INTRODUCTION

Insurance is a means of protection from financial loss. It is a form

of risk management primarily used to hedge against the risk of a
contingent, uncertain loss.

An entity which provides insurance is known as an insurer, insurance

company, or insurance carrier. A person or entity who buys insurance
is known as an insured or policyholder. The insurance transaction
involves the insured assuming a guaranteed and known relatively
small loss in the form of payment to the insurer in exchange for the
insurer's promise to compensate the insured in the event of a covered
loss. The loss may or may not be financial, but it must be reducible to
financial terms, and must involve something in which the insured has
an insurable interest established by ownership, possession, or
preexisting relationship.

The insured receives a contract, called the insurance policy, which

details the conditions and circumstances under which the insured will
be financially compensated. The amount of money charged by the
insurer to the insured for the coverage set forth in the insurance policy
is called the premium. If the insured experiences a loss which is
potentially covered by the insurance policy, the insured submits a
claim to the insurer for processing by a claims adjuster.
LIFE INSURANCE

Life insurance is a protection against financial loss that would result

from the premature death of an insured. The named
beneficiary receives the proceeds and is thereby safeguarded from the
financial impact of the death of the insured. The death benefit is paid
by a life insurer in consideration for premium payments made by the
insured.

The goal of life insurance is to provide a measure of financial security

for your family after you die. So, before purchasing a life insurance
policy, consider your financial situation and the standard of living you
want to maintain for your dependents or survivors. For example, who
will be responsible for your funeral costs and final medical bills?
Would your family have to relocate? Will there be adequate funds for
future or ongoing expenses such as daycare, mortgage payments and
college? It is prudent to re-evaluate your life insurance policies
annually or when you experience a major life event like marriage,
divorce, the birth or adoption of a child, or purchase of a major item
such as a house or business.

Life insurance is a contract between an individual with an insurable

interest and a life insurance company to transfer the financial risk of a
premature death to the insurer in exchange for a specified amount of
premium. The three main components of the life insurance contract
are a death benefit, a premium payment and, in the case of permanent
life insurance, a cash value account.

Death Benefit: The death benefit is the amount of money the insured’s
beneficiaries will receive from the insurer upon the death of the
insured. Although the death benefit amount is determined by the
insured, the insurer must determine whether there is an insurable
interest and whether the insured can qualify for the coverage based on
its underwriting requirements.

Premium Payment: Using actuarially based statistics, the insurer

determines the amount of premium it needs to cover mortality costs.
Factors such as the insured’s age, personal and family medical history,
and lifestyle are the main risk determinants. As long as the insured
pays the premium as agreed, the insurer remains obligated to pay the
death benefit. For term policies, the premium amount includes the cost
of insurance. For permanent policies, the premium amount includes
the cost of insurance plus an amount that is deposited to a cash value
account.

Cash Value: Permanent life insurance includes a cash value

component which serves two purposes. It is a savings account that
allows the insured to accumulate capital that can become a living
benefit. The capital accumulates on a tax-deferred basis and can be
used for any purpose while the insured is alive. It is also used by the
insurer to mitigate its risk. As the cash value accumulates, the amount
the insurer is at risk for the entire death benefit decreases, which is
how it is able to charge a fixed, level premium .
LIFE INSURANCE CORPORATION

Life Insurance Corporation of India (LIC) is an Indian state-

owned insurance group and investment company headquartered
in Mumbai. It is the largest insurance company in India with an
estimated asset value of ₹1,560,482 crore (US$240 billion).[2] As of
2013 it had total life fund of Rs.1433103.14 crore with total value of
policies sold of 367.82 lakh that year.[3][4][5]

The Life Insurance Corporation of India was founded in 1956 when

the Parliament of India passed the Life Insurance of India Act that
nationalised the private insurance industry in India. Over 245
insurance companies and provident societies were merged to create
the state owned Life Insurance Corporation.
 HISTORY

The story of insurance is probably as old as the story of mankind. The

same instinct that prompts modern businessmen today to secure
themselves against loss and disaster existed in primitive men also.
They too sought to avert the evil consequences of fire and flood and
loss of life and were willing to make some sort of sacrifice in order to
achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era –
past few centuries – yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the
year 1818. Oriental Life Insurance Company started by Europeans in
Calcutta was the first life insurance company on Indian Soil. All the
insurance companies established during that period were brought up
with the purpose of looking after the needs of European community
and Indian natives were not being insured by these companies.
However, later with the efforts of eminent people like Babu Muttylal
Seal, the foreign life insurance companies started insuring Indian
lives. But Indian lives were being treated as sub-standard lives and
heavy extra premiums were being charged on them. Bombay Mutual
Life Assurance Society heralded the birth of first Indian life insurance
company in the year 1870, and covered Indian lives at normal rates.
Starting as Indian enterprise with highly patriotic motives, insurance
companies came into existence to carry the message of insurance and
social security through insurance to various sectors of society. Bharat
Insurance Company (1896) was also one of such companies inspired
by nationalism. The Swadeshi movement of 1905-1907 gave rise to
more insurance companies. The United India in Madras, National
Indian and National Insurance in Calcutta and the Co-operative
Assurance at Lahore were established in 1906. In 1907, Hindustan
Co-operative Insurance Company took its birth in one of the rooms of
the Jorasanko, house of the great poet Rabindranath Tagore, in
Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established
during the same period. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed. The Life
Insurance Companies Act, 1912 made it necessary that the premium
rate tables and periodical valuations of companies should be certified
by an actuary. But the Act discriminated between foreign and Indian
companies on many accounts, putting the Indian companies at a
disadvantage.

The first two decades of the twentieth century saw lot of growth in
insurance business. From 44 companies with total business-in-force as
Rs.22.44 crore, it rose to 176 companies with total business-in-force
as Rs.298 crore in 1938. During the mushrooming of insurance
companies many financially unsound concerns were also floated
which failed miserably. The Insurance Act 1938 was the first
legislation governing not only life insurance but also non-life
insurance to provide strict state control over insurance business. The
demand for nationalization of life insurance industry was made
repeatedly in the past but it gathered momentum in 1944 when a bill
to amend the Life Insurance Act 1938 was introduced in the
Legislative Assembly. However, it was much later on the 19th of
January, 1956, that life insurance in India was nationalized. About
154 Indian insurance companies, 16 non-Indian companies and 75
provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the
management of the companies was taken over by means of an
Ordinance, and later, the ownership too by means of a comprehensive
bill. The Parliament of India passed the Life Insurance Corporation
Act on the 19th of June 1956, and the Life Insurance Corporation of
India was created on 1st September, 1956, with the objective of
spreading life insurance much more widely and in particular to the
rural areas with a view to reach all insurable persons in the country,
providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices,
apart from its corporate office in the year 1956. Since life insurance
contracts are long term contracts and during the currency of the policy
it requires a variety of services need was felt in the later years to
expand the operations and place a branch office at each district
headquarter. Re-organization of LIC took place and large numbers of
new branch offices were opened. As a result of re-organisation
servicing functions were transferred to the branches, and branches
were made accounting units. It worked wonders with the performance
of the corporation. It may be seen that from about 200.00 crores of
New Business in 1957 the corporation crossed 1000.00 crores only in
the year 1969-70, and it took another 10 years for LIC to cross
2000.00 crore mark of new business. But with re-organisation
happening in the early eighties, by 1985-86 LIC had already crossed
7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices,

113 divisional offices, 8 zonal offices, 1381 satallite offices and the
Corporate office. LIC’s Wide Area Network covers 113divisional
offices and connects all the branches through a Metro Area Network.
LIC has tied up with some Banks and Service providers to offer on-
line premium collection facility in selected cities. LIC’s ECS and
ATM premium payment facility is an addition to customer
convenience. Apart from on-line Kiosks and IVRS, Info Centres have
been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai,
Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a
vision of providing easy access to its policyholders, LIC has launched
its SATELLITE SAMPARK offices. The satellite offices are smaller,
leaner and closer to the customer. The digitalized records of the
satellite offices will facilitate anywhere servicing and many other
conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized

scenario of Indian insurance and is moving fast on a new growth
trajectory surpassing its own past records. LIC has issued over one
crore policies during the current year. It has crossed the milestone of
issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding period of the previous
year.

From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life
insurance business. The same motives which inspired our forefathers
to bring insurance into existence in this country inspire us at LIC to
take this message of protection to light the lamps of security in as
many homes as possible and to help the people in providing security
to their families.

» Some of the important milestones in the life insurance business in

India are:

1818: Oriental Life Insurance Company, the first life insurance

company on Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life
insurance company started its business.

1912: The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and non-
life insurance businesses.

1938: Earlier legislation consolidated and amended to by the

Insurance Act with the objective of protecting the interests of the
insuring public.

1956: 245 Indian and foreign insurers and provident societies are
taken over by the central government and nationalised. LIC formed by
an Act of Parliament, viz. LIC Act, 1956, with a capital contribution
of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace
its roots to the Triton Insurance Company Ltd., the first general
insurance company established in the year 1850 in Calcutta by the
British.

» Some of the important milestones in the general insurance business

in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company
to transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association
of India, frames a code of conduct for ensuring fair conduct and sound
business practices.

1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set
up.

1972: The General Insurance Business (Nationalisation) Act, 1972

nationalised the general insurance business in India with effect from
1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the
National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd. and the United
India Insurance Company Ltd. GIC incorporated as a company.
 MISSION AND VISION

» Spread Life Insurance widely and in particular to the rural areas and
to the socially and economically backward classes with a view to
reaching all insurable persons in the country and providing them
adequate financial cover against death at a reasonable cost.

» Maximize mobilization of people's savings by making insurance-

linked savings adequately attractive.

» Bear in mind, in the investment of funds, the primary obligation to

its policyholders, whose money it holds in trust, without losing sight
of the interest of the community as a whole; the funds to be deployed
to the best advantage of the investors as well as the community as a
whole, keeping in view national priorities and obligations of attractive
return.

» Conduct business with utmost economy and with the full realization
that the moneys belong to the policyholders.

» Act as trustees of the insured public in their individual and

collective capacities.

» Meet the various life insurance needs of the community that would
arise in the changing social and economic environment.

» Involve all people working in the Corporation to the best of their

capability in furthering the interests of the insured public by providing
efficient service with courtesy.

» Promote amongst all agents and employees of the Corporation a

sense of participation, pride and job satisfaction through discharge of
their duties with dedication towards achievement of Corporate
Objective.

The objectives of nationalisation have been incorporated in the form

of corporate objectives of LIC.

If the objectives of nationalisation are not fulfilled, whether the

private insurers can fulfill those objectives, what can be the next step
if both institutions, i.e., the nationalised and private insurers have not
achieved the objectives of insurance? These questions are
dispassionately analysed.

Rural Insurance:

The nationalisation of life insurance business in 1956 had aimed to

spread the gospel of life insurance business in the remote corners of
the country.

In the word of the then Finance Minister: "The purpose of

nationalisation was to see that the gospel of insurance is stored as far
and wide as possible so that we reach out beyond the more advanced
urban areas well into the hitherto neglected rural areas.

Millions of lives in rural areas were left uninsured because the private
insurers did not like to carry their business there. Now question arises
whether private insurers including foreign companies would like to
conduct their business in rural areas.

The answer is certainly not because they would not be getting profit
there. No private insurer would like to do business on loss.
If the government is not agreeing to this logic, then why private
airlines are not operating their business in non-remunerative areas.
The nationalised institutions are doing satisfactory business in rural
areas.

They have national mission and performing the business in urban as

well as rural areas. The insurance principle, inertia of large number is
being followed by LIC and GIC.

No private insurer can work longer on national mission to help

peoples 'progress and security because they have the main motives of
profit- making.' The Life Insurance Corporation has developed
corporate objectives.

"Spread life insurance much more widely and in particular to the rural
areas reaching all insurable persons in the country and providing them
adequate financial cover against death at a reasonable cost"

The rural business was unheard before 1955. After nationalisation, it

has increased to Rs. 21,570 crore which was 39.0 percent of
individual new business. Rural business of LIC in 1995-96 was 49
lakh policies out of the total 110 lakh policies issued in that year
giving rural business to the extent of 45% of total new policies issued.

Can anyone think of such achievement by private insurer? Logics are

hurled that nonbanking institutions are fetching maximum business
from rural areas. It should be analysed from safety and security point
of view.

The businesses procured by them are not safe and secure because
many non-banking institutions are getting business pressurising the
rural people.
It should be known that many non-banking institutions are eloping
with the money of people. They open an office for some months and
then close the office forever after extracting money from the people.

One finds it difficult to understand whether the government is

unaware or unable to prevent such nefarious activities.

If the government is unable to govern, it should not talk of

privatisation or denationalisation of insurance industry. LIC and GIC
are national institutions which are working for the nation and people.

The LIC has covered a large number of people by insuring them under
group insurance otherwise they would have been uninsured on
account of low premium paying capacity. The new business under
group insurance increased from Rs. 18.33 crore in 1966-67 to Rs.
50,651.43 crore in 1994-95.

All the four subsidiaries of General Insurance Corporation have tried

to procure maximum business for the benefit of people at large.

General insurance in rural areas have increased considerably under

Personal Accident Social Security amounting more than Rs. 300
crores and Hut Insurance Scheme amounting about Rs. 300 crore. Hit
and Run schemes have benefited a large number of beneficiaries.

Life Insurance Corporation of India has formulated corporate

objective "Meet the various life insurance needs of the community
that would arise in the changing social and economic environment.

The total payment under social security group/schemes amounted

more than Rs. 240 crore in 1991-92 and Rs. 550 crore in 1995-96. The
LIC and GIC have been working hard to benefit rural people through
its branches which have been respectively 2024 and 2997 as, on
March 1996.

The second objective of nationalisation of life insurance business was

to conduct business with utmost economy as the Finance Minister
said, "The business must be conducted with utmost economy and with
the full realisation that money belongs to the policyholders.

The premium must be no higher than is 'warranted by strict actuarial

consideration". The LIC has accepted the corporate objectives. "Act as
trustees of the insured public in their individual and collective
capacities.

Conduct business with utmost economy and with the fuurealisation

that money belongs to the policyholders". The trusteeship principle
has been carried by the LIC as it has tried to reduce the expense-ratio.

The expense ratio which was very high before nationalisation was
brought to a lower level in 1995.

The overall expense ratio declined from 27.20% In 1957 to 21.35% in

1995 and the renewal expense ratio have come down from 15.89% to
6.32% in the respective years. The corporation would have reduced
the expense ratio further had there been complete computerisation.

General Insurance Corporation along with its subsidiaries has

attempted to reduce the expenses considerably. The benefits of
reduced expenses have been given to the policyholders in the form of
enhanced bonus and reduced premium.

The bonus of life policy per thousand sum assured has increased from
Rs. 16 in 1956 to Rs. 86 varying to Rs. 95 in 1996 on whole life
policies and Rs. 12.80 in 1952 to Rs. 69 varying to Rs. 78 on
endowment policies.

The lapse ratio to mean life insurance business in force has gone down
from 7.6 per cent in 1955 to 3.1 per cent in 1991-92.

With increase life fund from Rs. 410.40 crores in 1956 to Rs.
72,780.06 crore-in 1996; the LIC has achieved its corporate objective,
i.e., maximise mobilisation of people's savings by making insurance
linked savings adequately attractive.

The life insurance carrying capacity that is the ratio of business in

force to national income has increased from 7.95% in 1951 to 30.30
per cent in 1995-96. The LIC has provided adequate financial cover to
the people of India.

The rising rate of business in force has clearly shown that the, LIC has
attempted to provide adequate financial cover to the people of India.
The premium income as compared to national income has revealed the
capacity of LIC for enhancement of business.

The third objective of nationalisation of life insurance business was to

develop national economy as put in the words of the then Finance
Minister, "Help development of National Economy in the right
perspective for the benefits of the societies as a whole."

Based on the objective, the corporate objective of LIC has been, "Bear
in mind, in the investment of funds, the primary obligation to its
policyholders whose money it holds in trust, without losing sight of
the interest of the community as a whole".
The LIC is performing this job through decentralised investment. The
percentage of LIC investment, to national income has increased from
3.4 percent in 1956 to 6.26 percent in 1996. It had contributed to Rs.
184 crores during the Second Plan and Rs. 40303 crore during four
years of Eighth Plan.

No private sector enterprise can sacrifice so much for nation. It is

illogical and anti-national to think to hand over the most contributing
financial sector to private entrepreneurs including foreign companies.

The money procured in the form of premium is helping reduced

inflationary pressure because so much of money is withdrawn from
circulation and is chantielised for productive sector.

The inflationary gap caused by the difference of money supply and

production has been reduced at both the fronts, i.e., reducing money
supply through premium collection and increasing production through
investment.

The investment of LIC has increased from Rs. 372 crore in 1956 to
Rs. 65057 crore in 1996, whereas the premium has increased from Rs.
88.65 crore to Rs. 14182 crore which were 0.2 percent and 2.4 percent
respectively of the money in circulation, in the respective years.

The diversified investment policy of LIC has served almost all the
industries, all the states and infrastructure from the drinking water
facilities to development of hardcore industries; LIC has invested for
their growth.

The corporate objectives of LIC say. "Meet the various life insurance
needs of the Community that would arise in the changing social and
economic environment".
The LIC investment in public sector has been approximately 80
percent of its total investment. Similarly, the general insurance
companies have invested about 65 percent of its total investment in
public sector. It has been varying from 6.3 percent to 73 percent in
different subsidiary companies.

The Life Insurance Corporation of India has been contributing in the

socio-economic development through its payment to government.

Government has invested only Rs. 5 crore as capital of LIC but has
received Rs. 160.94 crore as dividend in 1995-96. It is unthinkable
ratio of dividend which is 32 times of capital employed.

The tax money given to government is very high amount i.e., more
than Rs. 500 crore. Can any private insurer pay so many taxes to
government and government may receive so much high of dividend
rate? Certainly not.

Therefore, the logic of government to denationalise the LIC is

irrational and full of unwise step. Similarly, General Insurance
Industry has given more than Rs. 100 crore as income tax and more
than Rs. 800 crore as dividend. Taking the total funds received by life
insurance and general insurance industry together, the government has
received more than Rs. 1,600 crore in 1995-96.

If government is going to part with this revenue by throwing the

insurance industry to private entrepreneur's doubts may arise on the
rational functioning of the government.

It may be on account of some concrete reasons e.g., government is

being run by irrational people, government does not care for the
welfare of society, government is thinking to borrow money from
international agencies rather than mobilising domestic savings. The
scope of domestic saving is considerably high in India.

There is need of honest and sincere attempt to mobilise people's

saving for people's welfare. Government should not adhere on some
of the reports on insurance because they have been prepared on
government's liking and people's mood. The reports cannot be relied
on considering the broader and wider interest of the country.

It has been anticipated that the funds required for Ninth Five-Year
Plan can be met by insurance industry alone if the industry is given
freehand for operation and investment.

There will not be any need for inviting foreign investment and
incurring socio-economic and political risks. Privatisation of
insurance industry is totally out of context, irrational and antinational
decision.

Life insurance business was nationalised with the objective of

rendering prompt and efficient services to policyholders.
Consequently, corporative objective, "Involve all people working in
the Corporation to the best of their capability in furthering the
interests of the insured public by providing efficient service with
courtesy.

The business per active agent has increased to Rs. 10,63,101 in 1995
from the lowest level of Rs. 31,000 in 1955. The LIC has fulfilled the
responsibility of claims payment of which amounted to Rs. 4,532.22
crore on 42 lakh policies in 1995-96 from the lowest figure of Rs.
28.7 crore in 1956.
Outstanding claim which was 50% in 1956 came down to the level of
5.99 % in 1995-96. This shows that LIC has attempted hard to render
prompt and efficient services to take policyholders.

The business of LIC has been constantly increasing. The productivity

in terms of new business has increased from 26 policies in 1957 to 89
policies in 1994-95.

An employee who was required to serve 185 policies in 1957 is

serving 539 policies in force in 1994-95. No one can argue that
employee's productivity has declined as has been in other public
sector enterprises.

The case of LIC is totally different from other public sector units
which are running on losses and have been under constant pressure of
government. LIC and GIC having the benefits of corporate character
under statutory act of 1956 and 1972 are demonstrating its efficiency.

They improve further if political interference whatever is there is

eliminated from the horizon of the business. Statutory corporations
having their autonomy and management techniques can perform better
than any private entrepreneurs or government organisation.

Departmental undertakings are always on the mercy and methods of

government. The Indian Government has vividly demonstrated its
corrupt practices during the last five years and cannot be relied upon
for better management of nation and industry.

But statutory corporations being free from direct involvement of

government and performing efficiency in India and helping the
society at large which is not possible by individual entrepreneurs who
are always profit minded and least bothered to public welfare and
nation-building
 MARKETING STRATEGIES IN LIFE INSURANCE
CORPORATION

The study is designed to evaluate the marketing strategies in life

insurance service sector & how these strategies boost sales &
marketability of a product which ultimately lead to customer
satisfaction. The insurance scenario faces multiple challenges such as
increased costs of operation, regulatory pressures, and inflexible
technology infrastructure. These pressures are compounded by low to
moderate premium growth & the increasing burdens of regulatory
compliance. Keeping all the above problems around the study would
attempt to study all the factors that contributed to the effective
marketing strategies. This paper presents different marketing
strategies that are taken up in life insurance services keeping in view
external and internal environment of the firm. Marketing strategy is
the basic approach that the business units will use to achieve its
objectives, and it consists of broad decisions on target markets, market
positioning and mix, and marketing expenditure levels. As the
financial services sector has become more competitive, financial
institutions need to consider ,ways of developing relationships with
their existing customers in order to defend their market share.
Strategic dimension of marketing should focus on the direction that an
organization would take in relation to a specific market or set of
markets in order to achieve a specified set of objectives. Every insurer
must recognize that its "strategic posture" depends partly on the
competitive environment, partly on its allocation of marketing
resources. An insurance firm strategy is a plan for action that
determines how an insurer can best achieve its goals and objectives in
the light of the existing pressures exerted by competition, on the one
hand, and its limited resources on the other hand.
In today’s economy, the financial services industry is exposed to
increasing performance pressures and competitive forces (Goergen,
2001). Modern media, such as the internet, have created new
challenges for this industry (Fuchs, 2001).New business concepts, a
change in client sophistication (Davis, 2006), and anincreasing
number of new competitors entering into the market, such as
independent financial consultants, have changed the business models
and the competitive forces that established financial services
organizations are facing today worldwide.A marketing strategy serves
as the foundation of a marketing plan. A marketing plan contains a list
of specific actions required to successfully implement a specific
marketing strategy. A strategy is different than a tactic. While it is
possible to write a tactical marketing plan without a sound, well-
considered strategy, it is not recommended. Without a sound
marketing strategy, a marketing plan has no foundation. Marketing
strategies serve as the fundamental underpinning of marketing plans
designed to reach marketing objectives. It is important that these
objectives have measurable results.A good marketing strategy should
integrate an organization's marketing goals, policies, and action
sequences (tactics) into a cohesive whole. The objective of a
marketing strategy is to provide a foundation from which a tactical
plan is developed. This allows the organization to carry out its mission
effectively and efficiently. The following techniques are implemented
to device the Marketing Strategy for the product/service: 
Segmentation  Targeting  Positioning Market segmentation is the
process in marketing of grouping a market (i.e. customers) into
smaller subgroups. This is not something that is arbitrarily imposed on
society: it is derived from the recognition that the total market is often
made up of submarkets (called 'segments'). These segments are
homogeneous within (i.e. people in the segment are similar to each
other in their attitudes about certain variables). Because of this intra-
group similarity, they are likely to respond somewhat similarly to a
given marketing strategy. That is, they are likely to have similar
feeling and ideas about a marketing mix comprised of a given product
or service, sold at a given price, distributed in a certain way, and
promoted in a certain way. Segmentation: Market segmentation is
widely defined as being a complex process consisting in two main
phases:  identification of broad, large markets  Segmentation of
these markets in order to select the most appropriate target markets
and develop marketing mixes accordingly. Positioning: Simply,
positioning is how your target market defines you in relation to your
competitors. A good position is: 1. What makes you unique? 2. This is
considered a benefit by your target market .Positioning is important
because you are competing with all the noise out there competing for
your potential fans attention. If you can stand out with a unique
benefit, you have a chance at getting their attention. It is important to
understand your product from the customer’s point of view relative to
the competition. Targeting: Targeting involves breaking a market into
segments and then concentrating your marketing efforts on one or a
few key segments. Target marketing can be the key to a small
business’s success. The beauty of target marketing is that it makes the
promotion, pricing and distribution of your products and/or services
easier and more cost-effective. Target marketing provides a focus to
all of your marketing activities. Marketing Mix: Marketing
professionals and specialist use many tactics to attract and retain their
customers. These activities comprise of different concepts, the most
important one being the marketing mix. There are two concepts for
marketing mix: 4P and 7P. It is essential to balance the 4Ps or the 7Ps
of the marketing mix. The concept of 4Ps has been long used for the
product industry while the latter has emerged as a successful
proposition for the services industry. The 7Ps of the marketing mix
that are used to frame marketing strategies of life insurance companies
can be discussed as: Product - It must provide value to a customer but
does not have to be tangible at the same time. Basically, it involves
introducing new products or improvising the existing products. A
product means what we produce. If we produce goods, it means
tangible product & when we produce & generate services, it means
intangible service product. A product is both what a seller has to sell
& buyer has to buy. So, insurance companies sell services &services
are their products. Apart from life insurance as product, customer not
only buys product but also services in the form of assistance & advice
of agent. It is natural that customers expect reasonable returns for their
investments & insurance companies want to maximize their
profitability. Hence while deciding the product mix services or
schemes should be motivational. Price - Pricing must be competitive
and must entail profit. The pricing strategy can comprise discounts,
offers and the like. The pricing of insurance products not only affects
the sales volume and profitability but also influences the perceived
quality in the minds of the consumers. There are several different
methods for pricing insurance, based on the insurance marketer’s
corporate objectives. They are the survival approach, the sales
maximization approach, and the profit maximization approach. To
determine the insurance premium, marketers consider various factors
such as mortality rate, investment earnings, and expenses, in addition
to the individual risk profile based on age, health, etc., and the time
period/ frequency of payment. In insurance business the pricing
decisions are concerned with: -The premium charged against policies
-The interest charged for defaulting the payment of premium & credit
facility. -Commission charged for underwriting & consultancy
activities. The pricing decisions may be high or low keeping in view
the level or standard of customers or the policyholders. Mainly,
pricing of insurance is in the form of premium rates. The three main
factors used for determining the premium rates under a life insurance
plan are mortality, expense & interest. The pricing of insurance is in
form of premium rates. The three main factors for determining the
premium rates under life insurance plan are: Mortality: Average death
rates in a particular area. Expenses: The cost of processing,
commission to agents, registration is all incorporated into the cost of
installments & premium sum & forms the integral part of pricing
strategy. Interest: The rate of interest is one of the major factors which
determine people’s willingness to invest in insurance. People would
not be willing to put their funds to invest in insurance business if the
interest rates provided by other financial instruments are higher than
the perceived returns from the insurance premiums. Place - It refers to
the place where the customers can buy the product and how the
product reaches out to that place. This is done through different
channels, like Internet, wholesalers and retailers. This component of
marketing mix is related to two important facets- -Managing the
insurance personnel -Locating a branch The management of insurance
personal should be done in such a way that gap between the services
promises-services offered is bridged over. In a majority of service
generating organizations, such a gap is found existent which has been
instrumental in making down the image problem .The insurance
personnel if not managed properly would make all efforts insensitive.
They are required to be given adequate incentives to show their
excellence. They should be provided intensive trainings to focus
mainly on behavioral management. Another important dimension to
the place mix is related to the location of insurance branches. While
locating branches, branch manager needs to consider the number of
factors such as smooth accessibility, availability of infrastructural
facilities and management of branch offices and premises. Thus place
management of insurance premises needs a new vision, distinct
approach & an innovative style. The branch managers need
professional excellence to make place decisions productive.
Promotion - It includes the various ways of communicating to the
customers of what the company has to offer. It is about
communicating about the benefits of using a particular product or
service rather than just talking about its features. The insurance
services depend on effective promotional measures, so as to create
impulsive buying. Promotion comprises of advertising & other
publicity tactics. The promotion is a fight not only for market share,
but also for mind share. The insurance services depend on effective
promotional measures, so as to create impulsive buying. Promotion
comprises of advertising & other publicity tactics. Due attention
should be given in selecting the promotional tools. Personnel should
be given adequate training for creating impulsive buying. People -
People refer to the customers, employees, management and everybody
else involved in it. It is essential for everyone to realize that the
reputation of the brand that you are involved with is in the people's
hands. Understanding the customer better allows to design appropriate
products. Being a service industry which involves a high level of
people interaction, it is very important to use this resource efficiently
in order to satisfy customers.Training, development &strong
relationships with intermediaries are the key areas to be kept under
consideration. Process - It refers to the methods and process of
providing a service and is hence essential to have a thorough
knowledge on whether the services are helpful to the customers, if
they are provided in time, if the customers are informed in hand about
the services and many such things. The process should be customer
friendly in insurance industry. The speed & accuracy of payment is of
immense importance. The processing method should be easy to&
convenient to the customers. Installment schemes should be
streamlined to cater to the ever growing demands of the customers. IT
& Data warehousing will smoothen the process flow. IT will help in
servicing the large no. of customers efficiently and bring down
overheads. Technology can either complement or supplement the
channels of distribution cost effectively. It also helps to improve
customer service levels & helps to find out profitability & potential of
various customers product segments. Physical (evidence) - It refers to
the experience of using a product or service. When a service goes out
to the customer, it is essential that you help him see what he is buying
or not. For example- brochures, pamphlets etc serve this purpose.
Evidence is a key element of success for all insurance companies.
Physical evidence can be provided to insurance customers in the form
of policy certificate and premium payment receipts. The office
building, the ambience, the service personnel etc. of the insurance
company and their logo and brand name in advertisements also add to
the physical evidence. To reach a profitable mass of customers, then
new distribution avenues & alliances will be necessary.Initally
insurance was looked upon as a complex product with a high advice &
service component. Buyers prefer a face to face interaction & they
place a high premium on brand names & reliability.

Impetus for marketing strategy: India is a jumbo-sized opportunity for

life insurance need hardly belaboured. Here is a nation of a billion
people, of whom merely 100 million people are insured. And,
significantly, even those who do have insurance are grossly
underinsured. The emerging middle class population, growing
affluence and the absence of a social security system combine to make
India one of the world’s most attractive life insurance markets. No
matter how you look at it – whether in terms of life insurance
premiums as a percentage of GDP or premium per capita – the market
is under penetrated and people are under-insured. In a country where
there is high unemployment and where social security systems are
absent, life insurance offers the basic cover against life’s
uncertainties. India has traditionally been a savings-oriented country
and insurance plays a critical role in the development of the Indian
economy. The role of insurance in the economy is vital as it able to
mobilize premium payments into long-term investible funds. As such,
it is a key sector for development. So marketing strategies are
important and inevitable phenomenon to tap huge untapped potential.
Effective selling of insurance policies depends to a large extent on the
marketing strategies selected. As the market for insurance is dynamic
and accompanied by rapid changes in the environment due to
advancements in technology and uncertain economic conditions,
coupled with inflation, increased attention must be given in the future
to the selection of marketing strategies. Components of marketing
strategies: Pricing Personal selling Advertising Word of mouth selling
Institutional image Quality control Marketing orientation New
approaches to strategize the productization of life insurance services:
Latest tools and techniques are used by marketers of life insurance
products to boost the sales to ensure customer satisfaction and brand
building. Some are the approaches to survive in this scenario are as
under: Innovation: Innovation in the delivery system refers to the
internal organizational arrangements that have to be managed to allow
service workers to perform their job properly, and to develop and
offer innovative services. All the insurance companies have a
structured internal organization team with customer service teams for
the delivery of the service. Extensive training is given to the service
contact personnel who are called the financial consultants or Agent
advisers. Service development, service design and delivery are
intricately intertwined. All parties involved in any aspect of the new
service must work together at this stage to delineate the details of the
new service. (Valarie A Zeithmal and Mary Jo Bitner, 2003). The
need and importance of the customers involvement in the service
innovation process is considered to be of prime importance by all the
life insurance companies as the current market for life insurance is
customer centric. They also express their opinion that the new
services developed currently are based on customer focus. The degree
of involvement of the customer has gradually increased in the last five
years. In the last two years customers are involved in the new service
process as information providers. Product/Service differentiation: In
case of product differentiation, new products, customized products,
tailored products, bundled products can be introduced and new target
segments can be identified. For example, life, health and personal
accident insurance can be bundled together. Similarly Home Loan and
insurance covering fire and burglary can be put together. The life
insurance companies provides only packaged policies whereas new
players have been providing several Riders. Rider in insurance
parlance is an option that gives the policyholder additional coverage
without disturbing the fundamental risk coverage. The service in the
field of life insurance has improved greatly with the entry of
multinationals and rising competition. The customer should have the
option to continue or to switch over or to come out of the given
policy. The service in the field of life insurance has improved greatly
with the entry of multinationals and rising competition. The customer
should have the option to continue or to switch over or to come out of
the given policy. Advertising and sales promotion: Advertising and
publicizing have a positive effect on the prospective customers as well
as personal selling. Both the direct and indirect strategies have to be
balanced and mixed well to get the desired result. Discounts and
incentives promised along with the policy have to be presented in
detail to the customers. The companies must provide a tangible and
rational reason to the customers to buy a particular policy. Unity and
honesty must be maintained by the company and the frontline
executives at any cost to attract the customers in the long term.
Various creative and innovative strategies should be developed to
promote various different life insurance policies. Finding an ideal mix
of customers with high disposable income and targeting them with
specific policies is another good promotional strategy. Life insurance
may be one of the most difficult products to sell, but with an effective
promotional strategy it can be sold easily. Technology: Information
Technology progress is a major driver behind the structural change in
the Life insurance industry to enhance risk transfer efficiency.
Ebusiness opens up new ways to reduce costs while lowering market
entry barriers and facilitating the break-up of the traditional insurance
value chain. Insurance clients will benefit from greater transparency,
lower prices and improved services – not just in the sales area, but
also in claims management. New information and communication
technologies are making it easier for insurers to break up the value
chain and outsource individual functions to specialized providers. In
the long-term basis the information technology units control the
potential for new service delivery since all new products represent a
more sophisticated delivery of the service. Although it is argued that
service innovations are often non technological, this is still the center
of much analysis and debate (Kandampully, 2002). Customer
relationship management: Insurance companies experiencing
competition from within and abroad. Making this problem-situation
into an opportunity lies always on the prudent management adopting
or adapting tactics and strategies. In line of this, customer relationship
management is a measure of winning competitiveness as it is the
information-driven approach to customer analysis and process
automation; and thereon supplement customer-value proposition. An
action on tangible services – prompt and accurate issue of document,
prompt and fair settlement of claim ,good listening mechanism, better
problem solving approach, reliable manner of service and meet
requirement of customers on time every time - in lieu of intangible
promises would give utmost satisfaction to customers, the customer
relationship management provides better service to the insured
protecting him against perils or risks and the insurer enabling to retain
the existing customers and bringing in new customers in his ambit of
business Distribution channels: The distribution network is most
important in insurance industry. Insurance is not a high cost industry
like telecom sector. Therefore it is building its market on goodwill and
access on distribution network. We cannot deny that insurance are not
bought, it is sold. The market has a great scope to grow. This can be
better done by more innovative channels like a super market, a bank, a
post office, an ATM, departmental store etc. these could be used to
increase channels of insurance. But such growth in channels shall
increase with time. Till then agents seem to be the most important
distribution channel in this industry. Agents connect with people and
influence them to buy any insurance policy. For the same such agents
charge commission on the policies they get for the company. There is
a fixed percentage of commission for which these agents work. In the
field of distribution channels, many innovative techniques can be
adopted. For example, Bancassurance and selling through postal
network will make a great deal of difference. In Europe 25 percent of
insurance policies are sold through banks. Bancassurance, as a
package of financial services that can fulfill both banking and
insurance needs, if implemented correctly can bring vast benefits to
stakeholders such as banks, insurance companies, shareholders and
consumers.Bancassurance will facilitate mass selling of insurance
products through banks. Banks can act as large financial
supermarkets. Distribution of insurance will be smoother through
wider number of branches of the banks. Customer database,
personalized service, rural penetration, cross-selling of products (e.g.
car loan along with car insurance), being cheaper than agents are some
of the greatest advantages of Bancassurance. At present the
distribution channels that are available in the market are listed below:
 Direct selling  Corporate agents  Group selling  Brokers and
cooperative societies  Bancassurance  Mallassurance Conclusion:
Life insurance industry requires new strategies in order to survive and
survive successfully .To tap the insurance potential to maximum
industry needs to frame such plans and strategies that will help to
capture the market. Companies instead of focusing only on improving
the variety of products needs to focus on targeting new segments and
implement innovative strategies in order to achieve sustained growth
and ensure profitability of business as well as growth of insurance
coverage.
 SWOT ANALYSIS

COMPANY OVERVIEW

The Life Insurance Corporation of India (LIC or “the group”) is

primarily a life insurance service

provider.The company primarily operates in India. It is headquartered

in Mumbai, India and employed 119,767 people as on 31st March,
2012.

The group recorded revenues of INR2,873,153.8 million ($52,693.6

million) during the financial year ended March 2012 (FY2012), a
decrease of 4% over FY2011. The operating profit was
INR2,527,819.9 million ($46,360.2 million) in FY2012, a decrease of
4.7% over FY2011.

SWOT ANALYSIS

The Life Insurance Corporation of India (LIC or “the group”) is

primarily a life insurance service

provider. LIC commands a dominant position with a market share of

71.4% of the industry’s first
year premium at end FY2011-12 (FY2012). Thus it enjoys economies
of scale benefits. However, increasing competition, and increasing
GOI deficit could affect the group’s margins and financial position.

STRENGTHS

Dominant market position in Indian life insurance market

LIC, once a monopoly in Indian life insurance market, still commands

a dominant position. The market share of LIC increased to 71.4% in
total first year premium and to 80.9% in individual new business
policies. In group insurance premium the market share increased to
78.5%. The group’s dominant market position is attributable to its
long standing presence in the market. As on 31st March 2012, LIC
had 8 zonal offices, 113 divisional offices, 2,048 branch offices and
1,202 satellite offices (SOs). In terms of number of lives insured, LIC
is unrivalled with more than 250 million lives. Even after
liberalization of life insurance market in India, LIC continues to be a
dominant force due to its perceived backing of Indian government,
and also due to its agency strength that stood at 1,278,234 as on end
March 2012. LIC‘s dominant market position in Indian life insurance
market, which is perceived to continue in near future, provides it with
economies of scale benefits both in terms of policy production, and
marketing spend.
Diverse products, customer base, and channel partnerships
sustain premium collection

LIC product portfolio nearly covers the entire spectrum of life

insurance products available on offer

in India. The group generates core revenues through four operating

business divisions: individual

assurance (69.8% of total revenues in FY2012), linked business

(21.8%), group schemes (7.3%),

and individual pension (1.1%). Within these divisions, it provides

several products suited to the needs of its constituents. The group’s
customer base consists of people from diverse industries, regions, and
of various sophistication levels (in terms of insurance literacy). After
the opening of life insurance for private sector, LIC has diversified its
policy distribution channels. Diverse products, customer base, and
channel partnerships of LIC sustain its premium collection
momentum.

Strong financial position, due to both profitable business growth

and investment management

LIC balance sheet is strong with zero debt and continued year-over-
year growth in both shareholders’ funds and policy holders’ funds.
The group’s policy holders’ funds increased by 11.3% from
INR11,098.3 billion ($203.5 billion) in FY2011 to INR12,354.7
million ($226.6 million) in FY2012. Growth in shareholders’ funds
was also in double digits at 31.4% increasing from INR4,037.4
million ($74.0 million) in FY2011 to INR5,305.7 million ($97.3
million) in FY2012.The group’s strong financial position is
attributable to both business growth (indicated by net retention ratio
well in excess of 99.9% for the last three years), and investment
income. LIC’s strong financial position cushions it from adverse
market developments.

WEAKNESSES

Government control and corporate structure limiting returns

LIC is fully owned by the Government of India (GOI). As a result,

GOI exercises full control over the group’s operations. This type of
ownership has both advantages and disadvantages. Since, the opening
of life insurance market to private players, there is a significant
change perceived in the balance of advantages and disadvantages to
the latter. For instance, the group’s Board of Directors consists of a
significant number of government officials who are involved with
several government activities and thus their time spent on business
issues related to LIC is constrained. As a result, the group’s decision
making tends to be slower than its rivals in private sector. Moreover,
as it is owned by GOI, outflow of funds to GOI is significant. It is
estimated that nearly 24% of GOI’s expenses are funded by
contributions from LIC. Weaknesses arising out of government
control and corporate structure are expected to remain in the near
future limiting the group’s return on shareholders’ funds.
OPPORTUNITIES

Continued growth in Indian life insurance market

According to MarketLine, the Indian life insurance market shrank by

0.8% in 2011 to reach a value of $61.8 million. In 2016, the Indian
life insurance market is forecast to have a value of $129.9 million, an
increase of 110.2% since 2011. Life insurance is the largest segment
of the life insurance market in India, accounting for 90.6% of the
market's total value. LIC is the leading player in the Indian life
insurance market, generating a 68.5% share of the market's value.
Being the dominant player in Indian life insurance market, LIC has
scope to increase its revenue and profits.

Increasing spend on training and new product development may

accelerate business volume growth In the last few years ending
FY2011, LIC has been spending increasing amounts on training and
new product development. Though the details of amounts spent on
these heads is not revealed, one can infer, from the quantitative
disclosures such as number of persons trained and new products
launched, that the spending on these heads is increasing. For instance,
during FY2011, the group launched two new non-linked plans Bima
Account I and Bima Account II. LIC also launched a new non-linked
health insurance plan “Jeevan Arogya”. The plan offers
comprehensive hospitalization benefits for the whole family of the
principal insured. The training imparted to agents and employees
helps the group in increasing the success of new product launch, in
retaining their client base, and also in increasing their business
volume per client.

THREATS

Increasing competition likely to reduce profit margins

Competition in Indian life insurance market has intensified in the

recent years. There are public and private firms operating within
India's insurance market with state-owned LIC is the leading player in
the Indian life insurance market, generating a 68.5% share of the
market's value. But private players have moved aggressively, chasing
for business after being allowed to compete with LIC in 2000.

And overseas insurers, allowed to operate with the passing of the

Insurance Regulatory and Development Authority (IRDA) Act in
1999, have raced into the market despite rules limiting foreign direct
investment in domestic insurers to 26%. Tripartite life insurance joint
venture Canara HSBC Oriental Bank of Commerce (OBC) Life
Insurance entered into the group insurance business in October 2010.
Moreover, Indian government owned general insurers are planning to
enter health insurance through joint ventures with American insurance
companies. Increasing competition on one hand reduces profit
margins and on another hand reduces market potential per player.
Volatility in global financial markets may affect Indian equity and
debt market performance Global financial markets have been volatile
since the onset of subprime crisis. Though, coordinated actions by
several governments did restore some confidence in the market,
market participants are still jittery. A small trigger in Greece public
debt retirement caused a spike not only in Europe but also across
several other connected countries. Essentially, market participants
though are willing to take on higher risk for a perceived higher return,
the return of flight to liquidity can’t be ruled out even when the trigger
is small. As a result, when there is a withdrawal of foreign portfolio
investments from Indian equity and debt markets, investment returns
booked by LIC are likely to suffer.

Increasing GOI revenue deficit

India is projected to have a fiscal deficit of 5.1% in the year to March

2013. Though as a percentage of budgets, deficit is declining, it is
actually increasing significantly in terms of actual number.

Increasing deficit prompts the government of India (GOI) to extract

higher returns from its investments in LIC and other partly or fully
owned entities. As a result, cash outflow in the form of dividends
from LIC is likely to remain high as long as GOI’s absolute deficit
increases. Consequently, the group’s financial position could weaken.

.
 SUPPLY CHAIN

Insurers employ a score of supply chain vendors across the claims

process. Examples include claim investigators, third-party
administrators, auto body repair shops, defense counsel, engineers,
offshore claims service providers, materials suppliers, case managers,
and pharmaceutical benefits managers. As insurers consider more
flexible and expanded business models in the Digital Age, the
opportunity to bring business partners into the claims process and
operating model will become more prevalent. Additionally, as claims
become more complex–requiring more specialized expertise–and
claims handling becomes increasingly regulated and subject to
broader reporting rules under Sarbanes-Oxley, ICD-10, MMSEA
(Medicare, Medicaid, and SCIP Extension Act of 2007), and similar
laws and regulations, the number and diversity of these vendors will
only continue to grow along with insurers’ costs and risks. It is not
unusual for supply chain vendor costs to contribute 25 points or more
to insurer combined ratios, although insurer experience in this area
can vary.

Insurers have been slower than their counterparts in other industries to

rationalize their supply chain management strategies. Hurdles to
insurers’ adoption of more robust supply chain management programs
are similar to those in other industries:

Talent – Analytics Finding talent with the right analytical skills to

provide insight into your supply chain

Internal Optimization Pressures Top-down pressure to continually

reduce costs and optimize working capital in the supply chain
Supply Chain Responsiveness Designing a supply chain that can
respond to volatile customer demand in “real time”

Compliance: Business adoption of supply chain management program

Talent – Functional Knowledge Finding talent with the functional

knowledge of effective supply chain processes

Visibility and Coordination End-to-end visibility and coordination

across the supply chain

Because of the significance of supply chain costs to an insurer’s

bottom line, it is critical for insurers to focus on reducing these costs
now by adopting leading supply chain management practices.

The remainder of this article discusses current supply chain

management issues and trends and imagines a brighter future for
supply chain management in insurance claims if insurers incorporate
visibility, data, technology, and customer focus into their supply chain
management strategy.

Present State of Supply Change Management in Insurance Claims

In our experience, insurers’ use of modern supply change

management techniques to manage and improve their supply chain
process is generally at a relatively low maturity level in all but global
insurance organizations. We also have observed that even such large,
capable organizations often lack key components of a world-class
supply chain management system: (1) standardized supply chain
management processes across the entire supply chain; (2) clearly
defined metrics for measuring supply chain performance; (3) the right
supply chain performance data; and (4) a continuous feedback loop to
drive supply chain performance improvement.
We have observed that some insurers centralize some of their supply
chain management activities in a supply chain management office
responsible for vendor selection, contracting, and, to a lesser degree,
performance measurement. A single supply chain management
function enables standardized supply chain management practices
across the entire supply chain process and promotes optimal supply
chain outcomes. However, to the extent that an insurer’s supply chain
management function is not fully visible, i.e., does not encompass
supply chain activities from end-to-end because of manual processes,
the insurer is at risk of inconsistent, sub-optimal outcomes from its
supply chain activities.

Important Supply Chain Management Trends for Insurers

We discuss below three key supply chain management trends that

provide opportunities for insurers to reduce their supply chain costs
and risks and improve supply chain performance.

Data Analytics (Predictive and Prescriptive)

In the past several years, one of the most important areas of supply
chain management to undergo significant change is supply chain data
analytics. Supply chain analytics, which impact every aspect of the
business, enable alignment of the supply chain program with the
enterprise vision and goals. These analytics provide executives with a
window into supply chain financials, including expense analysis,
forecasting, and contract compliance.

Supply chain data analytics can empower the business to optimize

demand and supply planning, thereby reducing supply chain risk.
Supply chain analytics can allow insurers to benchmark and improve
supply chain vendor performance and identify instances of contractual
non-compliance.
Supply chain data analytics provide a basis for measuring customer
satisfaction and regulatory compliance related to the supply chain
interaction, creating opportunities to improve the customer experience
and retention and reduce regulatory fines and penalties. Finally,
insurers can harness supply chain data analytics in an iterative way to
continuously improve the supply chain process.

Supply Chain Control Tower and Big Data

The supply chain tower is a central hub with required technology,

organization, and processes to capture and use Big Data to provide
enhanced visibility into supply chain decision-making. While the
supply chain control tower is not a new concept in supply chain
management, what is new is that organizations are now increasingly
turning to it to leverage Big Data. Big Data can increase supply chain
visibility by giving organizations the ability to identify external
factors such as weather events and civil unrest that may impact supply
chain demand and supply. The accessing of Big Data through the
supply chain tower can be a boon for insurers, allowing them to more
quickly dispatch the right level of adjusters and other claim resources
to locations affected by a loss event and more accurately forecast loss
exposures arising from the event.

Social Media

Social media such as Facebook, Twitter, and LinkedIn provide means

for insurers to more closely communicate and immediately share
information with their supply chain vendors on such issues as best
practices, performance outcomes, and training. Social media can be
used as a forum for insurers to discuss performance issues with their
vendors and quickly determine a solution. The immediacy of the
information shared through social media can help insurers to avoid
supply chain performance issues or nip them in the bud, thus reducing
supply chain costs and ensuring that supply chain results remain on
track.

Given the importance of social media as a communications channel in

the personal sphere and business domain, particularly for Millennial
and Generation X customers, insurers should encourage the use of
social media by their supply chain vendors such as body shops and
contract adjusters to communicate with the insured and claimant
during the claim process. Today’s consumers expect to be able to
communicate with insurers on a 24 X 7 basis by any channel of the
consumer’s choosing. Insurers that promote a seamless All-Channel
Experience, including social media, for their customers across the
Claims Value Chain, including interactions with the insurer’s supply
chain vendors, can expect higher levels of customer satisfaction and
retention, potentially leading to greater insurer profitability.

The Future of Supply Chain Management in Insurance Claims

Here is a glimpse into what we believe the future for supply chain
management in insurance claims may look like:

 As insurers’ supply chain data analytics capabilities improve, the

model for insurer supply chain management organizations will evolve
from a largely procurement function to one that is more performance-
focused and better aligned with business objectives. The supply chain
organization will be less siloed and better integrated into business
operations.

 Better supply chain performance data analytics means that insurers

will be able to better forecast and proactively plan for supply chain
activity, more efficiently allocating the right supply chain vendor
resources to achieve improved claim outcomes.
 The wider availability of supply chain vendor performance data will
enable the closer partnering of insurers and their supply chain vendors
based on a common view of vendor performance and performance
goals. This shared vision should pave the way for continuous
performance improvement and supply chain cost reduction.

 A wider array of commercial supply chain technology solutions,

allowing for end-to-end visibility of the supply chain process and its
improved integration into claims process workflow and decision-
making, should become increasingly available.

 Insurers will have access to better supply chain risk management

tools, including dashboards and scorecards, to identify, manage, and
remediate supply chain-related instances of contractual, legal, and
regulatory non-compliance.

the quickened pace of change in the marketplace demands a “more

proactive and aggressive approach” to supply chain management. As
in the Consumer Products industry, changes in insurers’
rationalization of their supply chain management strategies have been
“gradual and incremental” at least until now. And as with Consumer
Products companies, remaining competitive will require insurers to
continuously hone their supply chain management strategies for
insurance claims, positioning themselves on the leading edge of future
supply chain management trends.

In light of the above, we believe that insurers should seriously

consider including supply chain management in their claims
operational reviews, recognizing that supply chain management
presents not only an opportunity for significant gains in efficiency,
process improvement, and cost-reduction, but also an area of material
risk, financial and otherwise. Finally, insurer investment in supply
chain management should be balanced against potential financial,
regulatory, reputational, and other returns. Given the relative
immaturity of current insurer practices for managing their supply
chain vendors, we believe these returns could be substantial.
https://www.scribd.com/doc/25975185/Ratio-Analysis-of-LIC