Life Insurance Marketing in India –A The Changing Advertising & Promotion
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BACKGROUND NOTE Contd..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.
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The committee's suggestions faced stiff opposition
from various labor unions and political parties in the country. They
opined that entry of private players would lead to job cuts by the
nationalized players in order to compete with them. There were a host of
other arguments against these reforms. The government sought to address
them by restricting foreign stake in insurance companies to only 26%,
which was well below 51% needed for the managing the company in the
Insurance Bill. |
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Though one of LIC's basic objectives was to ‘provide
insurance cover to all Indians,'insurance penetration in India was considered
to be very low. According to reports, only 65 million people were covered by
insurance. R N Jha, LIC's former Executive Director commented in his book,
‘Insurance in India,'“Insurance coverage has been extended only to about 25% of
the insurable population in 40 years,” indicating the huge uncovered market
potential in the country.
It was reported that per capita insurance premium[1] in developed countries was
much higher as compared to India. In 1999, per capita insurance premium in India
was only $8 while it was $4,800 in Japan, $1000 in Republic of Korea, $887 in
Singapore, $823 in Hong Kong and $144 in Malaysia. In the world market, in terms
of gross insurance premium also, India's share was only 0.3%, though population
wise it ranked second in the world. The corresponding figures in 1999 for Japan
was 31%, European Union 25%, South Africa 2.3% and Canada – 1.7%. Further, in
2001, while the ratio of insurance premium to the Gross Domestic Product (GDP)[2]
was 9% for UK and Japan, and 5% for US, it was only 1.9% in India.
Attracted by the huge untapped potential, many private players entered the
market after the Insurance bill was passed in late 2000. A majority of these
were collaborations between an Indian company and a leading MNC
insurance/financial services company (Refer Table I).
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TABLE I PRIVATE PLAYERS IN THE INDIAN INSURANCE MARKET
ADVERTISING INITIATIVES OF THE NEW PLAYERS
IMPLICATIONS OF THE ‘NEW-AGE'MARKETING INTIATIVES
TABLE II ADVERTISEMENT EXPENDITURE BY INSURANCE COMPANIES
TABLE III POPULAR LIFE INSURANCE BRANDS IN 20017
QUESTIONS FOR DISCUSSION
EXHIBIT I ADVERTISMENT CODE BY IRDA
ADDITIONAL READINGS & REFERENCES
[1] Total Insurance Premium of a
country divided by its total population.
[2] GDP is defined as the value, at current market prices, of the total
final output produced inside a country during a given year.
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