kind of trust which

cannot be taken by creditors.

4. It helps to achieve the purpose of the life Assured : If a lump sum

amount is received in the hands of anybody, it is quite likely that amount

might be spent unwise or speculative way. To overcome this risk, the Life

Assured can provide that the claim amount be given in installments.

5. Ready marketability and suitability for quick borrowing : If policy-

holder is not in a position to pay the premium, he can surrender the policy

for a cash sum. He can also take the loan for a temporary period to tide

over the difficulty. Some times a life insurance policy is acceptable as

security for a commercial loan.

6. Tax reliefs : by paying the insurance premia, the assured obtains great

relief in Income tax, gift tax, wealth tax.



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PR AND INSURANCE IN SERVICES MARKETING

The importance of an effective Pr organization and activity is all the more

important in a service industry like insurance because of the special

features such as abstract product, immediate sacrifice for contingent

benefit, alien nature of concept, ignorance, illiteracy and superstition, etc.

about which detailed observations have been made elsewhere. However,

in our country, it appears that PR in insurance industry is perhaps a very

neglected management function. Such neglect is bound to result in heavy

costs in terms of adverse impact on growth rate, lesser consumer

satisfaction, inadequate performance by the sales-force, and lower

productivity and job satisfaction amongst employees. Since, however,

these losses are not quantifiable and since the overall growth and progress

of the industry are not unsatisfactory, they have, all these years, failed to

attract such attention as is deserved, to the detriment of legitimate interests

of PR and the long-term interests of the industry itself. Very little systematic

and concerted effort towards PR practice appears to be done both by LICand GIC.

Some steps have, no doubt, been taken by both LIC and GIC from time to

time to improve its PR and help its marketing. Appointment of

Policyholders' Councils and Claims Review Committee as well as Division-

wise officers to look into Policyholders complaints indicate the industrys

PR awareness and desire to help solve the customers problems to some

small extent. However, it is no secret that PR-mindedness and vigilant

efforts to establish good relations not only with customers but also other

publics is badly lacking. As a small example, it can be pointed out that the

guidelines issued by LIC chairman every year for the past few years hardly

contain any views about how to establish good PR. Some more activities

which need to be systematically undertaken include the following :

Out of the various publics with which an average organisation has to deal,three, viz., employees, government and consumers are the more important



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ones from the point of view of the insurance industry. PR objectives must

be defined as well as long-range plans formulated and specific

programmes to deal with these publics must be drawn up in a systematic

manner and should become not only known to but fully accepted by various

levels of management. A campaign for this purpose, i.e. creating better PR-

consciousness amongst practicing managers should be undertaken on

priority. Awareness must be created that good PR is not what a

department or a few senior executives say or do but an essential ingredient

of every managers job to be performed all the time.

Better PR-mindedness is necessary in launching any new plans. Such

awareness should include involving the internal PR organisation and, if

necessary, an external PR consultant, sufficiently in advance of the

proposed launch so that PR needs and angles can be taken into account

right from incorporating desirable features in the plan, giving it an

expressive instead of a prosaic name, creating favourable conditions for its

introduction through strategic news-stories and sponsored articles,

informing the field force at appropriate time so that the heavy burst of initial

advertising and publicity does not find the field force unaware, uninvolved

or unprepared, etc. Here, the example of LICs Money Back policy provides

and example of both a success and a failure of PR effort. The name

`Money Back which replaced the earlier `Anticipated Endowment shows

and awareness of PR aspect of a product name. Both the phrases

technically convey the same or nearly the same meaning. However, the

first is using simple, every-day-usage words and is very easily understood

and remembered. The second, on the other hand, would confuse an

uninitiated layman and is, therefore, non-communicative. As against this

positive achievement, it should also be noted that when the plan was

launched, most of the offices, leave aside Development Officers and

agents, did not have necessary tables of rates, detailed sales literature,

etc. Moreover, no guidance was at any time provided to the sales force

about how to promote the plan and successfully overcome the sales



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resistance in the market, which was bound to feel that LIC had withdrawn a

popular and beneficial plan. It may also be mentioned here that all the new

plans launched thereafter have been given catchy names like, e.g., Jeevan

Saathi, Bima Sandesh instead of the prosaic and uncommunicative names

which used to be given earlier but the practice of launching them

haphazardly has improved only marginally.

Similar PR-mindedness is also essential in conducting sales promotional

activities such as competitions. Very often, competitions are merely

declared but no systematic follow up to motivate participants and to keepthem actively involved are taken. What is even worse is that results are

declared and prizes awarded so late as to make the sales force quite

indifferent to and skeptic about future competitions and also other sales

promotion activities.

Efforts to create institutional loyalty amongst average employees is far from

adequate. Even the involvement of first-line managers in creating such

loyalty and better productivity are not adequate. Managers at many levels

do not think of themselves as management and merrily make excuses that

they cannot do this thing or that due to lack of management support. A

systematic programme of communication and interaction to improve this

state of affairs does not appear to have been considered as a pressing

need. Some retrograde steps have been taken, like, e.g., discontinuation of

LIC NEWS LETTER which recognized achievements of individuals and

offices helping to create a sense of achievement and loyalty.

When noteworthy achievements of individual employees or teams on the

sportfield get reported in the papers. They create a favourable image in the

minds of public about the organization itself. Initiative has to be taken by

the PR department to ensure its speedy dissemination and coverage.

Some years ago, a blind employee of LIC won the national award as the

best physically handicapped worker and the organization itself has also

won national awards for employing orthopaedically as well as



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opthalmologically handicapped persons. Not much initiative was, however,

taken to highlight these achievements.

No proper training is received by staff in dealing face to face with

consumers or properly communicating with them through correspondence.

While use of standardized proformae for several types of written

communications minimise the chances of inadequate or incorrect

communication, even the format and wordings of such proformae can be

improved with better awareness of PR needs and consumer psyche. If a

given proforma contains several different items of advice which are meantto be conveyed to different policyholders out of which one or more specific

actions are relevant to a given query or communication, sufficient care to

correctly tick or otherwise mark such items is also quite often lacking,

leading to consumer dissatisfaction. It also creates additional unproductive

work for the office which has to deal with a given problem more than once

due to lack of clarity of communication and/or clear understanding of the

consumer query.

The use of mass media such as newspapers, radio, TV, etc, is made

almost exclusively for publishing advertisement but the tremendous scope

for their use towards PR-oriented communications remains unexploited.

Even such activities as press conferences, sponsored articles, ratio and TV

interviews, panel discussions or talks which used to be organized earlier

appear to have been given a go-by giving the media and discerning

publics, a message of neglect and indifference. It is possible for first-line

operating offices, properly directed by a vigilant and imaginative PR

department, to invite local, press, radio and TV reporters to claim

settlement functions or to brief them about interesting achievements,

events, etc. and get good coverage for its activities to efficiently serve the

consumers. The role of LIC and GIC investments in different areas can and

should be projected more exhaustively in local and regional media. Human

interest stories fo Gics role in saving a given enterprise from the effects ofan unexpected, fortuitous calamity can also create a favourable image, if



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projected locally. Use of new communication tools like FAX, Telex or

teleprinters can be effectively made by a vigilant and competent PR

department at the corporate office to disseminate relevant information to

the Area/Divisional Officers without loss of time for supply simultaneously

to regional and local papers.

Since insurance, both life and general, constitutes and important economic

activity in any country and further since, in our country, all insurance

industry happens to be a national enterprise, it should not be difficult to

introduce broad concepts of insurance knowledge in various school and

college text books. It is also high time that insurance as a subject was

introduced in the educational curricula at the appropriate level. In the

recent past, some progress has been made in this direction through much

more could and should have been done.

Insurance is a subject of great social and community relevance. However,

the involvement of insurance persons in our country in social and

community life is comparatively very poor. No efforts on the institutional

level appear to be made to train and encourage insurance persons to

become important functionaries and active participants in the affairs of their

respective communities.

Even the Government PR, which has several dimensions for the success of

insurance industry in our country, is spasmodic, unplanned and limited to a

few top executives only. The organization as a whole seems to be tending

to avoid rather than welcome opportunities to carry out an effective Pr. The

efforts through regular supply of facts and figures and through personal

briefings appears to be woefully inadequate or almost non-existent.

It is essential that the industry makes use of competent PR professionals

as consultants to organize its PR activity on a sound footing in the same



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way as it used ad professionals for drafting and releasing its advertising

communications The involvement of such PR consultants as well as its own

internal PR organization in decision making at the front end of problems

will certainly help improve matters.

There is considerable scope and immediate need for improving the PR

activities of insurance industry in our country at all levels and for creating

greater awareness both of the need and scope for engaging in better

liaison with all the publics more effectively and more systematically.



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INSURANCE MARKETING

While rural marketing has some distinct aspects of its own, marketing of

insurance - both life and general - does not essentially differ from the

marketing of other services. There-fore, efforts have been made throughout

the book to explain those aspects relating to insurance that need special

attention or emphasis, as and when the basic or general concept has beencovered. This section primarily brings together at one place some of those

points dealing with insurance marketing which have already appeared

earlier under appropriate sections and briefly deals with some special

features applying to the marketing of services in general and insurance in

particular. Broadly, the special features of insurance marketing are as

under:

Marketing concept has not gained adequate acceptance:

Even in other parts of the world, where marketing concept has gained wide

acceptance in precept and practice in several fields, insurance industry has

been one of the last to move towards its adoption and even today lags

behind many other service industries including banks in its practice.

Conditions in our country are no exception to this world experience. Thus,

the marketing approach has not replaced the mainly sales-oriented

activities in both life and general insurance. Views like `there is immense

scope for the growth of insurance business in our country and we have not

even touched the fringe of the potential' are freely e expressed to signify

that what is needed is merely for the sales force and operational offices to

`push' the existing products more vigorously. The adoption of a systems



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approach to marketing which includes careful study of external and internal

environment including competition, assessment of market needs and

development of products to satisfy the demands, developing suitable

marketing mix for every identified market segment, and above all, imbibing

the marketing approach and philosophy by the top level management's has

not yet taken sufficiently deep roots.

The statement that in our country both life and general insurance marketing

enjoys a monopoly position is quite often made to signify that thecommercial success for them can be taken for granted. However, this is far

from the truth. It is true that if a person decides to insure his life, he may

have to approach LIC or if a person decides to obtain comprehensive cover

for his car or scooter, he will have to get it from one of the four subsidiaries

of GIC. But, what is often lost sight of is that unless a prospect is

reasonably satisfied that his claim will be paid promptly and fairly, he has

the option of not insuring his life or obtaining `Act only' policy for his car or

scooter and be his own insurer against death or serious damage to his

vehicle, as the case may be. Whether he will buy his policy from LIC or GIC

or be his own insurer will be decided in the final analysis by the successful

marketing of their products by these Corporations which, in other words,

depends upon their adopting a marketing approach in their operations.



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Selling of Insurance needs `creation of a demand':

In our country, the need for insurance benefits is, most of the times, not

sufficiently understood and appreciated. In both life and general insurance,

the sacrifice (payment of premiums) is real and immediate, whereas the

benefits are distant and contingent. With our cultural tendency towards

fatalism coupled with paucity of incomes in an overwhelmingly large

number of cases, there is a tendency to indefinitely postpone the buying of

insurance. In respect of most of the individual, as distinguished from

institutional, prospects, the salesman has to begin by convincing the

prospect about the existence of the need before he can enter upon the

process of selecting the requisite service. This can be contrasted with, say,

the purchase of medical service in which case, the buyer is aware of the

need and makes up his mind about purchasing the service without the

prodding of the doctor or hospital concerned. The dependence of insurance

marketing on sales-persons arises out of this. While dependence on sale

forces may not be reduced in near future, efforts can and should be made

to spread better awareness through advertising, publicity and public

relations programmes.

Market analysis and segmentation is not adequately undertaken:

The progress of both GIC and LIC has been reasonably good from year to

year and both the organisations have been content to operate the

traditional markets in an unplanned manner. Sufficient steps to make a

detailed analysis of the markets, to evolve proper marketing strategy for

each one of the identified market segments and to establish adequate

sales facilities in each of them in a systematic manner have hardly been

undertaken. It is both possible and necessary to establish better pre-sale



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and post-sale servicing organisation. Without exaggeration, it can be said

that both these institutions are selling insurance rather than marketing it. In

the case of general insurance, while efforts are made to penetrate new

segments of organisational markets through covers for oil rigs, satellites,

etc., there is much scope to plan for better segmentation and penetration of

individual customers' markets through improved promotion of existing

covers and development of new coves to suit the changing market needs.

Product development has not kept pace with changing market needs:

An inevitable corollary of the failure to undertake market analysis and

segmentation successfully in that the product development and

modification activity has also been in the low key. Most of the new plans

introduced by LIC have not won sufficient market acceptance and support

primarily because they have not gained acceptance of its own selling

organization. While the experience of GIC in respect of plans like cattle or

crop insurance is better, there is still scope for more concerted efforts to

identify specific needs, devise plans to meet the requirements, undertake

efforts to promote these plans systematically and open new markets for

non-traditional business. There is scope to undertake motivational as well

as marketing research for this purpose on a more regular, systematic

basis. It appears that adequate use of the sales organization is not being

made to obtain the market intelligence and to ascertain the market needs.

Development of new products is done mainly on the basis of the impulsive

perception of the management about what the market needs. This perhaps

accounts more than anything else for the inadequate success of some of

the new plans and covers introduced both by LIC and GIC from time to

time.



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While discussing the role of market intelligence and assessment of the

opinions of the sales force in development of new products, it must be

admitted that by and large the sales organisations of both LIC and GIC do

not possess adequate insight into the technical bases of developing plans

or determining premium rates. Therefore, even if efforts were

conscientiously made to ascertain the needs of the market through the

sales wings, there is every likelihood of such efforts proving unproductive

and, in the bargain, giving rise to the criticism from the sales wing that

though many worth-while suggestions were offered by them, they were not

considered by the management sufficiently seriously. This does not,

however, mitigate the need to evolve a better machinery to develop new

products and modify existing ones, on the basis of assessed needs of the

market segments.

In the marketing of services in general and insurance in particular, the need

for presale service is quite pronounced. While both GIC and LIC extend

presale services to their institutional clients to some extent, no

organizational machinery to provide them to their individual customers

exists and they are forced to depend upon the agents/sales officers. As a

part of their strategy to improve the `augmented product' it should be the

endeavour of the industry to provide such services at their branch offices.

Better attention to promotional inputs is needed: In respect of every

component of the promotional mix, the accomplishments of the insurance

industry leaves much to be desired. Detailed observations have been made

in respect of each ingredient in the concerned chapters. Briefly, the scope

for improvement can be summed up as under:

a) Advertising: The overall long term objectives should be clearly definedand discussed between the top management and the concerned



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department on the one side and between the top management assisted by

the department and the advertising consultants on the other. A broad

strategy has also to be worked out at the beginning of each year so that the

advertising efforts do not become dispersed and uncoordinated. Efforts

also need to be made to evaluate various campaigns as well as the

effectiveness of the different media used to convey the various messages

as, otherwise, much of the expenditure is likely to prove infructuous. For

example, press advertising meant for rural markets may be ineffective in

large tracts of our land where in the newspaper reading habit in rural areas

is limited almost exclusively to reading them aloud publicly at a common

meeting place like the Panchayat Office, advertisements getting omitted

altogether during such public reading. Similar evaluation also needs to be

made about the efficacy of fleeting media like radio and TV in covering

information-heavy messages about, say, basic need for insurance, specific

covers or plans and so on.

b) Publicity:Adequate use of publicity is not being made either by the LIC

or GIC though there is much scope to do so. The area, regional or

divisional offices in case of GIC and zonal and divisional offices in case of

LIC need to be trained and encouraged to make better use of local media

to communicate more frequently and more systematically with their

respective markets through progress reports, human interest stories,

achievements in insurance as well as non-insurance fields like sports, civic

life problems, etc. by its individual employees.

c) Selling: There is an urgent need and good scope to improve the

competence as well as involvement of the sales organisation in performing

their duties. Many first line salesmen and sales-supervisors, viz., agents

and Development Officers/ Inspectors lack in adequate knowledge about



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the product as well as practical training in systematic selling and become

instrumental in creating consumer dissatisfaction by their errors of omission

and commission. While efforts are made at the time of initiation to impart

some basic training, the need for further training and re-training at

periodical intervals should be satisfied by a proper action-plan more clearly

defining the training objectives and methodology and improving the infra-

structure facilities than heretofore. As an integral part of the strategy to

gear up the sales-organisation, the role of the sales-force in providing both

pre-sale as well as post-sale service must be high-lighted and enforced

through education, persuasion and incentives. Better use of Marketing

Information Systems to motivate and supervise the sales organisations can

lead to an around improvement in the performance of salesmen.

Other aspects of marketing orientation which can be profitably

implemented by the insurance organisations in our country include:

Involvement of administrative staff in marketing objectives:At present,

it appears that the administrative staff including officers at the various

operational offices does not feel sufficiently involved in the marketing

objectives of the organisation. This is leading to avoidable consumer

dissatisfaction and is likely to prove a serious handicap in exploiting the full

marketing potential, unless speedy steps are taken to effectively remedy

the situation. There are several manifestations of this lack of involvement

which are seen almost every day. A policyholder paying a personal visit to

an office goes from pillar to post in getting somebody to listen to his

problem and help him to solve it. Replies to policyholders' letters do not

provide sufficiently clear guidance in simple words but are often couched in

jargon, abbreviations or technicalities, which may, no doubt, make it easier



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for the communicator to explain himself briefly, if not tersely, but fail to

communicate effectively.

Transaction-orientation must replace paper-orientation: When a

customer visits, say, a bank or post office, there may be occasions when

he feels unhappy about the delay that takes place in attending to his work

such as getting a cheque encashed or a letter registered. However, by the

time he leaves the premises of the bank or the post office, his job has been

completed and the anger or unhappiness he felt gets substantially if notentirely subsided by the time he returns to his home or place of business.

This is because most of the interactions that take place at the bank or the

post office are transaction-oriented. As against this, except in case of

payment of premium due, the customer's interface with LIC or GIC does

not result in the completion of the transaction for which he approached but

rather marks the beginning of some correspondence which finally results in

the completion of some transaction at some future date. During the

intervening interval, the dissatisfaction of the consumer is quite likely to go

on increasing. If this is to be avoided, more transaction-orientedness must

replace the present tendency to `keep the field up to date'. This is not

always possible because of the inherent difference between the types of

transactions that take place at a bank or post office on the one hand and

an insurance corporation's office on the other. However, looked at from the

consumer's angle, it is difficult for him to readily appreciate the reason why

LIC or GIC fails to solve his problem across the table. Every effort needs to

be conscientiously and vigilantly made to give as much transaction-

orientation to its dealings by the insurance organisations as possible and to

explain the likely time-lag and the reasons therefore. This also needs more

active role to be played by the sales force, who can and should always beavailable to the consumers to provide guidance at their homes or offices



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and minimise the need for the customers to approach the office directly.

When any customer approaches the office after the initial guidance and

help provided by the sales organisation, his communication is better likely

to be complete so that it becomes possible for the organisation to solve his

problem more easily and speedily. Apart from the involvement of the field

personnel, the earnest desire and effort on the part of the administration to

develop awareness of the need to provide more efficient and transaction-

oriented service is necessary for the successful marketing of insurance.

More inter-action with the communities at every level should be

encouraged : Both LIC and GIC are providing the economy with sizeable

funds for long-gestation plans in addition to providing attractive return to

the government on its investment. In fact, both LIC and GIC provide very

good success stories in the public sector. This is more especially ture of

LIC which is mobilising the common man's savings for long-term nation-

building financial activities. During 1987-88, the latest year for which the

figures are available, LIC's invisible surplus during the year amounted to

Rs. 2130 crores, major part of which was invested in socially-oriented

investments. However, when the banks lend a few thousand rupees to an

individual to buy, say, an auto-rickshaw, this fact gets proclaimed to the

people of the whole town through a suitable announcement displayed on

the vehicle itself, where-as the facts about LIC's investments of several

hundred crores in priority sectors as well as big and small commercial

enterprises, are not adequately known even within its own organisation.

This gives rise to a wrong impression about the role of both the insurance

organisations. To counteract this situation, it is necessary that the line

managers of these organisations should be encouraged to become as

active as possible in the non-controversial aspects of community affairs inthe areas where they work so as to make the presence of them-selves and



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their organisations better felt. Greater thought should also be devoted by

both GIC and LIC to find ways and means of projecting the positive side of

their performance and the important role played by them on the national

scene.



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THE ROLES OF MARKETING IN FINANCIAL

SERVICES(IN INSURANCE)

Introduction

As the role of the financial services sectors - banking, insurance, building

societies, hire purchase, franchising, consumer credit, general household

financial services and so on - continues to grow in the economies of most

of the Far Eastern, Pacific Rim and Western nations, pressures are

mounting for more effective marketing management of the financial

services on offer. Despite the recession, which is affecting various

industries in different countries with varying intensity, the financial services

sector is continuing to grow in terms of turnover and profits and thus has a

paramount impact on the other spheres of the economy. For these

reasons, there is currently growing interest in applying marketing

techniques and tools in financial services. This interest has generated a

relatively large number of publications, from the International Journal of

Bank Marketing in the UK to the Journal of Retail Banking in the USA, as

well as many other journals and publications on services marketing.

What are financial services? Financial services can be defined as

`activities, benefits and satisfactions, connected with the sale of money,

that offer to users and customers, financial related value'.1 Suppliers of

financial services include the following types of institutions: banks,

insurance companies, building societies, credit card issuers, investment

trusts, stock exchanges, franchising and leasing companies, national

saving (s) / giro bank (s), unit trusts, finance companies and so on.



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Marketing is becoming increasingly necessary in the competitive

environment of today's financial services. Intensified rivalry from other

institutions has caused financial institutions to think seriously about how

they can compete effectively. This has led them to give increasing attention

to marketing techniques. The financial institutions service two markets:

corporate and retail customers, or, in `marketing language', financial

services serve industrial markets and ultimate consumer markets. These

two markets can be subdivided into five main types: the government /

public sector, the private sector, the commercial sector, industry and the

international markets. Within the financial services industry the two main

sectors are banking (including building societies) and insurance.

Competition in the Financial Services Market

Although for many years financial services companies have differentiated

their market (s) according to various demographic criteria, the competition

in the industry has now become even more fierce. For example:

There are many insurance companies offering special deals for older

motorists. The Direct Line insurance company also offers competitive

mortgages.

Saga Holidays has entered the insurance market, offering special dealsin the home and content insurance sectors; this company now claims to

be the fastest-growing insurance company in the UK.

Many financial services companies focus on over 60 year olds,

because, apparently, these tend to make fewer claims on their

household insurance policies (on average, only 10 per cent of people



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aged 50 and over claim on their house contents insurance in

comparison with about 20 per cent of people under 30 years old).

With the new regulations that came into force in mid 1994, financial

services companies will have to disclose full information on the `true value'

of the various long-term financial products that are being offered. This

statutory regulation is likely to increase even further the current price and

product differentiation competition in the financial services market.

The Main Characteristics of Financial Services

The financial services have the following characteristics.

(1) Intangibility. Banking and insurance services, except in particular

instances, meet a general rather than a specific need. Particular benefits

from one rather than another institution are not readily apparent and

therefore financial services are dependent on effectively getting their

message across to the public and ensuring that their image and services

are attractive.

Indeed a service such as bank credit that cannot appeal to a buyer's sense

of touch, taste, smell, sight or hearing places a burden on the bank's

marketing organisation. Bank credit is represented by demand and time

deposits, and loans. Since a bank is often selling an `intangible' and not

necessarily a physical product, it must tell the buyer what the service will do

(that is, its `special' benefits). It is not always able to illustrate, demonstrate

or display the services on offer, and therefore storage, transportation and

inventory control are not relevant for the bank marketer. This is partly

attributable to the relative absence of middle persons. As a result it

severely limits the alternatives available to the financial services marketerand often necessitates the use of direct channels of distribution.



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(2) Inseparability. Because of the simultaneous production and distribution

of financial services, the main concern of the marketer is usually the

creation of time and place utility; that is, that the services are available at

the right place and at the right time. This implies that direct sale is almost

the only feasible channel of distribution. But as will be seen later, one way

of overcoming the inseparability factor is the use of credit cards, whereby

the service is transferable. This particular factor affects pricing, because of

the relatively high costs of offering this service to the customer (for

example in insurance).

(3) Highly individualised marketing system. When selecting channels of

distribution, the goods marketer will usually have a marketing system that

contains several established middle persons. More often than not, such

systems are the most efficient. Unfortunately this is not always the case for

the financial institutions with few traditional distribution channels. Hence the

financial services are induced to locate branches of their outlets as

conveniently as possible. In many bank transactions a client relationship

exists between the buyer and the seller, as distinct from a customer

relationship. This is especially true in the case of many corporate and trust

accounts, although it now extends more and more to other retail customer

as well. Where such a close personal and professional client relationship

must exist, direct channels may be the only feasible choice, as elaborated

in Chapters 8 and 9 for this book.

(4) Lack of special identity. To the public, often one financial service is

very much like another. The reason why a particular financial institution or

branch is used is often related to convenience. Each organisation must find

a way of establishing its identity and implanting this in the mind of the

public. As the competing products are similar, the emphasis is on the



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`package' rather than the product. The `package' consists of branch

location, staff, services, reputation, advertising and, from time to time, new

services. As major competitors offer similar services, the emphasis will be

on the promotional aspects rather than on the inherent uniqueness of a

particular financial institutions' service.

(5) Heterogeneity, or a wide range of products / services. Financial

services organisations have to offer a very wide range of products and

services to meet a vanity of financial and related needs from differentcustomers in different areas. On the one hand they provide a special one-

off management service for industrial customers and on the other hand a

retail service covering life insurance, money receipt, storage, supply and

transmission. The implication is that only very seldom can a financial

service be standardised.

(6) Geographical dispersion. There has to be a branch network in any

financial institution of size and scope, in order to provide benefits of

convenience and to meet international, national and local needs. Therefore

all services or promotions must have both appeal and wide application.

(7) Growth must be balanced with risk. When selling banking or

insurance products the financial institution is `buying' risk. There has to be

a well controlled balance between expansion, selling and prudence.

(8) Fluctuation in demand. The demand for certain categories of financial

services - for example life insurance, do fluctuate significantly, according to

the level of general economic activity. This factor puts extra pressures on

the roles and functions of marketing in insurance organisations.

(9) Fiduciary responsibility : The responsibility of any financial servicesorganisation to guard the interests of its customers. This aspect is



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important not just in banking and insurance, but also in other sectors of the

financial services.

(10) Labour intensiveness. The financial services sector is still highly

labour intensive, which increases the costs of production and affects the

price of financial products. Indeed personalised service versus automation

is an important issue in financial services. Because of their relatively high

personnel costs, as well as to enhance customers' convenience, financial

services are increasing their use of technology.

The Financial Services Management System

Most financial services organisations have two types of objective :

Flexible goals, for example increasing (or decreasing) deposits of

certain kinds, increasing (or decreasing) loans of certain types, directing

customers to certain types of product or services.

Fixed objectives, for example profitability, a high return on investment,

achieving certain market shares and growth rates, development of

certain images achieving a spread of customer types in order to

minimise risks and business fluctuations, and so on.

A written statement of objectives is becoming increasingly necessary in allthe financial services. Bearing in mind the need to maintain good business

and public relations, the general financial services business objective is

profits that are sufficiently high to protect depositors and shareholders.

Depositors are of special importance since in building societies and the

clearing banks they finance up to 95 per cent of assets. The return on

investment required by the chief executive will influence the operational

manager's targets, as will planned growth and size. The latter may not



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necessarily yield economy, but can sometimes yield competitive

advantage. Lastly comes an increased market share, not only because an

increased share of a market often brings competitive advantages, but

usually the objective is a larger share of selected customer groups, and not

of the total market.

Customer behaviour, attitudes and segmentation.

Marketing research that attempts to collect, investigate, analyse and

interpret customers' attitudes and market developments, in each of the

areas mentioned here, in order to contribute to the maximum attainment

of objectives in the light of existing non-controllable factors.

Product/service development and introduction.

Branch management; location and distribution of financial services.

Advertising, communication, promotions and publicity.

Pricing of financial services.

Defining marketing strategies, administering and controlling the

marketing programme.



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INSURANCE IN SERVICES MARKETING

This is a quasi-collective service, or a `subsidy' created by customers who

are subject to a certain risk to the few insured who are, in fact, affected by

the occurrence of that particular risk. marketing has grown in importance in

insurance, mainly due to growing competition in products and pricing.

The importance of marketing has been boosted even more today by the

industry's gigantic size. In the United States, for example, the total annualvolume of corporate and personal insurance is around $300 billion,

representing about 5 per cent of all business and family expenditures. The

insurance companies' assets exceed $600 billion and about 1 per cent of

the working population is employed in this industry. In the UK, unlike in the

USA, a high proportion of the population is underinsured. One of the

reasons for this is that the marketing system for insurance is multi-faceted

and includes both private and governmental (tax-supported) systems, and

many risks and catastrophes are covered by the state social security

system. However it is still an important and growing sector, with over -4

billion yearly in premiums for life assurance and annuities alone.

Governments, through laws and regulations, create a `need' for insurance.

In most countries it is now a legal requirement for motorists to have

insurance cover for liability to third parties. The situation may also arise

where individuals or institutions, such as commercial banks, require their

customers to insure imported goods that are being paid for through a letter

of credit. Building societies, hire purchase companies and principals in

construction contracts also impose a requirement for insurance cover.

Insurance contracts embody the principles of insurable interest and utmost



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good faith, the purpose of which is to eliminate the possibility that society

will be prejudiced by the insurance product.

Environmental factors and competition in the insurance market.

A number of environmental and non-controllable variables have recently

affected the insurance markets, as follows:

Many insurance companies have incurred severe losses as a result of

the large number of catastrophes, for example hurricanes and othernatural disasters in the USA.

Laws and regulations put forward by the European community have

liberalised the insurance market throughout Europe, intensifying the

fierce competition in these markets. These developments have led to

many insurance companies opening subsidiaries in other member

states and/or entering into strategic alliances with insurance companies

in other European countries.

Deregulation and increased competition have resulted in the launching

of a number of direct insurance companies (for example Direct Line)

that also offer cheaper home loans. This has increased even further the

pressure on insurance companies to cut costs, mainly by cutting jobs. In

1994 the Norwich Union cut its direct sales force from 800 to 250. Many

insurers call this process `rationalisation'.

There are two major categories of insurance: general insurance (that is,

property and liability insurance) and life insurance, which has several main

subcategories.



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The need for insurance services arises because of the three types of

system that create hazards and uncertainty.

The social system creates hazards such as burglary, arson, riots, civil

commotion, strikes or kidnapping. This leaves the individual or the

institution in a state of financial uncertainty.

The natural system relates to natural forces such as hurricanes,

earthquakes, lightning, floods, storms, tempests and so on.

The technical system (that is, that created by individuals and institutions

within a society) can create the hazards of fire, explosion, pollution,

radiation, contamination, breakdown, collision, impact and so on.

Natural risks/hazards: firehurricanes earthquakesfloods storms

Need satisfactionthrough marketing ofinsurance services

Product development

Social risks/hazards :burglary kidnapping arsonriots strikes

Insurancecustomer's needs

and wants byprivate, industrial &

commercialcustomers

Pricing

Promotion & advertising

Technical risks/hazards :explosion pollutionradiation collision impact

Distribution & selling

The hazards generating the need for insurance

marketing.



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There are three main factors affecting the insurance market in addition to

the various factors generally affecting all other financial institutions.

First, the impact of legislation and tax concessions. Legislative

requirements and restrictions can exert a considerable influence on the

size and scope of the market. This influence can take several forms,

ranging from control of the number of offices operating in the market to the

types of contract written or even to the detailed policy conditions.

Second, the size and distribution of the population and national income.

The size of the population might be expected to have a particular direct

influence on the market for insurance, and particularly life assurance.

However this is not necessarily true, as other elements, such as the density

and distribution of the population and demographic and socioeconomic

factors, should be taken into consideration as well.

When real incomes increase rapidly there is a tendency for personal

consumption to increase. At the same time personal savings are

channelled into traditional financial institutions such as banks and building

societies, whilst some will be channeled to life assurance companies. This

shows that there is a large potential market for life assurance when

national income increases. However the major problem here is competition

from other financial institutions and the effects of inflation.

Third, competition. Aggressive competition and the increasing costs of

service and administration have led, on the one hand, to the elimination of

small unprofitable companies and, on the other hand, to difficulty in offering

a personal service. Thus a trend has arisen for insurance companies to



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amalgamate in order to exploit economies of scale and to be able to invest

heavily in computers and other ancillary equipment to: (1) calculate their

costs accurately, (2) achieve lower operational costs and (3) expand their

service capability.

In order to combat competition, wider cover at little or no extra premium

(pricing policy) is now being offered, for example, by direct selling over the

counter or via mail order with more economically packaged contracts.

Savings can also be affected (as noted above) by competition between

banks and building societies, which provide both long-term and short-term

saving facilities. Life assurance policies are a form of long-term saving, but

as most savers usually prefer to hold cash or short-term assets, the life

companies are at a disadvantage. Furthermore the severe bouts of inflation

in recent years have increased the reluctance of the public to enter into

long-term financial commitments. so insurance companies will have to find

ways and means of drawing savers away from the traditional financial

institutions, either by guaranteeing surrender values (that is, the amount of

money refunded when policy holders cash in their policies) or allowing

policy holders to borrow against the surrender value so that they know their

money is not completely tied up. In order to deal with the marketing

problems facing this sector, marketers in insurance companies employ a

set of marketing tools and techniques.



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DIFFERENT SERVICES PROVIDED THROUGH

CLAIMS COMMITTE

Claims Review Committee

The corporation settles a large number of death claims every year. Only in

case of fraud or suppression of material information, is a claim repudiated.

The number of death claims repudiated is, however, very small. Even in

these cases, an opportunity is given to the claimant to make a

representation for consideration by the Review Committees at the zonal

Office and the Central Office. As a result of such reviews. Depending on

the merits of each case, appropriate sanctions are made.

The Claims Review Committee at the Central Office has an outside

member Justice S.C.Pratap, former chief Justice of the Andhra Pradesh

High Court, which has helped in providing transparency to our operations

and has resulted in greater satisfaction among the claimants, policyholders

and public. The Claims Review Committees at zonal Offices have been

reconstituted in 1998-99 with the induction of High Court/District Court

Judges (Retd.), as a measure of empowering and providing transparency

to the working of the claims Review Committee at the Zonal level.

Grievance Redressal Machinery

Policyholders Grievance Redressal Cells exist in all the offices of the

corporation, headed by Senior Officers who can be approached by

policyholders to get their grievances redressed, on any day but particularly

on every Monday between 2.30 PM and 4.30 PM.

All Branch Offices - Sr./Branch Manager

All Divisional Offices - Marketing Manager

All zonal Offices - Regional Manager (Marketing)

Central Office - Chief/Exe. Director (Mktg. Customer Services)



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Hi-Tech Services

To provide quicker and better services to our policyholders, approx. 97% ofour total Branches have front end computerisation for giving on-line service

to policyholders.

In addition to this, New Delhi, Chennai, Bangalore and Mumbai have

installed Metro Area Networking (MAN) and Interactive Voice Response

System (IVRS). Through MAN policyholders in the cities can obtain their

policy status and make premia payment to any of the Branches within the

city, and any Branch of the city can handle their policy enquiries. Through

IVRS policyholders can obtain on phone and by fax-on-demand various

information about their policy e.g. loan quotation, paid-up value, revival

quotation, accrued bonus statement etc. The phone numbers for IVRS are

as follows:

Delhi : 3329595/3329700 Chennai : 8589830

Bangalore : 2211435 Mumbai : 6187655



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LIC has a family of schemes for you and your family to meet various needs.

I) Basic Life Insurance Plans:

1) Whole Life Assurance Plan: A low cost insurance plan where the Sum

Assured is payable on the death of the life assured, whenever it occurs.

2) Endowment Assurance Plan: Under this plan, the Sum Assured is

payable on maturity or on death of the life assured, if earlier.

II) Term Assurance Plans:

1) Two Year Temporary Assurance Plan: term assurance for periods of

upto 2 years is available under this plan. The sum assured is payable only

on death of the life assured during the policy term.

2) Convertible Term Assurance Plan : the plan provides for term

assurance for 5 to 7 years with an option to purchase a new Limited

Payment Whole Life policy or an Endowment Assurance Policy at the endof the selected term provided the policy is in full force.

3) Bima Sandesh: This Term Assurance Plan provides for return of

premiums paid, on the life assured surviving the policy term.

4) Bima Kiran: In addition to benefits available under Bima Sandesh plan,

this plan provides Loyalty Addition, in-built accident cover and Free Term

Cover after maturity, provided the policy is then in full force.

III) Plans for Children:

Various childrens Deferred Assurance Plans are available, viz., CDA,

Jeevan Balya and Jeevan Kishore. Jeevan Sukanya is a plan specially

designed for girls. The Childrens Money Back assurance Plan is specially

designed to provide for childrens higher educational expenses with added

attractions of Guaranteed Additions, Loyalty Additions and optional familybenefit.



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IV) Pension Plans:

These plans provide for immediate or deferred pension for life. The pensionpayments are made till the death of the annuitant (unless the policy has

provision of guaranteed period). We have pension/annuity plans like

Jeevan Dhara, Jeevan Akshay, etc. which provide return of the purchase

price on death of the annuitant. We have Jeevan Suraksha plan which

provides pensionfor the spouse also and premium paid upto Rs. 10,000/- is

exempted from income tax under Section 80 CCC(1). Jeevan Sarita a

Joint-life-last survivor Annuity-cum-Assurance plan is available for thebenefit of both husband and wife.



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SERVICE OF DIFFERENT POLICIES

1) Jeevan Griha (Double & Triple Cover): For people desirous of

obtaining housing loan with the policy acting as collateral security and to

ensure repayment of the loan in the event of the premature death of the

borrower.

2) Mortgage Redemption: Suitable for borrowers as it ensures that the

outstanding loan is repaid in the event of the borrowers death.

3) Bhavishya Jeevan: A Special Endowment plan ideally suited for

professionals with a limited span of high income.

4) New Jana Raksha: Ideal for people with no regular income. It provides

for death cover for a period of 3 years from the first unpaid premium,

provided at least 2 full years premiums have been paid.

5) Double Endowment: this is an Endowment Assurance plan with doublethe sum Assured payable on maturity.

6) Fixed Term (Marriage) Endowment/Educational Annuity: A plan

suitable for making provision for start-in-life, marriage or education of

children.

7) Convertible whole Life: The policy is issued as a whole Life plan with

an option to convert it into an Endowment Assurance at the end of 5 years.A plan suitable for those who cannot afford high premium in the initial years

but have prospects of increased income within a few years.

8) Money Back Plan: Besides providing life cover during the term of the

policy, the maturity benefits are paid in installments by way of survival

benefits.

9) Jeevan Surabhi:A Money Back Plan where premiums are payable for alimited period, with periodical increase in insurance cover.



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10) Jeevan Sathi: A double cover Joint Life Endowment Assurance plan

for husband and wife.

11) Jeevan Chhaya: An ideal plan to provide for your childs higher

education.

12) Jeevan Mitra: An Endowment Assurance plan with twice the sum

assured payable on the death of the life assured during the policy term.

13) Jeevan Shree: A Limited Payment Endowment Assurance plan with

attractive Guaranteed Additions at the rate of Rs. 75/- per thousand sumassured p.a. and Loyalty Additions.

14) Asha Deep II: The plan provides, besides death and maturity

payments, benefits in case the life assured suffers from any of the four

defined ailments.

15) Jeevan Aadhar: especially designed for handicapped dependants.

This is a limited payment whole life policy with guaranteed additions at therate of Rs. 100/- per thousand sum assured p.a. where the claim amount is

paid partly in lumpsum and partly in the form of an annuity. Income Tax

relief under Section 80DD is also available as per current IT Relues.

16) Jeevan Sanchay: This is a Without-Profit Money Back type plan with

provision for Guaranteed Additions at the rate of Rs. 70/- per thousand sum

assured p.a. and Loyalty Additions payable on maturity or earlier death.

17) Jeevan Sneha: A Money Back Plan exclusively for women. There is

provision for Guaranteed Additions at the rate of Rs. 70/- per thousand sum

assured p.a. and Loyalty Additions payable on maturity or earlier death.

18) Bima Nivesh: A single premium plan of assurance with compounding

guaranteed additions at the rate of Rs. 85/- per thousand sum assured p.a.

for first 5 years and Rs. 90/- per thousand sum assured p.a. for next 5



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years. The same premium is payable for a given policy term, irrespective of

age at entry.

19) Jeevan Asha-II: The plan provides, besides death and maturity

benefits, payment towards certain surgical procedures and periodical

survival benefit payments. There is also a provision for guaranteed

additions at the rate of Rs. 70/- per thousand sum assured p.a.



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Blue print of LIC services

Customer

Agent Development Officer Branch Manager

Administration Processes the information

Agent gives policy to customers

Customer pays premium

On maturity or death, amount is paid

FINDINGS OF THE STUDY



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The Life Insurance Company of India faces Gap 5. LIC is a monopoly in life

insurance market. LIC is giving good services, but customers expect much

more from them. Since, there are no other competitors in the market, so

they are not fulfilling all the expectations of the customers.

For example some customers expects better bonus rates & more

exemptions on income tax benefits which Life Insurance Company are not

providing. A few customers also expects at the door step service which is

not being provided by LIC.

Policy holders expects the policy amount to the paid within a weeks time

after the date of maturity or after the death of the person, but LIC is not

prompt enough to give back the policy amount. Thus it is clear that Gap 5

exists.

Life Insurance Company also faces Gap 1. The managements perception

of customers expectations does not match the customers expectations. LIC

introduces different schemes periodically, without any market survey. Theyformulate different schemes, without knowing whether there are actually

needed by the customers or not. The Management perceives that the

schemes are very attractive & would be accepted by the customers. Not all

the schemes are required by the customers, as a result there schemes are

not very successful.

Gap2 also exists in Life Insurance Company. Due to lack of knowledge of

the management as to what is required by the customers, therefore

employees are not given proper guidelines & specifications to provide

service to the customers.

The service delivery by LIC is not very efficient and satisfactory, thus

resulting in Gap 3. This is because of two reasons. Firstly, it is a semi

government organization & it is a known fact that these organizations are

not very efficient in providing services. Secondly, it is the only existing life



47/107


insurance company & has monopoly in the insurance market, therefore

they provide the services as per their whims & fancies.

Life Insurance Company promises much more than what they can or they

are providing. The customers are assured that they would get back the

policy amount on the date of maturity or within 7 days of the death of the

policy holder, but this does not happens as customers sometimes have to

wait for a month or more to get back the amount. Thus Gap 4 also exists in

Life Insurance Company.



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SUGGESTIONS AND RECOMMENDATIONS

1. As the customers of LIC are not satisfied with the services provided by

them, therefore LIC should ensure prompt and efficient service delivery

to its customers.

2. LIC introduces schemes and policies without conducting a market

research. Therefore they should obtain feedback from the customers

prior to the formulation of schemes as well as afterwards.

3. LIC should ensure that there is no delay in giving the policy amount to

the customers and that it should be given on the maturity date or the

time specified.

4. LIC should have a customer relation department wherein any problems

that are faced by the customers are handled at that point of time.

5. LIC should lay down clear and specific guidelines and train the

employees accordingly so that they can provide services as required by

the customers.



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CONTENTS

Page No.

Acknowledgement

Introduction (Nature of Insurance, Brief History) 1

Queing for Insurance Pie in India 6

Brief History of Life assurance in India 7

PR & Insurance in Services Marketing 10

Insurance Marketing 16

The Roles of Marketing in Financial Services (In Insurance) 26

Insurance in Services Marketing 33

Different Services Provided through Claims Committee 38

Service through Different Policies 42

Blue Print of LIC Services 45

Findings of the Survey (Gaps) 46

Recommendation & Suggestions 48

Annexure



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ACKNOWLEDGEMENT

We are thankful to Mr. Pawan K. Verma, Sr. Divisional Manager

for permitting us to carry on extensive study of LIC at Divisional Office.

Jeevan Prakash.

We acknowledge with thanks the valuable suggestions of Manager

(OS), Mr. J.P. Khanduri (D.M.) and Mr. Vipin Anand, Marketing

Managerwho gave us inspiration for conducting the particular study. We

are also thankful to Prof. Rajita Choudhuri for providing us an opportunity

to carry out a study on Services Marketing in Insurance Sector (LIC).

It is needless to say that any piece of creative work requires the

involvement of a number of individuals, since it beyond the scope of ourlimitations to enlist each & very individual associated with this work who

extended their co-operation in sharing unbiased views & feedback which

helped to collect concrete data,

Hence, we would express over sincere gratitude to all those who

played contributory role directly or indirectly towards accomplishment of our

report.



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INTRODUCTION

Insurance- what is it?

Man has always been in search of security and

protection from the beginning of civilization. This

urge in him to lead to the concept of insurance. The

basis of insurance was the sharing of the losses of

a few amongst many. Insurance provides financial

stability and strength to the individuals and

organization by the distribution of loss of a few

among many by many by building up over a period

of time.

The legal definition of insurance is that, it is a contract between the insurer and

insured whereby, in consideration of payment of premium by the insured the

insurer agrees to make good any financial loss the insured may suffer due to

consideration of an insurance peril.

History of general insurance:

As civilisation progressed the incidence of losses started of giving rise to the

concept of loss sharing. The Aryans through their village cooperatives practiced

loss of profits insurance. Mediterranean merchants also practiced it in the century

4th B.C. through the issue of bottomory bonds. The code of manu indicates that



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there was the practice of marine insurance carried out by the traders in India with

those srilankans, Egypt and Greece.

The earliest transaction of insurance as practiced today can be traced back to 14 th

century A.D. in Italy when ships are only being covered.

The insurance act of 1938

The act was passed in 1938 and was brought into force from 1st July 1939. The act

has been amended a number of times the most important being in 1950 and 1968.

It applies to General Insurance Corporation of India and the four subsidiary

companies subject to exception restrictions and limitations as specified by the

central government.

The important provisions of the act relate to the following-

1. Registration- every insurer is required to obtain a certificate of registration

from the controller of insurance. The registration is required to be renewed

annually.

2. Accounts and returns-an insurer is required to keep a separate of accounts of all

the receipts and payments in respect of each class of insurance. Every insurer

is required to prepare at the end of each year in the prescribed form-

Balance sheet

Profit and loss account

Revenue accounts for each class of insurance.

The accounts are required to be audited annually by an auditor and printed copies

and four copies submitted to controller of insurance within six months from close

to an year.

3. Investments- every insurer ahas to invest only ion those investments approved

under the provisions of the act. Returns in the prescribed form are to be

submitted to the controller showing as at the end of each preceding year,

investment made out of assets.



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4. Limitation on expenses of management- the act prescribes maximum limit of

expenses of management including commission may be incurred by an insurer.

Essential features of general insurance

All insurance contracts are governed by by principles of utmost faith and

proximate cause.

Insurable interest-

A person who wants to insure must have insurable interest in the property to be

insured. The essentials of insurable interest are

There must be a property capable of being insured.

Such a property must be subject matter of insurance.

The insured should have a legal relation to the subject matter insurable interest

could arise in a number of ways such as:

1. ownership

2. mortgage

3. trustee

4. bailee

5. lessee

In fire insurance, the insurable interest must exit throughout the contract. It must

exist:

1. At the inception i.e. while placing the property for insurance.

2. During the currency of the policy i.e. the interest should not cease during the

period of insurance.

3. At the time of loss in event of fire / accident the insured should continue to

have an interest in the property to claim the insurance money.



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In marine insurance the insurable interest must exist at the loss time. It need not

necessarily be at the time of taking cover.

In case of personal accident insurance a person has unlimited financial interest on

his own life. How ever in practice suitable monetary benefits must be considered.

There will be no contact of insurance in ht e absence of insurable interest that

distinguishes from wagering co

Documents

Services Marketing, LIC