Sahay - The LIC Story: Making of Indias Best-known Brand

The LIC Story

Making of Indias Best-known Brand

Kamalji Sahay

MACMILLAN

With tremendous pride and respect

I dedicate this book

to

the millions of agents and several thousands of my colleagues

who together contributed to the making of

Indias best-known brand.

CONTENTS

PROLOGUE

THE JEWEL IN THE CROWN

The day, 1 September 2005 was a special day for the Life Insurance Corporation of India (LIC). It marked the beginning of the 50th year of its formation. In a young country like India, not many institutions can claim a 50-year history. The LIC has had the good fortune of providing 50 glorious years of service to the nation, providing social security to crores of people and creating a brand that is now synonymous with trust. On 1 September 2005, the then Finance Minister P. Chidambaram, in his speech, not only acknowledged the LICs unparalleled contribution to India, but he went a step ahead and called it a Jewel in the Crown of India. While there are not many phrases or words that can do justice to the LICs spectacular contributions to society and the nation, these words express it perfectly.

Zindagi ke saath bhi, Zindagi ke baad bhi

There are many things that make LIC a true jewel; chief among them is its sheer reach. Only a handful of Indian companies, across any sector, are really comparable in scale to their global counterparts and have as deep a reach among Indian consumers, both physically and psychologically, as the LIC. With nearly 40 crore lives covered through individual as well as group schemes, the LIC is the largest life insurance company of the world, in terms of customer base. To put it in perspective, the customer base of the LIC is almost six times that of the population of UK. In the national context, this is one-third of Indias population, covering 70 per cent of its insurable people. The largest bank in India, the State Bank of India (SBI) has a customer base of 27 crore before the merger of the associate banks which is only 70 per cent of that of the LIC. There are 23 private life insurance players in India, which together cover only 25 per cent of coverage of LIC. Cumulatively, LIC has provided 80 crore individual policies in its lifetime of over 60 years, through which it has directly touched at least as many lives and indirectly made a difference to at least 400 crore lives (besides those covered under group schemes) more than three times Indias current population a feat unmatched globally by any other life insurance player!

With this kind of penetration, LIC has facets beyond just life insurance. As we will see, this reach actually puts LIC in the league of nation builders, employment generators, and financial conglomerates. After all, this is the kind of customer base that start-ups in India today would give their eyeteeth for, but yet find difficult to garner, despite deploying technology, as well as tempting cashback offers. However, the LIC is not viewed with the same awe as its global counterparts, or even other private sector success stories in India. It could be because the LIC is a public sector undertaking (PSU) and the fact that, since it emerged in an era when bragging was frowned upon, the organization never blew its own trumpet. In that sense, it is a truly Indian company with its belief in karma and in results, despite the fact that it is the only PSU other than China Life among the leading global life insurance companies, which are all private sector enterprises. LIC is comparable to private sector enterprises in almost all parameters and is better than them in many respects; that is a rare jewel indeed!

In a country as diverse as India, replete with regional heroes be it political, business, sports, movie stars, or even gods the LIC is probably the best example of a true pan-Indian brand, catering on such a scale, cutting across the diverse layers of Indian demography. This is not surprising as the idea of LIC was not very different from idea of India itself.

The Birth of a Nation (and its Twin)

On 31 August 1956, the State Reorganization Act, 1956, was enacted. This redefined the various state boundaries along linguistic lines and created modern-day India. It had only been a few years since India was formed by uniting various princely states. The British had left behind a country that was not only economically poor, but also woefully lacking in self-confidence and belief. Our only strength was our unity, and the idea of unity in diversity was embraced by all to create a strong and modern nation.

Exactly a day later, on 1 September 1956, modern Indias twin, the Life Insurance Corporation of India, was created in a very similar fashion. Except that instead of princely states, this nation was formed after bringing together various small and big private life insurance companies and mutual-benefit societies. These companies were run in a fashion not very different from that of the princely states. The rationale behind creating LIC was similar to that of creating a united India. India was then in no condition to provide social security schemes like the ones in the US, the UK, and other developed nations for its 36 crore poor people. Yet, in the India of the 1950s with its high mortality rates and single earning members with many dependents (because of social taboos about working women) financial security was the need of the hour. Life insurance was identified as the best solution, but the existing private players were ineffective and catered only to small urban pockets. Insurance was out of reach of the population that actually required it, particularly those in the rural and the lower economic strata, and this gap expedited the idea of an agency like LIC. Unlike its global counterparts, LIC was not formed as just another business enterprise. It shouldered the responsibility to fulfil a very basic necessity of an entire nation: a necessity to help attain the three basic requirements: Roti, Kapda, aur Makaan (food, clothing, and shelter).

When the 245 existing insurance companies were merged to form the LIC, the units together consisted of 27,000 employees; Assets Under Management (AUM) of close to Rs 400 crores; 50 lakh policies in force; and an insurance cover of over Rs 1000 crores. All employees were given exactly the same positions with the same benefits and responsibilities, making the LIC one of the largest employers of the time. None of the private sector companies was even close to LIC in this respect. By 2017, the LIC had expanded, with over 5000 offices, 1.2 lakh employees, 12 lakh agents, AUM of Rs 25.72 lakh crores, and more than 30 crore policies in force. The LIC now deploys around 80 per cent of its funds in socially oriented projects, contributing to the improvement in the quality of life of almost a billion people across the country. The LIC has contributed generously to various Five-Year Plan and has been instrumental in providing bulk funds to both large and small public and private sector institutions of India. It has been one of those rare conglomerates, which command respect across political, religious, caste, and gender barriers: from professionals to businessmen, movie stars to sportsmen, students to housewives, and grandfather to grandchildren. LIC, since its inception, has thus proven to be a great leveller as it has gone about performing the tough task of sensitively handling another great leveller: death. There is only one other entity who can rival this cross-spectrum bonding: India itself.

Where There is a Will, There is a Way

One may argue that the LIC had the advantage of being a monopoly, but insurance has never been an easily saleable product. People seldom demand a life insurance policy of their own volition. During the LICs early years, life insurance was a sensitive topic and people were uncomfortable discussing it openly with a stranger. It involved discussing personal financial and family matters. Secondly, it did not fulfil any immediate need and the whole concept revolved around providing an intangible security net whose actual benefit would never be visible in the policyholders lifetime. Additionally, there was a requirement to pay in advance, and that too for a period spanning ones entire working life. People were more interested in making a living than in securing one. In the early days of the LIC, there was no digital medium to propagate this as aggressively as it is possible today. Yet the LIC soldiers travelled by trains, buses, cars, motorbikes, bicycles, and in certain cases, even by bullock carts, to propagate LICs vision to the farthest corners of the country and they, quite literally, reached all those places. They walked in urban and rural streets, lanes and by-lanes full of dust or mud, and even in the cruellest of weather conditions. They set up shop in places with no roads, no electricity, and no telephones. Challenges were met with innovative solutions some of which have gone on to become industry standards. If it was difficult to set up offices, Indian post offices were used; if it was difficult to conduct a proper medical check-up, policies were customized to do away with that requirement; if only providing a security cover was not incentive enough, clubbed policies with fixed returns were made, and so on. Much before the technology revolution, packaged foods, social media, mobile telephony, automobile industries, retail revolution, and other such B2C industries, the LIC was the first of its kind to cater to the mass consumer. True, there were other operations, like the Indian Railways, India Post and banks, but they catered to the immediate, short-term, needs of the people. The LIC was probably the first institution in India that was providing something for which the need itself had to be created and explained to the prospective customer.