Life Insurance Marketing in India (A) The Changing Advertising & Promotion Norms

Background Note Contd...

The 1928 act was amended and a new act, 'Insurance Act' was formed in 1938. By the mid-1950s, 154 Indian insurers, 16 foreign insurers and 75 provident societies were operating in the country. The life insurance business was concentrated in urban areas and was confined to the higher strata of the society. In 1956, management of these companies was taken over by the Government of India. LIC was formed in September 1956 through the 'LIC Act 1956' with a capital of Rs 50 million. One of the main objectives of forming LIC was to spread the insurance cover and make it available to the lower segments of the society.

In 1972, government formed General Insurance Corporation (GIC) when it took over management control of 106 private general insurance companies. Over the years, LIC expanded its network all over the country emerging as one of the largest corporations in India.

Insurance industry's growth in the India was minimal in 1960s and 1970s due to factors like low savings, low investment, inadequate infrastructure, and illiteracy.

However, changes in the economy in 1980s, such as growth in the rate of industrialization, infrastructure, the capital markets, savings rate and capital formation resulted in a tremendous growth in the life insurance industry, which in other words meant growth of LIC.

Over the years, LIC launched several schemes aimed at expanding its reach in the rural areas. Many group insurance and social security schemes were started by the company to enhance its reach over the rural. LIC had seven zonal offices, 100 divisional offices, 2,048 branch offices and army of agents totaling 6,28,031. Need for reforming the industry was felt in the early-1990s for providing better coverage to the Indians and to increase flow of long-term financial resources to finance the growth of infrastructure.

In 1993, the Indian government constituted the 'Malhotra Committee' to suggest reforms in the industry. The committee submitted its report in 1994, with recommendations for opening the insurance sector to private players, improving service standards and extending insurance coverage to larger sections of the population. The committee's suggestions faced stiff opposition from various labor unions and political parties in the country.

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Case Details

Case Code : MKTG026
Themes: Advertising and Promotion
Case Length : 11 Pages
Period : 2000-2002
Organization : ICICI Prudential, Max New York Life, ETC
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Insurance

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