Lessons for private insurers from LIC’s long-term success

Kamalji Sahay Posted online: Tue Nov 20 2012, 02:38 hrs, ET
 During the 12th year of liberalisation of the insurance industry, there is a sudden lull in the market.

There is no excitement on any front and all the noise regarding too many regulatory interventions has died down. The half-yearly results, as on September 12, do not give any indication of a once-booming industry bouncing back. Some kind of uncertainty is pervading the whole atmosphere.

Those who used to speak of the advent of a new era have withdrawn themselves from the limelight. This is, of course, a very unfortunate situation for an industry vital to the economy and these developments reflect the truth, whatever be the sporadic announcements from Hyderabad, Mumbai and Delhi regarding inducing growth through various strategic decisions. At this juncture of dilemma, it will be worthwhile to look at the inherent strengths of India’s largest insurer — Life Insurance Corporation — as this behemoth has not only survived the liberalisation, but has also regained its market share after initially losing nearly 50% to the private sector.

Today, LIC is not only the market leader, but also, to the utter disbelief of the experts who predicted a huge erosion in its ability to protect its turf in the face of innovative products and state-of-the-art service standards being introduced by the private players, the public sector organisation has conceded just over 1% average market share to the 23 private sector players. Interesting, isn’t it?

On Diwali, an old colleague shared his experience that out of nearly 100 SMSs of greetings that he got, nearly 80% were from insurance agents with whom he had worked as an LIC branch manager 20 years back. I think the secret of LIC’s success lies here.

Each salesman of this institution who has survived for at least five years is virtually a moving office in its locality and is trusted by the customers for all insurance needs. A strong force of such sales people has been created by LIC’s marketing officials through a continuous handholding in the field for enabling them to successfully launch themselves on a very rewarding career. 

I have met LIC agents who literally worship their mentors, who they look upon as selfless seniors who place business before self and for whom the interest of the organisation is uppermost. For 20 years, the team, mentioned to me by my colleague, has been contributing and earning loyalty of customers through their continued visibility and presence in the market. In the process, they have taken care of their family and grown with the organisation. 

With a team of such dedicated workers, any organisation is sure to grow and become highly competitive. During my close interactions with private sector players, I gathered that they are grossly lacking in team building. 

There is no stability in the field force and the managers do not get involved with them at the field level. It is generally believed that pressure for performance will bring business and when somebody is not able to cope, he needs to exit. 

I vividly recall an occasion when I was a witness to a large business house planning its foray into insurance, holding meetings of the top team with only one motto: to be seen wherever LIC is. But the top man there said, “We will recruit a large number of youngsters in the sales force, squeeze them and then throw them out and the cycle will go on.” 

This was considered the recipe for a high-octane business performance. That day, I felt that the company is being launched with a basic flaw regarding the sales-force management and the company will never be able to come close to its target .The apprehensions proved correct.

Today, it is observed that in companies other than LIC, there is hardly any employee in the field force who can claim to be serving the company as advisor or sales manager since inception or for a fairly long time. In this situation, how can a company expect loyalty of its customers for 15, 20 or even more years? Life insurance, or any other insurance for that matter, thrives on long-term relationship.

To revive the industry, fundamentals of the business strategies are required to be examined, focussing on the essential character of the business. 

It is to be understood in the background of the exemplary success of the state insurer. 

The sales people are given utmost importance in the organisation and the seniors are in regular touch with them al the time. 

The motivation to sale comes from the top man in the organisation. The motivation to continue in the profession 

comes from the wonderful atmosphere that provides several reasons other than income to stick to the cadre. 

Too much dependence on IT has dehumanised an organisation’s relationship with the field force. I think the sales people slowly build an insurance company over a period of time and those who are in other functions support them to stay connected with customers and the market with the enthusiasm that fuels high performance.

The author is former MD & CEO of Star Union Dai-ichi Life Insurance

vinay mohanty