Life Insurance Marketing in India (B): The Changing Distribution Norms

By 2002, with 0.8 million agents all over the country, LIC had an enviable reach. However, the fact remained that more than 75% of the Indian insurable population was untapped. According to industry observers, one of the main reasons for the low insurance penetration was the poor distribution and marketing strategies adopted by LIC. Prior to liberalization, due to its monopoly status, LIC seemed to have had no strategically devised distribution strategies in place. It depended entirely on individual agents, which it had trained over the years to distribute its products. LIC made no efforts to use other distribution channels (Refer Exhibit I for various distribution channels for selling life insurance). LIC's agents were not well qualified for their work. Prior to liberalization of the Indian insurance industry, no minimum qualification was laid down for people who wanted to become insurance agents. Agents generally acted like brokers; they cared more for their commissions than the needs of the customer. As a result, they did not make the effort to educate customers about the insurance products being offered. To distribute insurance products, LIC employed a large number of marketing people as 'Development Officers'. These officers employed and trained a number of agents. Development Officers received bonuses from the business generated by their agents, in addition to their salary.