Life Insurance Corporation's Future Prospects

Reacting to media reports about LIC being adversely affected by the entry of MNCs, an LIC agent said, “The entry of the private players will not make any difference to LIC. The private players will concentrate more on the higher income groups while LIC will maintain its goodwill among the masses.” A policyholder added, “LIC has already been offering all the frills that the private players are now banking on and the only differentiating factor could be the quality of service.” Apprehensions of the MNCs ‘taking over'the Indian insurance sector were gradually put to rest as various reports revealed that LIC would easily continue to be the market leader. A Monitor Group study predicted that LIC would continue to have 75-80% market share even in 2010. A report by consultants KPMG revealed that the threat of new players taking over the market had been overplayed and that the nationalized players would continue to hold strong market share positions. At the same time, there would be enough business for new entrants.

A look at the developments in other countries which opened up their insurance sector to global players reveals that new companies seldom displace the existing players. In China, Malaysia, Indonesia and Thailand, the foreign companies accounted for only 10% of the market share. In South Korea, the opening up of the sector saw the six biggest domestic players, who initially controlled the entire market, increase their business substantially. The foreign companies were not able to capture more than 0.4% of the domestic market.

What LIC does to retain its competitive strength will determine its success in the future. For now, LIC seems to be taking a Business Wire report very seriously. This report aptly summed up the whole issue: “Over the years, LIC has made money the easy way. Hereafter, it must sweat for it.”

QUESTIONS FOR DISCUSSION:

1.Write a brief note on LIC's reaction to the entry of foreign players. Critically examine the steps taken by LIC to face the competition from MNCs.

2. Do you agree with Bajpai's statement that service would not be a key feature to success in the post-IRDA era? If you were a new entrant in the Indian insurance market, what are the issues you would focus on?

3. Do you think LIC will be able to remain the market leader in the insurance business in the long run? Give reasons for your answer.

ADDITIONAL READINGS & REFERENCES :

1. LIC intensifies tech-drive, Business Line, February 21, 2000.
2. Vasani Vimala, LIC International eyes 60% growth in Gulf, Business Line, March 20, 2001.
3. Zervoudis M. & Karamchandani A., the Monitor Group Study on insurance - I, Business Today, March 22, 2000.
4. Zervoudis M. & Karamchandani A., The Monitor Group Study on insurance - II, Business Today, April 7, 2000.
5. Zervoudis M. & Karamchandani A., The Monitor Group Study on insurance - III, Business Today, May 22, 2000.
6. Basu Jaya & Chandrasekhar R., Insuring the profits, Business Today, August 22, 2000.
7. Kumar B.N., Poaching of LIC agents, Business India, September 18, 2000.
8. Jayaram Anup & Dhawan Radhika, Free at last, Business World, November 13, 2000.
9. Chandrasekhar R., The elephant learns to dance, Business Wire, November 21, 2000.
10. Singh Gina, Unsure alliances, Business World, December 25, 2000.
11. Sarkar Ranju, Insurance wars, Business Wire, February 24, 2001.
12. Sen K. Sarbajeet, LIC lines up offshore plans, Business Line, March 26, 2001.
13. Competition spurs LIC to new highs, Business Line, April 24, 2001.
14. www.indiainfoline.com

2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.

To order copies, call +91- 8417- 236667 or write to ICMR,
Survey No. 156/157, Dontanapalli Village, Shankerpalli Mandal,
Ranga Reddy District,
Hyderabad-501504. Andhra Pradesh, INDIA. Ph: +91- 8417- 236667,
Fax: +91- 8417- 236668
E-mail: info@icmrindia.org
Website: www.icmrindia.org