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

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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. 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. 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.

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