Life Insurance Marketing in India (C) The Changing Product & Pricing Norms

Background Note Contd...

However, changes in the country's economy in 1980s, such as growth of industrialization, infrastructure, the capital markets, savings rate and capital formation resulted in tremendous growth in the life insurance industry, which meant the growth of LIC. Eventually, LIC launched several schemes aimed at reaching out to the rural areas. The company launched many group insurance and social security schemes. LIC had seven zonal offices, 100 divisional offices, 2,048 branch offices and about 6,28,031 agents. In the early 1990s, it was felt that the insurance industry needs to be reformed in order to provide better coverage to the customers and to increase the inflow of long-term financial resources to finance the enhancement of infrastructure. In 1993, the Indian government set up the Malhotra Committee to suggest reforms in the industry.

The Committee submitted its report in 1994, with suggestions like opening the insurance sector to private players, improving service standards and extending insurance coverage to larger sections of the population. The Committee's suggestions were strongly opposed by various labor unions and political parties in the country.

They opined that the 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 the Malhotra Committee's suggestions. The government tried to deal them by restricting foreign stake in insurance companies to only 26%, which was well below the 51% that was needed for managing the company in the Insurance Bill.

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. In 1999, 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 the per capita insurance premium² in developed countries was much higher than that in India.

Life Insurance Marketing in India (C) The Changing Product & Pricing Norms - Next Page >>>

2] Total Insurance Premium of a country divided by its total population.

Case Details

Case Code : MKTG028
Themes: Pricing
Case Length : 14 Pages
Period : 2000-2002
Organization : ICICI Prudential, Max New York Life, ETC
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Insurance

Free Case Studies

Business Strategy
Finance
HRM
Insurance
IT and Systems
Marketing
Operations
Leadership
More Case Studies >>

Micro Case Studies

Business Environment
Business Ethics
Business Strategy
Human Resource Management
IT and Systems
Marketing
Operations
Micro Case Studies >>

Free Resources

Micro Case Studies
Free Case Studies
Articles
Interviews
Book Reviews
Glossary
Online Quiz
More Free Resources >>

Case Related Links

Best Selling Case Studies
Business Case Studies
Learning With Case Studies
Cases Used in Textbooks
Prize Winning Case Studies
More Case Studies >>

Case Studies and Management Resources