What will the entry of international insurance majors mean for the Life Insurance Corporation (LIC) of India? In a free-wheeling discussion with Paramvir Singh of The Financial Express LIC chairman, G Krishnamurthy and the corporation’s managing director, GP Kohli, comment on how LIC plans to operate in the changed scenario.

How is LIC positioned to face the competition?
GK: LIC has a balanced product development and marketing strategy, significant technical expertise and a very strong brand equity. Our name has now become a generic word for insurance. This means that unlike the new entrants in this segment we will not have to do image-marketing or build-up on a parent company image.
Also, LIC’s strength is in volumes not in finances — in volume terms LIC is the leading life insurance company across the world with over 85 million enforced policies. It also has to its credit an unshakable distribution network of more than 2000 branches and nearly 5.6 lakh agents, an unbeatable head-start in a market about to witness explosive growth. LIC does have an early bird advantage here and the millions of existing policies give it a further mileage since each new policy entails at least a first year loss, called the ‘new business strain’.
With a regular stream of premium inflow, it will be far easier for LIC to withstand this loss arising out of new business costs.

What would be the leader’s strategy for the future?
Kohli: The future game-plan of LIC would revolve around three factors:
‘Products variety, Service and Professionalism’. Currently we offer almost the entire range of traditional life insurance products. Though at present it is not feasible to offer individual insurance products, LIC has a large product range aimed to provide a product for every need. LIC has set up ‘claims review committees’ at central and zonal levels, comprising of experienced LIC officials and legal experts. We are also beefing up our human resources, instilling a professional outlook in areas such as customer focus and risk management, providing both on the job and classroom training and also delegating powers to lower officers for faster claims and grievance settlement.
GK: On the infrastructure front, LIC is leaving no stone unturned and is committed to provide service excellence through technology. A metro area network has already been commissioned in most metros and semi-metros to facilitate policy-holders in these places in premium payment and other services. Branches within cities will also be linked up to enable the customer to pay the premium at any branch. LIC will also be actively utilising the internet medium for the purpose of sales, distribution and providing information and is trying to rope in institutional agencies like the village panchayat and the corporate societies registered under the ‘Societies Act’ to strengthen the distribution network. Though the tie-up with banks is not possible now, but LIC will definitely explore this option once the ‘Banking Regulation Act’ is amended.

The only part of LIC’s operations that still remains a gray area is investments. What is the future of LIC’s investment policies?
Kohli: The investment strategy will depend on what norms the government prescribes for mandatory investment like that for the rural, social and infrastructure sectors.
LIC has set-up a ‘Project Appraisal Equity Research Cell’ comprising 25 hand picked officers who have been given extensive training in this regard. However, our focus remains on the primary business of providing insurance for life and related segments, since unlike general insurance, the returns in life insurance come mostly from the premiums collected.
GK: Manpower training will remain the corner-stone of all future strategies. The training is imparted at some of the best institutes within the country and abroad, apart from the regular training at the zonal training centres,management development centers and the ‘National Insurance Academy’, Pune. Training and product development has now become a continuous exercise at LIC.