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

BACKGROUND NOTE Contd..

The life insurance market in India was divided into two customer segments: individual and corporate. The segment comprised of individual customers was further divided into four sub-segments – protection, investment, savings and pension. Protection products offer only protection to the customer from risk. They do not provide any savings facility to the policyholder. Investment products offer long-term investment growth and insurance cover. Savings products like endowment and money back policies provide protection and investment benefits in combination. Pension policies are products offered to customers as income during their years of retirement.

The corporate segment was divided into three sub-segments – protection, statutory savings and pension.

Group term insurance products provided low cost life insurance cover as part of employee benefit packages as a motivation to employees or to cover housing/vehicle loan of the employee. The statutory savings segment comprised gratuity products for companies.

The pension policies included products such as group superannuation, enabling a company to benefit from investment and the operational expertise of a specialist company to manage its funds. It was reported that in the individual insurance segment, investment products segment was growing rapidly as they provided long-term investment growth and insurance cover (Refer to Table II for the customer segments and products offered under them).

TABLE II
CUSTOMER SEGMENTS IN INSURANCE INDUSTRY

	INDIVIDUALS	CORPORATES
Protection	Term Assurance	Group Term Insurance
Investment	Single Premium Bonds	-
Savings	Endowment/Moneyback	Gratuity
Pensions	Pension Plans, Annuities	Superannuation

Source: Strategic marketing.

Over the years, LIC catered to both individual and corporate segments. Its individual insurance policies included Endowment Policies, Money Back Policies, Term Assurance Plans, Periodic Money Back Plans and Joint Life Plans. The corporate policies included group insurance schemes such as group gratuity schemes, group term insurance schemes, group savings linked insurance scheme and group leave encashment schemes (Refer to Exhibit II for the products offered by LIC and other major private insurers). LIC provided a return of 7% on average on all its policies. Around 80% of LIC's premium income came from endowment and money back policies.