SUMMARY, FINDINGS AND

RECOMMENDATIONS

INTRODUCTION

Life insurance, which is an important component of financial service

sector, has witnessed significant growth during the last few years. It

contributes to social stability by permitting individuals to minimize financial

stress and worry. It provides certainty of payment at the uncertainty of

loss. It can reduce the financial burden on the state caused by people living

too long or dying too young. It provides capital to society by investing its

accumulated funds in various productive channels. The business of life

insurance generates large employment opportunities and it allows more

favourable credit terms.

The insurance sector in India has completed a full circle from being

an open competitive market to nationalization and back to a liberalized

market in a period of less than half a century. The first life insurance

company called Oriental Life Insurance Company was set up in the country

in 1818. From 1818 to 1956, life insurance business in India was in the

hands of private insurers. The business of life insurance was nationalized in

1956 and the Life Insurance Corporation of India was established on 1st

September, 1956. LIC enjoyed monopoly in the field for more than four

decades. During the post nationalized era, the industry introduced more

than 50 products in the market. However, the monopoly and growth of

business have not met the requirements of the country. Life insurance

premium accounted for only 1.2 percent of GDP, which was negligible

compared to other Asian countries. Life insurance penetration and density

also were woefully low in the country. As part of the liberalization process

initiated in India and on the recommendations of Malhotra Committee, IRDA

was created and the sector was opened to private players. At present,

more than a score life insurers are operating in the market.

All the activities of a life insurance company can be grouped into

three major functional classifications – marketing, investment, and

administration. Of these three areas, marketing is the largest in terms of

both personnel requirements and costs, and is critical to success.

The studies conducted previously have served as a basis for the

present study. Several studies have been conducted in India and foreign

countries about insurance business in general. Very few studies were

conducted in India specifically about life insurance marketing of LIC. No

research worthy to be mentioned has been conducted in Kasargod and

Kannur districts in Kerala about the marketing of life insurance products

and related aspects.

Even though LIC achieved tremendous progress after nationalization,

the Corporation covers only about 24 % of insurable population in India. At

the same time, potential for the insurance market is very vast in India.

Even after 52 years of establishment of LIC, the awareness of people about

insurance, insurance products, and its benefits is not high, especially in

rural areas. Due to lack of awareness, people often buy products

recommended by agents who always give importance to their commission.

Product knowledge of agents is disappointing according to the views

expressed by Branch Managers and Development officers. Ensuring

customer satisfaction and job satisfaction of agents are the twin issues

before LIC in the competitive environment, which must be tackled for

success in life insurance marketing. It is against this background that the

present study is undertaken.

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The study is undertaken with the objectives of evaluating the

performance of LIC in marketing individual products in Kasargod and

Kannur districts in Kerala in the context of growing competition from private

sector. It also examines the awareness and preference of urban and rural

policyholders, their perceived satisfaction with regard to LIC’s products and

services of agents and branch offices. The productivity of agents in the two

districts, their attitude towards job and job satisfaction are also assessed in

the study. It analyses the problems faced by agents in marketing life

insurance in urban and rural areas of the two districts. On the basis of

objectives specified for the study, hypotheses are framed and tested.

Since the study assesses the productivity of agents in the two

districts, LIC can analyse the contributing factors related to it. Analysis of

the influence of advertising media shall help the Corporation to concentrate

more on the most influential media. Assessment of product satisfaction of

customers will assist the Corporation to identify those aspects of the

product which give them more satisfaction and it would help in effective

product positioning and also for developing customer driven product mix.

Since the study evaluates the service quality parameters, the Corporation

can identify the gaps in service quality and take appropriate steps to tackle

them.

The study is confined to two districts under the Kozhikode Division. It

evaluates the performance of LIC in marketing individual products only.

Since more than 98 percent of the new business premium income of LIC is

underwritten through individual agents, this intermediary alone is

considered for the study. The policyholders are classified into urban and

rural on the basis of their domicile and their perceived satisfaction is

assessed.

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The study covers a period of 12 years from 1995-96 to 2006-07 to

assess the performance of LIC at all India level and covers a period of six

years from 2001-02 to 2006-07 to assess the performance in Kasargod and

Kannur districts. For analyzing the data collected, statistical tools like

Percentage, Average, Standard Deviation, Chi-square test, Analysis of

Variance (ANOVA), and Coefficient of Variation and the like are used.

FINDINGS

The major findings of the study on the basis of data analysed are

presented below:

Customer Satisfaction of Life Insurance Products

1. The overall product satisfaction of customer is ‘moderate’ as the

mean score is 3.34 for urban and 3.30 for rural respondents. ANOVA

test shows that the difference in product satisfaction between urban

and rural respondents is not significant at 0.05 percent level.

2. Regarding cost of product (premium), urban as well as rural

customers are neither satisfied nor dissatisfied as the mean score

obtained is less than three at five point scale.

3. Customers are satisfied with the risk protection aspect and

moderately satisfied in the savings aspect of life insurance products.

Customer satisfaction is ‘more than moderate’ regarding income-tax

benefits accruing from life insurance products.

4. As regards return from products, customer satisfaction is ‘poor’ as

the mean score is 2.29 for urban and 2.09 for rural customers.

When it comes to safety aspect of life insurance product, they are

more or less satisfied. Regarding liquidity, their satisfaction is ‘just

moderate’ as the mean score is 2.98 and 3.03 for urban and rural

customers respectively.

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5. Chi-square test for the different components of product satisfaction

shows that there is no significant difference in the perception of

urban and rural respondents, at 0.05 percent level.

Customer Satisfaction of Pre-sale Services

1. Customer satisfaction of the pre-sale services of agent is ‘moderate’,

as the mean value obtained is 3.27 for urban and 3.32 for rural

respondents. Since the mean value is not very high, the attitude of

the respondents towards the pre-sale services of agent is found not

much favourable.

2. The level of customer satisfaction with regard to pre-sale services

like assistance in filling forms and attentiveness to customers are

found to be high whereas that connected with services like selection

of policy, product knowledge, explanation of product benefits, and

financial advice are found low. There is no significant difference in

perception about the agents’ pre-sale services, between urban and

rural policyholders.

Customer Satisfaction of Post-sale Services

1. The overall satisfaction of customers about the post-sale services of

agents is ‘just moderate’ as the mean value obtained is 2.83 for

urban and 2.85 for rural respondents.

2. Customer satisfaction is ‘moderate’ in the case of assistance in policy

document and other services such as obtaining loans, payment of

maturity claims, nominations, assignments and the like.

3. ANOVA test reveals that there is no significant difference in

perception between urban and rural customers about the after-sale

services of agents, at 0.05 percent level. Coefficient of Variation

shows that the perception of urban respondents is more consistent

than that of their rural counterparts.

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4. Comparison of perception of the pre-sale service with the post-sale

service reveals that agents show more interest at the time of selling

the products. But customers are not satisfied in the post-sale service

of agents.

Customer Satisfaction of Office Services

1. The SERVPERF score of 3.31 for urban and 3.32 for rural respondents

reveal that customer satisfaction is ‘moderate’ for almost all the service

dimensions. The analysis further shows that the customer satisfaction

of office service elements such as accessibility, assurance, competence,

reliability, responsiveness, and tangibility are in high order whereas

communication, empathy, understanding the customer, system and

procedure are in low order.

2. The ANOVA test shows that the difference in the perception about

branch office services between urban and rural respondents is not

significant at 0.05 percent level.

Customers’ Overall Satisfaction

1. The overall satisfaction of customer, which is the totality of product,

agents’ services and office services satisfaction of customer, is

‘moderate’ in the case of both urban and rural customers as the mean

score obtained on five point scale is 2.88. There is no significant

difference in over all satisfaction between urban and rural customers of

LIC.

Policyholders’ Profile

1. The profile of the respondent policyholders reveals that they are

heterogeneous with different socio-economic background. Gender wise,

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most of them are male policyholders, in the age group of 30 to 50 years,

and literate with secondary level to post graduate level of education.

2. Respondents are from different strata of occupation (salaried

employees 35.5 percent, business class 33 percent, agriculturists 11

percent, professionals 10.75 percent, and daily wage earners 9.75

percent). Their monthly income ranges from Rs.5,000 to Rs.30,000 with

an average of Rs.11,487.

3. Insurance status of earning members in the family of respondents is

27 percent and it is 9 percent in the case of non-earning members.

4. The average rate of savings of urban policyholders is 28.8 percent of

their income and that of rural ones 23.86 percent of their income. The

difference in the rate of savings between urban and rural respondents is

significant at 0.05 percent level.

5. Urban respondents, on an average, spend 10.58 percent of their

savings for purchase of life insurance, whereas it is 8.16 percent in the

case of rural respondents. The difference in the amount spent for life

insurance is significant between urban and rural respondents at 0.05

percent level.

6. There is association between rate of savings of income and

percentage of savings spent for purchase of life insurance by urban and

rural respondents, but the association is not very significant.

7. The average size of policy is Rs.2, 02,941 in urban areas and it is

Rs.1, 04,926 in rural areas. The difference in the sum assured between

urban and rural policyholders is significant at 0.05 percent level.

8. On an average, 17 percent of the respondents have adequate life

insurance coverage; the remaining 83 percent are underinsured. The

Chi-square test reveals that there is significant difference between

urban and rural policyholders regarding the reasons for low coverage.

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9. The agent is the main source of information about LIC products

(urban 41.35 percent and rural 46.95 percent) followed by

advertisement (urban 22.56 percent and rural 24.43 percent). The Chi-

square test shows no significant difference in the sources that create

information about life insurance between urban and rural respondents,

at 0.05 percent level.

10. Television is the major source of advertising influencing urban

customers (Mean score 5.18); whereas it is newspaper (Mean score

5.20) in the case of rural customers.

11. The agent is the most influential factor in purchasing life insurance in

the case of both categories of respondents (urban 38.24 percent and

rural 39. 77 percent). It is followed by own interest (urban 25.74

percent and rural 21.21 percent) and that of spouse (urban 22.06

percent and rural 21.21 percent). Friends and relatives are least

influential factors.

12. Awareness for money back and new generation policies (ULIP) is high

among both categories of policyholders. But it is low for pension

products (urban 38.24 percent and rural 37.12 percent),

education/marriage policies (urban 38.97 percent and rural 39.39

percent), and annuity (urban 7.35 percent and rural 11.74 percent)

schemes among both categories of respondents. The analysis of

variance shows that the difference in awareness between locations and

products is significant at 0.05 percent level.

13. Customer knowledge about product features and benefits like

payment of three years’ premium in advance, reduction of sum assured

in certain cases and getting policy details on IVRS No. 1251 is poor

among urban and rural policyholders. But it is comparatively high in the

case of product features like loan facility on money back policies and

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remittance of premium in any branch office of LIC and the like among

both categories of policyholders.

14. Money back policy is the most preferred policy in urban (46.32

percent) and rural (47.35 percent) areas followed by endowment (38.24

percent and 39.77 percent respectively) and ULIPs (36.76 percent and

31.44 percent respectively). There is no significant difference in product

preference between urban and rural customers, at 0.05 percent level.

15. Savings linked with protection is the main objective for which life

insurance is purchased by urban as well as rural customers. The

consideration of risk alone is the second motivating factor in the

purchase of life insurance for both urban and rural segments. Enjoying

income-tax benefit is the third consideration in the case of urban

policyholders (Mean score 3.34) and it is the least in the case of rural

policyholders (Mean score 2.24).

16. LIC policy is not considered as a prime investment avenue by urban

as well as rural policyholders. Of the six types of investments given for

ranking, LIC Policy is ranked in the third place.

Profile of Agents

1. The profile of respondent agents shows that they are from different

socio-economic background. Fifty percent of the sample respondents

are Rural Career Agents. The gender-wise classification reveals that life

insurance agency business is dominated by males (62 percent). Majority

of the samples are in the age group of 30 – 40 years (52.50 percent),

with mean age 38 years. More than 50 percent of the agents have

education above higher secondary level. It is found that no

professionally qualified person has been attracted to the profession of

LIC agency business.

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2. The monthly income of respondents ranges from Rs.5,000 to Rs.25,000.

The average income of the LIC agent is Rs.10, 325 per month.

3. Only 51 percent of the respondents have selected life insurance agency

business as a means of livelihood and the rest 49 percent have selected

it due to various other reasons like supplementing personal/family

income (29.5 percent), as a kind of social service (10 percent), and

pressure from friends and relatives (9.5 percent).

4. It is found that majority of the agents do not keep a definite time

schedule to spend in the field and branch office. Average time spent by

an agent in the field is less than four hours per day.

5. The proportion of business of agents under SSS varied from 20 to 60

percent. On an average 24.1 percent of the business of the agents is

from SSS. More than 50 percent of the agents concentrate on salaried

income, NRI and business segment of the market. Agriculturists and

daily wage earners are not given due importance due to the fear of

surrender and lapse of policies in this category. At the same time

occurrence of policy lapse is more in the NRI segment of the market

because of over selling.

6. It is significant to note that more than 57 percent of the agents

maintained other agency businesses. This reveals that time of majority

of the agents is divided between life insurance and other agency

businesses. More than 51 percent of the agents could not perform well

consistently as they are not members in any club.

7. Commission is the main criterion chosen by 43 percent of the agents for

recommending plans to customers, while 39 percent considers the

needs and desires of customers. In fact many of the agents do not know

how to estimate insurance requirements of their clients according to the

scientific concept of Human Life Value (HLV).

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8. Direct meeting is the most commonly used method followed by more

than 39 percent of the agents. It is also found that more than 23

percent of the agents canvas prospects by offering to pay the initial

premium, even though it is prohibited by statute.

9. The analysis shows that only 29 percent of the agents maintained an

office of their own for policy servicing. Maintenance of records by LIC

agents, except regarding family particulars and premium paid, is found

unsatisfactory.

10. More than 50 percent of the agents do not read and understand the

literature pertaining to life insurance before meeting the prospects.

Majority of the development officers and branch managers are of the

opinion that the knowledge level of the agents about insurance and

insurance products is poor.

11. The frequency of the agent meeting their customers is found not

satisfactory as 29.5 percent of them meet once in a year only and 25

percent meet once in six months.

12. Collecting premium from customers is the main after sales service

rendered by 43 percent of the agents. Rendering all types of after sales

service is not being practised by 95 percent of the agents.

13. According to the views of agents, Money back policy is the most

commonly accepted product in urban and rural areas. Second

preference is for unit linked products in urban areas and for

conventional endowment products in rural areas.

14. On an average 19.65 percent of the policies sold by agents are lapsed or

surrendered in a year. The major reason for surrender and lapse is

inability to pay due to low income. It is followed by diversion of funds to

other investments, lack of service of agents, diversion of funds to other

commitments, lack of conviction in life insurance, poor quality of service

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of branch office, and other reasons such as over selling, low bonus rate

and the like.

15. Obtaining death certificate is the most difficult problem experienced by

the claimants at the time of settlement of claims, followed by title

transfer/policy missing, and age proof.

16. Over all satisfaction of customers perceived by agents is ‘moderate’.

17. Participation of agents in the sales promotion campaign is not

satisfactory. More than 39 percent of the respondents did not

participate actively in the campaign organized by LIC.

18. The study reveals that only 59.5 percent of respondents attend training

programme for agents regularly. The quality of training for agents

perceived by the respondents is ‘average’.

19. It is found that 34.81 percent of the respondents who are under the

development officers meet their team leader once in a week, at the

same time there are agents (8.23 percent) who meet their development

officers less frequently.

20. The overall perception of agents towards job and job prospects is

‘moderate’ as the mean value obtained is 2.09 on three point scale.

21. Majority of the agents (67 percent) face problems in marketing LIC

products. Inadequate training in agency profession is the major problem

in marketing faced by agents in both urban and rural area. The other

problems in the order of severity are: inter rivalry between agents,

competition from private insurers, lack of awareness of the public, lack

of conviction, procedural delay from LIC, and non-co-operation from

development officers. The variance between urban and rural mean

values is not significant at 0.05 percent level, which shows that the

problems in marketing are more or less similar in both areas.

Performance of LIC in Kannur and Kasargod Districts

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The performance of the Corporation in marketing individual life

insurance products in Kasargod and Kannur districts analysed in terms of

number of products sold, sum assured of products sold and First Premium

Income (FPI) collected during the period from 2001-02 to 2006-07 is given

below.

1. The CAGR of number of products marketed shows 10.16 percent in

Kasargod and 6.07 percent in Kannur, whereas all India growth rate

shows 11.18 percent over a period of six years from 2001-02 to 2006-

07. There is significant difference in number and growth of products

marketed between Kasargod and Kannur districts during the period

under study.

2. The CAGR of sum assured of products marketed shows 18.57 percent in

Kasargod, and 12.45 percent in Kannur, whereas all India growth shows

6.14 percent for the period from 2001-02 to 2006-07.

3. First Premium Income (FPI) of products marketed during the period

under study shows CAGR of 43.03 percent in Kasargod and 34.79

percent in Kannur; whereas all India performance showed a growth rate

of 22.69 percent during the same period. There is significant difference

between the two districts regarding average First Premium Income (FPI)

received and growth in FPI during the period under study.

4.Growth in the number of individual agents fluctuated between a high of

14.3 percent and a low of 1.33 percent in Kannur; between a high of

12.36 percent and a low of (-) 5.97 percent in Kasargod district during

the period from 2001-02 to 2006-07.

Productivity of Agents

1. The productivity of agents in terms of number of products marketed has

fluctuated in both Kannur and Kasargod districts throughout the period

under study. The CAGR of productivity over a period of six years from

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2001-02 to 2006-07 is 3.71 percent in Kasargod, 2.21 percent in Kannur,

and 3.13 percent at all India level. The average productivity per agent is

28 policies in Kannur, 27 in Kasargod and 28 at all India level.

2. The CAGR of new business marketed per agent is 12.34 percent in

Kasargod and 5.88 percent in Kannur; whereas it is only 0.36 percent at

all India level. The average sum assured of products marketed per

active agent is Rs.25.94 lakh in Kannur, Rs.22.44 lakh in Kasargod, and

Rs.23.15 lakh at all India level.

3. The FPI per agent fluctuated widely in both the districts during the

period under study. The CAGR of FPI is 32.34 percent in Kasargod,

28.46 percent in Kannur, and 13.40 percent at all India level over a

period of six years from 2001-02 to 2006-07. The average FPI per agent

is Rs.1.17 lakh in Kasargod, Rs.1.18 lakh in Kannur, and Rs.1.92 lakh at

all India level.

4. There is no significant difference in productivity of agents in Kasargod

and Kannur districts at 0.05 percent level of significance.

Impact of Privatisation on the Growth of LIC

1. The entry of private players in the life insurance market has impeded

the growth of Life Insurance Corporation of India. The compound growth

rate of premium income for the period from 2001-02 to 2006-07 is 23.35

percent in the case of LIC, 134.85 percent in the case of private players,

and the industry average growth is 30.58 percent during the same

period.

2. The CAGR of new business in terms of number of products is 11.73

percent in the case of LIC, 75.42 percent in the case of private players,

and the industry average is 16.14 percent during the period from 2002-

03 to 2006-07.

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3. The market share of LIC in total premium income has decreased from

98.68 percent in 2001-02 to 72.47 percent in 2006-07 (i.e., a total of

26.21 percent decrease) and market share in terms of number of

products has decreased from 96.70 percent to 82.82 percent (i.e., a

total of 13.88 percent decrease) during the same period.

4. On the basis of growth in premium income and market share of LIC in

premium income and number of policies, it can be concluded that the

performance of LIC has been affected badly after privatization of the

insurance sector.

The hypothesis formulated and tested proved the following:

There is significant difference in product awareness between urban and

rural customers.

There is association between rate of saving and life insurance purchase

of policyholders. But the association is not much significant.

Urban and rural policyholders do not prefer LIC policy as the best

investment proposal to invest their savings.

The overall product satisfaction of policyholders is ‘moderate’ and there

is no significant difference in the product satisfaction perception

between urban and rural policyholders.

The pre-sale services of the agents have been rated as ‘moderate’ and

there is no significant difference in perception about the pre-sale

services of LIC agents, between urban and rural customers.

The post-sale services of the agents have been rated as ‘just moderate’

and there is no significant difference in perception between urban and

rural customers about the post-sale services of LIC agent.

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Customer satisfaction of office services have been rated as ‘moderate’.

There is no significant difference in perception between urban and rural

policyholders regarding office services of LIC.

The overall satisfaction of urban and rural customers is ‘moderate’.

There is no significant difference in overall satisfaction between urban

and rural customers.

The overall satisfaction of agents towards the job and job prospects is

‘moderate’.

The ANOVA test shows that there is no significant difference in

marketing problems between urban and rural area.

RECOMMENDATIONS AND SUGGESTIONS

Based on the findings of the study and opinion gathered from

executives, development officers and agents of LIC, the following

suggestions are recommended for improving the performance of the

Corporation in life insurance marketing.

Suggestions for improving Product Satisfaction

The following suggestions have been made for improving product

satisfaction of policyholders:

1. Product satisfaction can definitely be improved by keeping the

premium low while enhancing the returns and liquidity aspects of

the LIC products in comparison with other financial products. Since

the cost of life policy (premium) is based on mortality rate,

management expenses and investment income, any improvement in

these variables should go to the benefit of policyholders. For this

purpose, LIC should periodically revise the mortality table once in

five years and review the premium rates once in three years. If any

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reduction in the premium rates takes place as a result of such

reviews, the benefit can be passed on to the policyholders.

2. Return on policies in the form of bonuses should be increased in

order to make the product more attractive as an investment. This is

possible by investing the surplus funds of the Corporation in

securities which yield higher return. An effective and efficient fund

management is required in this regard. Return on unit linked

policies can be increased by keeping the allocation charge for

administration at the lowest limit.

3. Liquidity of life insurance policies can be improved by introducing

short-term products. More over, if value added benefits like switch-

over option to other plans, introduction of flexible products, rider

benefits and the like are added to the existing product benefits, it

would increase product satisfaction among the policyholders.

4. In the case of unit linked products, all charges must be

comprehensively described and presented in clear language in the

policy document itself prominently. The allocation of premium

amount between investment in units and administrative expenses

must be clearly mentioned in the brochure or pamphlets for unit

linked products. The customers must be provided with a unit

account statement at least once a year.

5. Since life insurance is an instrument effecting transfer and coverage

of risk, the Government should encourage savings through life

insurance by giving additional financial benefits to policyholders,

thereby enhancing welfare of the society.

Suggestions to Improve Agents’ services

Following are the suggestions made to improve the services of LIC

agents:

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1. The role and image of LIC agent needs to be upgraded to that of a

provider of professional expertise in enabling a customer to select

the best possible product mix to meet his/her life insurance needs.

Over and above the regulatory requirement of competence, LIC has

to ensure that the agents who operate in the market have enough

knowledge and skills to understand, evaluate and analyze the

changing needs of the customer, and these would have to be

sharpened by continuous training on an ongoing basis.

2. World class training should be provided to newly recruited agents.

Further, a training manual should be developed separately for

agents. In agents’ training, more emphasis has to be given on the

product details, need-based selling and ‘relationship marketing’.

3. The quality of service rendered by agents to their customers should

be monitored by Branch Managers or Development Officers as the

case may be. For this purpose, a standardized instrument for

measuring all dimensions of services of agents has to be developed

and customer response should be collected by using the instrument.

The renewal commission to agents should be based on satisfactory

rating of customers.

4. All agents who do the minimum business should be encouraged to

maintain their own office for policy servicing. The agent or his staff

must be available in the office during working hours to assist the

customers. All agents should be given computer facility in their

office. This will help them to keep records relating to all aspects of

the policyholder and assist in providing satisfactory service to the

customer.

5. Every LIC agent should ensure that the premium notice is sent to

their customers duly. This is possible only if they maintain record of

their customers. They should also ensure that the customer receives

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the policy document within 30 days of remittance of premium. The

services rendered by the insurance agents may be covered under

customer protection legislation in India which facilitates redressal of

customer grievances for deficiencies in services.

Suggestions to improve Office Services

The following suggestions are made to improve the services of

branch offices:

1. Efforts should be taken to improve the quality of service of branch

offices, especially in the areas of communication, empathy towards

customer, system and procedure. Adequate training should be

given to service personnel for improving customer related skills and

problem solving skills. The service system and procedures at the

branch offices need to be simplified.

2. As part of internal marketing and interactive marketing, the

Corporation should effectively train and motivate its customer-

contact employees and all the supporting service people to work as a

team to provide customer satisfaction. The Corporation may

strengthen internal marketing by providing rewards in the form of

incentives to branch managers, administrative officers and other

support staff who are directly connected with procurement of

business.

3. To improve the tangibility dimension of branch offices, customer

facilities like seating arrangements, drinking water, toilets and the

like may be provided where these facilities are found inadequate.

4. Apart from paying death claim, LIC should also provide other

supports such as counselling from psychologists, career guidance to

children, how best to utilize claim money and the like to the affected

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family. A cell under the charge of Assistant Administrative Officer

may be created specifically for this purpose.

5. The Divisional Offices should assess the service quality of its

branches through periodical survey of some selected customers by

using a standardized instrument. The rating score may be used for

appreciating best Branch Managers and other executives and certain

financial incentives may be granted to officers who score above the

standard score set by the Corporation.

Productivity of Agents

The following suggestions are made for improving the productivity of

agents:

1. The present minimum number fixed for retaining agency business

i.e., 12 lives per agent in a year, should be revised. It should be

increased to at least 24 lives a year with the additional condition that

at least one life should be insured every month. Fixing of minimum

target for every month will keep the agent live in the field and deter

him from engaging in other businesses.

2. The Branch Manager/Manager (Sales) and Development Officer

should weekly monitor the business performance of agents under

them. Further, the frequency of agent meeting the development

officer should be increased. There should be a schedule for it and

the schedule should be framed in such a way that every agent meets

his/her development officer at least once a week. This is highly

essential in the competitive environment for achieving the business

targets of agents.

3. Sales promotion campaigns need to be conducted frequently and

branch managers and development officers should motivate the

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agents under them for active participation in the campaign. This will

definitely boost the sales of agents.

4. It should be made compulsory for all agents to attend at least one

training programme during a period of two years. The standard and

quality of training given to agents should be monitored personally by

experts and improvements effected on the basis of feed back from

participants. Mobile training centres may be established to give

continuous training for all agents in each branch office. The product

knowledge of agents can be improved through giving training on an

ongoing basis.

5. The Corporation should work out some schemes of incentives/

penalties for good/ bad performers amongst agents.

Suggestions for improving market penetration

1. To increase insurance penetration, multi level marketing practices

like a senior agent appointing sub-agents, a broker appointing sub-

brokers and a bank appointing a sub-broker and the like should be

encouraged, with proper regulations. With increase in contact points,

insurance penetration also will increase. At the same time,

distribution channels like Self Help Groups (SHGs) and Non-

Governmental Organizations (NGOs) may be encouraged to sell

policies in hitherto neglected areas.

2. Establishment of micro branches or satellite offices and appointment

of specialized insurance agents in rural areas shall help the

Corporation to exploit the vast untapped rural insurance market.

3. To increase life insurance coverage, LIC should identify target

groups as well as locations where the coverage is weak. While fixing

the business targets for branches, the Planning Department at the

Divisional Office should also examine the potential available and

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ensure that the target is in consonance with the rise in income and

savings of the people. After making relevant study to determine

their potential and special requirements if any, tailor made products

may be devised to attract them.

4. LIC should design and market innovative products suitable to

agricultural workers, industrial workers, fishermen and the like with

rider benefits like payment of accident benefits for injury or accident

happening to the policyholder while he is engaged in his job. The

payment should be a certain percentage up to 75 percent of sum

assured depending upon the intensity and seriousness of the injury

or accident.

5. The IRDA should set the targets for all players for another period of

five years. Rather than setting targets in terms of getting minimum

percentage of business from rural sector and setting minimum

number of lives for social sector, it should be minimum percentage

of business from high, medium, and low income people from the

rural sector and minimum number of lives from high, medium and

low income people from the social sector.

6. The IRDA should prescribe a minimum share of business from

traditional policies in the overall portfolio of life insurance

companies. It could help insurers to have a stable business and

continue servicing claims of policyholders, especially when markets

are turbulent.

Other Suggestions

1. Pamphlet or notice of LIC’s product which is intended to be sold to a

prospect must be made available to him/her. The content of the

pamphlet or notice should clearly state in regional language the

features and benefits of the life insurance product. A new

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dimension may be added to customer service in the form of

readable policies structured in a simple format and drafted in plain

English, so that the customer is encouraged to read and understand

what he has bought.

2. Customer awareness about LIC’s products should be enhanced in

order to have good market performance. Since advertisement

through television and newspaper influence the customers greatly,

LIC should think of giving due weight to this media. It would be best

practice for LIC to project in their advertisement the features and

benefits of the product and how it would meet the needs of the

individuals. Moreover, since branch offices are the business

procuring centers, adequate freedom should be given to branch

managers for putting advertisements on hoardings, banners and the

like in regional language.

3. Since the majority of the population live in rural areas, the LIC needs

to develop the proposal forms in the regional language so that the

customers are able to understand what is contained in the form.

The cooling period of 15 days presently fixed may be extended to

30 days, entitling the policyholder to return the policy and claim

premium refund subject to the insurer’s charges and cost of risk

cover provided. Further, the policyholder may be given a copy of

the proposal form along with the policy document.

4. On the basis of product features, life insurance policies need to be

positioned in the market after proper market segmentation. Money

back policies, Endowment policies and ULIPs should be positioned on

its unique financial features, while term insurance policies should be

positioned using its risk features.

5. The remuneration received by the rural career agents is low as

compared to that of the urban career agents; whereas it is difficult

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to sell policies in rural areas than in urban areas due to various

reasons. If the rural career agents are paid remuneration at least

corresponding to that of the urban career agents, they are likely to

be motivated for improved performance.

6. Agents who are members of Branch Managers’ club and above

with10 or more years of service may be allowed to keep sub agents.

This will reduce the financial liability to the Corporation in the form

of commission to development officers.

7. A new and innovative marketing strategy has to be developed for

introducing new product. The features of the new product and the

marketing strategy formulated for it should be communicated to the

marketing personnel before the new product is launched in the

market. The marketing strategy should be built on the competitive

advantage position of LIC. No matter what distribution strategy LIC

adopts, customer relationship has to be taken care of in order to

maintain the customer base on a long-term basis.

Conclusion

Customer satisfaction is ‘moderate’ for product, pre-sale services of

agent and branch office services and ‘less moderate’ for post-sale services

of agent, among urban and rural policyholders in the districts under study.

Customer awareness is ‘poor’ for products and benefits accruing from

policies. There is significant difference regarding awareness between

locations and products. There is association between savings and life

insurance purchase by policyholders, but the association is found not much

significant in the case of both urban and rural policyholders. There is no

significant difference in the productivity of agents in Kasargod and Kannur

districts. But the productivity has not improved much during the period

under study. This may be because of the poor product knowledge of agents

and poor quality of training. The overall job satisfaction of agents is just

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above moderate. Majority of the agents face problems in marketing life

insurance. The growth of LIC has been impeded by the entry of private

insurers.

It is hoped that the recommendations suggested above will be useful

to LIC to improve its marketing activities with a view to attracting more

customers from both urban and rural areas and strengthening its presence

in the market in the competitive environment.

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