Project report: Organizational Environment and Effectiveness of Life Insurance Corporation of India

Prepared by: Ashish Baboo (080/48) Ashok Verma (083/48) Bipin Kumar Singh (096/48) Dinesh Kumar Soni (118/48) Jaydev Doshi (121/48)

Contents

Why LIC? ............................................................................................................ 3 Brief Introduction of LIC ..................................................................................... 3 Organisational Structure .................................................................................... 4 Organizational Culture: ...................................................................................... 5 Organisational Domain ...................................................................................... 6 General Environment factors ............................................................................. 8 Corporate Social Responsibility Initiatives ........................................................ 9 Sources: ............................................................................................................. 9

Why LIC?
LIC is the largest state-owned life insurance company in India, and also the country's largest investor. LIC's market share at the end of March 31, 2011, had stood at 72 per cent of all new policies sold during the last financial year (2010-11) with the 23 rival life insurance companies, most of which are tied up with international giants, holding a mere 28 per cent of the market share. LIC has regained its market share from 54% in 2005 to 78% as on Sept11. Its success is result of coordinated effort of its employees and agents. It has systematically changed its working within organization to improve efficiency in routine work and achieve customer satisfaction. It has continuously strived for achieving and sustaining its primary goal of utilising the Peoples money towards Peoples Welfare. LIC also funds 24.6% of Indian Govt.'s expenses and it is a major player in Indian share market and holds significant shares of large number of Indian companies.

History of Insurance in India

The history of Life insurance in its modern form dates long back to 1818 when Oriental Life Insurance Company was started by Europeans in Calcutta as the first life insurance company on Indian Soil. These insurance companies mainly provided the insurance facilities to the British community and Indian natives were not being insured. All these factors led to the rise of some Indian companies to provide social security through insurance to various sectors of society like Bombay Mutual Life Assurance Society established in 1870 and Bharat Insurance Company in 1896. A lot of new insurance companies mushroomed in India inspired by nationalism and Swadeshi movement. A need for a regulating body and nationalization of life insurance industry was felt which ultimately took place in 1956 when about 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. One of the primary objectives of forming the LIC was to Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.

Organisational Structure

1) Central Structure

Chairman

Managing Directors

Actuarial

Marketing

Investment AccountsMarketing Manager

Inspection

HR

2) Zonal Structure

Zonal Manager

Actuarial

Legal

Engineering CRM Marketing Manager

Health Insurance

Pension

3) Divisional Structure
Divisional Manager

Marketing Manager

Manager Sales

Branch Manager

Assistant

Asst. Admin Officer

Asst. Branch Manager

Dev. Officer

Organizational Culture:
LIC has institutionalized a Culture of Trust within its organization and also with its policy holders, and this is what causes its phenomenal success. Organizational trustIt is apparent from its HR policies which encourages the managers to coach his subordinates through on-the-job training. Even the experienced agents who are not part of organisation are also included in this culture of trust and their opinion and expertise is taken sought of by the organization. This culture at LIC is embedded with the wide-spread practice of junior officers coaching senior executives. Most transferees and promotees at LIC, learn their new jobs from their junior managers. This practice of coaching from the bottom-up is another reason why LIC is a rare entity. What is even more fascinating is that such coaching occurs without any official policy or pressure. This is a practice of people freely sharing knowledge to make the boss independent and successful.

Policyholders faith in LIC : LIC has earned faith of customers through its customer focussed policy. It put interest of policyholders on top and always gives benefit of doubt to a policy holder during claim payments. LIC philosophy is based on Sanskrit quote in its logo yogakshema vahmyam meaning Your service is our duty. LIC has successfully inculcated this spirit in its employees. Enhancing performance by reward : LIC has introduced both intrinsic and extrinsic reward system for its employees and insurance agents. It launches monthly competition for agents in form of cash award as well as honouring by ZM, MD & Chairman. LIC has introduced Growth oriented bonus scheme for its Development Officers to motivate them for continuous growth. Its has introduced job rotation scheme for its administrative staff to give them sales & marketing experience. Awards and Achievements : LIC is rated among most trusted brand of India since past 5 years. It has also been awarded World HRD congress award for its HR innovative Initiatives and World Brand excellence Award for its Brand Excellence.

Organisational Domain

Stockholders

Agents

Employees

LIC
Government Customers

Shareholders: The primary shareholder for the LIC of India is the government of India with it owning 5% of the shares of the company. Rest of the shares are owned by a trust. Employees: LIC of India is amongst the biggest recruiters of the country providing livelihood to more than 115,000. With 8 Zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India it has the biggest network across the nation and a reach even to the remotest of the areas. Customers: The company caters to more than 350 million policies and is the highest policy seller in the country. The customers have investments to the tune of INR 8 trillion. Agents: LIC of India has more than 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks as on 31st of March 2011. They all work towards promoting the various schemes of the company and for soliciting life insurance business from the public. Government: Through LIC Indian govt. has been able to increase insurance penetration in the country and provide solutions to the security needs of the public. It also serves the purpose of being an instrument helping in the inculcation of the savings habit amongst the public, thereby strengthening the economy of the country.

General Environment factors

Economic

Competition

LIC
Social

Political and Regulatory

Economic: Despite slowdowns in the general economic outlook of the world in 2009, LIC continued to perform extremely well and showed increase in performance. Political and Regulatory: LIC was initially regulated by Insurance Act 1938 and LIC Act 1956 but after arrival of private companies it is now regulated by IRDA along with previous Acts. There is a conflict between IRDA and SEBI on regulation of unit linked plans. LIC has privilege of Government guarantee on its policies over its competitors. Insurance companies are also provided with incentives like tax rebate under 80C clause for their policies Social: With growing awareness and education, people are more concerned about their future security and hence need of insurance is on the rise, which includes life insurance policies as well as health insurance policies. Growth in income has also made the policies in reach of the
common man.

Competition: After introduction of IRDA act in 1999 private insurance players were allowed in Indian insurance business. Despite entry of private players like Bajaj Allianz, Bharti-Axa, Fidelity, SBI life insurance, Aviva life insurance competition has intensified. Thorough internal changes like E-proposal, EDMS system and GOIBS, LIC has managed to stay ahead of competition.

Corporate Social Responsibility Initiatives

LIC funds investments towards industrial growth, infrastructure growth and national development. To channelize its social responsibilities LIC has formed a Public Trust named LIC Golden Jubilee Foundation which works mainly in the area of poverty eradication, education and health care. LIC donates to social causes/community development in different parts of the country. It also has been contributing to Prime Ministers National Relief Fund, Chief Ministers Relief Funds of various states and also to Rajiv Gandhi Foundation to help relief measures in case of natural calamities such as Earthquake, Tsunami etc.

Sources:
1. Official Website of Life Insurance Corporation of India http://www.licindia.in 2. Website http://economictimes.indiatimes.com/