Mumbai, July 11: Public sector insurance monolith Life Insurance Corporation - with an asset base of over Rs 132,000 crore - has roped in Booz Allen Hamilton for its restructuring. It will shortly appoint another domestic consultant who will work in tandem with Booz Allen Hamilton to finalise the restructuring plan. According to sources, Booz Allen Hamilton will address issues like organisational recast, business development with a special focus on customer service and human resource development.According to senior industry analysts, LIC's need for sound strategic planning to manage its existing activities was long overdue. This is the first time since its nationalisation in 1955 that LIC has roped in a consultant.
It had effected certain organisational changes in the early '80s on the basis of the recommendations made by one-member panel comprising Ishwar Dayal. The institution's total premium income was pegged at over Rs 22,000 crore in March 1999, of which investment income stood at Rs 13,183crore.
LIC deals with around 10 crore policy holders. Analysing the future of the public sector life insurance industry once it is thrown open, sources said that private insurers can wipe out LIC's market share by better consumer services and effective claim settlement procedures. LIC might also lose its skilled staff once private companies enter the fray, particularly skilled marketing intermediaries. Besides, the institution has become too big to be managed effectively, they added.
Industry watchers have identified the following drawbacks in the institution:
The corporation's management is top heavy and too bureaucratic; The work culture within the organisation is unsatisfactory; Insurance covers are costly and returns from life insurance are significantly lower compared with other savings funds; A sizable number of policies lapse every year and policy holders are not always interested in continuing with the policy; Militant trade unionism has contributed to thegrowth of restrictive trade practices; Development officers of LIC focus on their incentives rather than understanding the customer needs; and Government interference affects the organisation's functioning.However, LIC has also some inherent strengths like the goodwill established over the years as a public sector with government support, a huge life fund of the order of Rs 127,389 crore and a vast network of zonal offices, divisional offices and 2000-odd branches (of which over 1,000 are located in rural India) spread over 1,363 centres and a network of 125,000 employees and 525,000 agents with an overseas presence.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
Printer-friendly page