First, the distribution effectiveness has to be increased so that insurance penetration improves substantially.
A life insurance industry veteran, Kamalji Sahay has been the founder MD & CEO of Star Union Dai-ichi and former executive director of state-owned LIC of India. His new book ‘The LIC Story: Making of India’s Best-Known Brand’ elucidates how the insurance behemoth has made a place in every household in the country. LIC has taken all possible steps to remain ahead of others in technology-enabled customer service, says Sahay in an interview to Saikat Neogi.
Why has LIC been able to hold on to a major marketshare despite private insurers being in business for nearly two decades?
The biggest advantage that LIC has is its strong brand value. LIC is synonymous for insurance in India and in spite of various promotional activities, private sector insurers have not been able to create space for themselves in the minds of people. Besides, LIC has taken all possible steps to remain ahead of others in technology-enabled customer service. I would also like to mention that so far no company is able to match the reach of LIC in every town and village of India.
The state-behemoth has the highest claims settlement ratio year after year. Is it because it has a stringent underwriting policy?
LIC has achieved globally best standard in claim settlement not because of stringent underwriting. LIC has achieved excellence because it has been ingrained in the mind of each person working for LIC, whether as a salesman or as an employee, that claim settlement needs to be given highest priority. It is not just a process of doing a particular job. In fact, claim settlement operations are motivated by strong empathy that everybody has been trained to adopt and practise in this large institution. Prompt claim settlement is a matter of faith and not just a duty for most of the employees and the officers. Underwriting, of course, has to be judicious but it is never done for depriving somebody of a legitimate life cover. As an insurer, of course, necessary precautions have to be taken to minimise adverse selection or prevent frauds.
What are the new areas that LIC should focus on to stay ahead of the curve?
In order to stay ahead in a highly competitive market, LIC needs to strengthen the alternate channels of distribution. The channels which have helped private players to grow substantially year after year are to be matched by LIC’s setup also. The existing models of distribution may not be able to open new avenues for income. Moreover, there is an urgent need to upgrade the capabilities of the managers who are responsible for sales and for leading the vast sales force. The leadership style has to undergo some drastic transformation from top to bottom. Creating a vision for everybody for creating a culture of need based strategy for emerging markets following the huge demographic transformation that India is undergoing currently, is required. There is no substitute for a committed and well-trained workforce; rest will be taken care by the organisation’s strong culture of high performance year after year. So far as technology is concerned, LIC is second to none.
Why is LIC turning out to be a milch-cow for the government to bail out PSUs and banks facing financial crisis?
LIC is the only financial institution which is capable of making investments of very large sums and of lending long-term bulk funds to different institutions involved in economic and infrastructure development activities. Currently, it has assets of more than `26 lakh crore and every day LIC collects a huge premium amount from policyholders which needs to be deployed profitably. Hence, LIC is looked upon by other institutions as well as by the government as a financial giant which can step in to bail out companies which are in urgent need of bulk money for their survival or for their developmental activities. So this lending business continues as a matter of routine, but whenever a crisis-ridden institution seeks funds for its requirements it is seen by the public as a misuse of the financial strength of LIC. The policyholders are justified in raising objection to such investments by LIC, but LIC is after all, an organisation fully owned by the government and it is difficult for LIC to avoid playing the role of a saviour when the government desires it to do so. So far, all such demands for bulk funds from LIC for disinvestment or for bailing out PSUs have not affected the financial strength of LIC. LIC has been successfully managing its funds and honouring all its commitments to the policyholders.
For the life insurance industry in general, what are the three most important things that need to change soon?
First, the distribution effectiveness has to be increased so that insurance penetration improves substantially. Second, defining product and process strategy based on extensive data analytics. And the third significant issue is creating mass awareness about insurance products and their benefits for both life and non-life business.