PESTLE ANALYSIS POLITICAL FACTORS AFFECTING LIFE INSURANCE CORPORATION:
Within India political ambitions and rise of communalism may well continue for quite some time. Therefore, it expected that the insurance companies might consider offering political risk coverage also. The only area where Indian insurers consider giving cover cover is with regard to customs duty change under under certain conditions. conditions. Certain type of political risk at the international level has serious implications for exporters. The term ‘politi ‘politica call risk’ risk’ has has a wider wider connot connotati ation on than than commo commonly nly unders understoo tood d or assumed. It covers events arising not just from politics, but risks in the course of intern internati ationa onall transa transactio ctions. ns. In this this conne connecti ction on,, it may be noted noted that that export export credit credit insurance has evolved out of uncertainties relating to international trade, particularly due due to proble problems ms arisin arising g out of foreig foreign n legal legal jurisd jurisdict iction ion,, politic political al chang changes es and currency exchange difficulties faced by many developing countries. Insurance business in rural / social sector: LIC is required to undertake some percentage of their insurance business in the rural social sector as specified by the IRDA. They should discharge their obligations to providing life insurance policies to persons residing in the rural sector, workers in the unorganized sector or to economically vulnerable classes of society and other categories of persons as specified by the IRDA. ROLE OF THE GOVERNMENT: As As insur insuran ance ce is an impo import rtan antt serv servic ice e sect sector or,, henc hence e it is high highly ly regu regula late ted d by government. Since 1956 insurance sector was highly regulated by government of India. On March 16, 1999, the Indian cabinet approved on Insurance Regulatory Authority Bills that was designed to liberalize the insurance sector. Two governments in India have fallen over the issue of liberalization of the insurance sector (which was nationalized in 1971). But the government of A.B. Vajpayee as gone ahead to announce the liberalization of this sector announcement was made in November 1998.
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GOVERNMENT’S GOVERNMENT’S OBJECTIVES FOR LIBERALIZATION LIBERALIZATION OF INSURANCE: The main objective of opening of insurance sector to the private insurers is as under: 1. To provide better coverage to the Indian citizens. 2. To augment the flow of long-term financial resources to finance the growth of infrastructure.
THE FOUR AMENDMENTS, MADE IN THE LIFE INSURANCE BILL BY THE LOK SABHA, ARE AS UNDER: 1. The Insura Insurance nce Regulat Regulatory ory and Develop Developmen mentt Authori Authority ty should should give give priority priority to health health insurance. 2. Policyholder’s fund will be invested in the social sector and infrastructure. The percent may be specified by the IRDA and such regulations will apply to all insurers operating in the country. 3. Insurers will be expected to undertake a certain percent of business business in rural areas, and cover workers in the unorganized and informal sectors and economically backward classes. 4. In the event of insurers failing to fulfill the social sector obligations, a fine of Rs. 25 lakh would be imposed the first time. Subsequent failures would result in cancellation of licenses.
INVESTMENT DECISIONS MANDATED BY GOVERNMENT: LIC is required to fulfil certain social commitments as well. As many of the social welfare measures are not just regulated, but have been mandated to hand over a portion of their funds to the state for investment in infrastructure and for social development through government bonds and securities. In India, the pattern was, accordingly, prescribed in great detail by the government. This was not in the form of guidelines, but as a legal obligation under the insurance Act, 1938. PATTERN OF INVESTMENT SPECIFIED FOR LIFE INSURANCE: Type of investment Percentage: (1) Government Securities 25% (2) Government securities or other approved securities not less than 50% (a) Infrastructure and social sector not less than 15% (b) Other govern by exposure norms not exceeding 35%
ECONOMIC ECONOMIC FACTORS CORPORATION: FACTORS AFFECTING LIFE INSURANCE CORPORATION: 2
Intere Interest st rate rate at bank bank and and intere interest st rate rate of P.F variatio variation n very very much much affect affect to life life insu insura ranc nce e indu indust stry ry,, beca becaus use e peop people le are are alwa always ys attra attracte cted d by high higher er retu return rns. s. Theref Therefore ore,, they they do not prefer prefer lower lower return return policy policy.. Unemplo Unemployme yment nt also also affect affects s insurance industry, because the unemployment people will not have earning, so savin saving g also also affect affects s to life life insura insurance nce secto sectorr Life Life insura insurance nce indust industry ry will will direc directly tly affected by Earthquake, Monsoon, and Natural calamity. Because of these events turns into lots of death, so the insurance companies have to pay claim against policy. Infant mortality rate and maternity mortality rate are also affecting to life insurance. Typical Indians want luxurious product against low income, so that they prefer instalment or annuity (EMI), so that they may not have extra saving to invest in life insurance. Increased Economical Activity: Although economic activity has slowed down since 1996, sooner or later there will be an upswing. The increase in the growth rate in various sectors accompanied by the growth in trade in the context of fulfilling of commitments to the WTO will signal a growth in the demand for insurance covers of new types. For example, aviation insurance cover will be on an increasing scale in view of the need for more frequent air travel for men and for transporting materials. This would necessitate necessitate substantial substantial property, liability and personal insurance. insurance. As far as cover against business interruption is concerned, the pace of business and of change today is so fast that even the most careful assessment of exposure time, and the most liberal coverage cannot protect the insured adequate in the event of a loss be on the increase and insurance companies cannot afford to ignore the vast potential in this business. Interest Rates: - During the last years the government has rationalized interest rate create creates s better better busin business ess opport opportuni unitie ties s for the life life insura insurance nce secto sectorr becaus because e the substitute products are graded lower by the customers. On the other hand the value of the holdin holdings gs of the insura insurance nce compa companie nies s will will increa increase. se. Ration Rationali aliza zation tion of the interest rates is still expected, and it is an opportunity for the company.
Low interested rates mean low investment return for reinsurers causing negative impact on their overall net profitability as pricing is to a certain extent sensitive to interest rate fluctuations. fluctuations. The negative impact therefore, lead to higher pricing level for reinsures in order to sustain their profitability. But, in reinsurance market, which is characterized by over capitalization a resulting intense competition. The opportunity for such rate increases practically remains very slim and even non-existent. As a result, reinsurers are under tremendous pressure to cut their operational cost to safeguard profitability. Furthermore, low interest rates discourage and even prevent any outflow of capital from reinsurance business to capital markets, causing current over capitalization in reinsurance market to continue. A positive outcome is that low inflation rates, if sustained for a considerable period, usually bring some relief to reinsures from the resulting lower than forecast claims payment. Also, this can lead stability to reinsures administrative cost. As interest rates fall, bond value rise, and insurers feel richer. On the liability side, rese reserv rves es are are not not expl explic icitl itly y disc discou ount nted ed so lowe lowerr inte intere rest st rate rates s do not not incre increas ase e reserves, lower inflation means lower expected future claims payments which lowers requir required ed reserv reserves. es. This This in turn turn increa increase se surpl surplus, us, again again allowi allowing ng insure insurers rs to feel feel richer. Therefore, low interest rates and low inflation result in higher assets, lower 3
liabilities, hence greater surplus and greater risk capacity resulting in less demand for, and greater greater surplus of reinsurance. Low interest rates and low inflation reduce the ability of reinsures to offset technical losses by using financial products and should, as a consequences, force market competition downloads. However, this will also serve to weaken the balance sheets of insurers and create an increase in the demand for balance sheet protections. Lastly, these conditions move risk from the liability side of the balance sheet to the asset side while actually generating new needs for cover. Inflation rate: - Inflation can also be one of the causes to change the scenario. High inflation for instance, would tend to reduce the insurance business, particularly life, because the real value of the money paid back to the policyholder on maturity of the policy would go down and would, therefore, lose its attraction for the investor. At the most, the insuring public may prefer pure risk plans (terms insurance), which have a low premium outlay. The response to an inflationary situation will depend on what benefit the insured is looking for. In a situation of high inflation, clients would prefer policies where the savings portion is periodically returned while the risk portion is maintain for the duration of the contract. Those who prefer risk protection are likely to opt for long term policies, which may also be preferred because they are likely to be low low premiu premium m polic policie ies. s. A flex flexib ible le syst system em,, unde underr whic which h the the sum sum insu insure red, d, is increased from time to time so that the real value of the cover is maintained, and could give a boost to the market under conditions of high inflation. Fortunately, the rate of inflation in India has been contained to less than 5 percent for a fairly long time and unless it goes out of hand, it is not likely to dampen the market. Customer satisfaction: - Since the customer is the focus of any service industry, every such industry continuously strives for greater variety and better quality of products, improv improveme ement nt in its delive delivery ry system system,, cost cost effec effective tivenes ness, s, easy easy access access,, and and quick quick response to perceived needs – in short qualitatively superior service. Indian life insurance companies already have a sizable line up of the products. The difference betwe between en them them and the foreig foreign n operat operators ors perha perhaps ps lies lies in the servic service e provid provided, ed, because there is still not enough concern on the part of the Indian companies, with customer satisfaction, on time renewals, claims settlements, etc. if high standards have been achieved elsewhere, elsewhere, it is not impossible to attain the same in India too.
The concept of “sales” is now redefined as a long – standing relationship. The relationship does not end with the conclusion of the transaction, but has to be durable and of a long term nature. Hence, improved in performance of the company will not be synonymous with only basic cost reduction or larger business, but the new measure of performance will be set in terms of service to the customer. SOCIO-CULTURAL SOCIO-CULTURA L FACTORS AFFECTING LIFE INSURANCE SOCIO-CULTURAL CORPORATION: The basic social factors that affect the life insurance sector are as under: 4
Population Life style Educational level Level of earning Societal benefits These are the major social factors:Population: Growth in the population is a major factor pushing up the demand. It is also going to exert a special influence on the life insurance market in other ways. Apart from exerting pressure on demand for goods and services, and through that, ill effects of uncontrolled growth of population also could spur the growth of demand. For example, overcrowding in public places of entertainment, public support, or too many vehicles on the road can result in hazards like stampedes and pollution, which require covers and still are not sold on a large scale today. Thus the positive as well as the negative aspects of population growth are going to spur demand. Life style: The peculiar lifestyle of a country or an age also influences the insurance business. Change therein produces different demands for life insurance. For e.g. All over the world, family size is shrinking and the fact that in decades to come, both presents are more frequently likely to work outside the home will mean that there could be a greater possibility of property loss. Similarly, a larger number of vehicles on the roads for people commuting to their jobs or business would mean larger incidence of accidents. This will increase the demand for life insurance i nsurance products.
Of course, there is also the other possibility that wherever it is possible, some people will try to spend a part of their time working at home either because they would like to be with their families or because they find it more convenient. Activities like life insurance and financial services are particularly well suited for such arrangements. With time becoming scarcer for most people who pack in a full day, there is a higher demand for convenience and service. Companies will respond by trying to shorten the the tran transa sact ctio ion n time time for for the the deliv deliver ery y of prod produc ucts ts and and serv servic ices es and and crea creati ting ng distribution systems that can reach clients wherever they are and whenever they want to use them, so as to ensure convenient access to service providers. In recent times, there has been a surge in the high end business of the LIC. For instance, as against 90 policies each worth more than Rs 10 million in 1999-2000, the number was as high as 900 policies in the next year. Or again, the number of jeevan shri policies jumped from 88,000 to a total of 2,33,000 policies in the same period. However, consumers’ behavior cannot be adequately and accurately predicted. The young younger er genera generatio tion n is overw overwhel helmin mingly gly influe influence nced d by consu consumer merism ism.. If this this trend trend 5
continues or increases with increasing income, there will be fewer propensities to save or insure, as a result of which the increasing purchasing poser may not be reflected in the life insurance market. Crumbl Crumbling ing social social value values, s, the deteri deteriora oratin ting g law and order order situat situation ion,, the growin growing g incidence of crime, extortion, abduction, etc., are posing a new category of risks which need to be covered through suitably designed policies. Thus these are how changing changing life style of the citizens citizens is affecting affecting the life insurance insurance industry. Level of education:
India is one of the developing countries: the level of education is very low here. The literacy rate is very poor. More than 50% of the population is still uneducated or more or less not educated. Thus the people are not able to understand the concept of the life insurance. Among the educated people the quality of the education is still a big question mark. Thus the awareness is not created and it has become a big challenge for the industry. Thus one of the factors, which affect the life insurance sector, is low level of education. Societal benefits:
In view of the fact that large sections of India have inadequate life insurance cover, an important social responsibility of the government relates to spreading it far and wide. In addition, the government attempts to extent life insurance with certain social obligations in view in both urban and the rural areas through such means special schemes for the weaker sections, and by tilting of the life insurance companies’ investments in favour of social developments. The social changes emerging in the country provide opportunities for insurers to sell financial services products such as family health care programmed, retirement plans disability insurance, long-term care for senior citizens and different employee benefit plans. It is not the total population but the insurable population which is material for the conclusion of potential. Apart from the usual demographic and other well known factors such as age group, income level, sex-wise distribution, and literacy level, a realistic assessment of this potential has to be based on several other relevant factors. Many invisible factors like religious faiths and social values too need to be considere considered. d. As such, such, there is considera considerable ble difficulty difficulty in accuratel accurately y estimating estimating the poten potentia tiall and and crude crude estima estimates tes can can be mislea misleadin ding. g. The estima estimate te will will also also vary vary according to the criteria used to measure if. In principal, every individual is a potential candidate for life insurance. In reality, financial status limits this potential, not only because of the practical consideration of the insurable worth of a person to the insurer in financial terms, but more so due to 6
the prospect’s capacity to pay life insurance premium after meeting other pressing needs. Again, there are many practical factor affecting ‘insurability” such as old age, past and present illness, and physical and mental m ental impairments. In addition, the cost of reaching out to a very large number of customers, if they are disperse dispersed, d, becomes becomes important. important. In that sense, the cost and profitability profitability of exploiting exploiting the potential, which is otherwise attractive, limit the opportunity. The sheer size of the numbers, there fore is not crucial itself. For For asse assess ssin ing g the the prac practi tica call busi busine ness ss pote potent ntia iall of life life insu insura ranc nce, e, the the eligi eligible ble popul populati ation on needs needs to be “Quali “Qualifie fied” d” in relati relation on to other other factor factors s includ including ing those those mentioned above. Thus, in the opinion of some experts, out of the population in the insurable age group, only the main workers (i.e., excluding marginal workers) with adequate income may be considered as the actual insurable population. The The popu popula latio tion n in the the age age grou group p 15-5 15-55 5 is usua usually lly rega regard rded ed as the the insu insura rabl ble e population, since this can be considered as the main “active” age group (in the sense of working, earning. And supporting others), and beyond this range life risk may be considered to be not worth insuring. There is one opinion, which suggests that in our country the age group 15-55 as the base base is not not totall totally y suitab suitable. le. Due to variou various s factor factors s includ including ing the unempl unemploy oymen mentt problem, real earning starts from around the age of 25 for salaried persons. For others, particularly small entrepreneurs, traders and businessman, the starting age is a little higher. Only in the affluent sector of society life insurance can be taken before personal earning starts. Thus, number wise life insurance below the age of 25 is not so significant (although amount wise it need not be so). On the other hand, people over the age of 50 rarely apply for fresh life insurance, mainly because in India the normal retirement age is around 60 years. Also, a high percentage of the population in the lower income group does not remain “insurable” after the age of 50. Thus, in our country the practical age range for insurable population actually narrows down to 25 to 50.
TECHNOLOGICAL TECHNOLOGICAL FACTORS AFFECTING AFFECTING LIFE INSURANCE INSURANCE CORPORATION: Internet as an intermediary in the current Indian market customer is not aware about the intrinsic value of insurance. He thinks of insurance only in the mount of March as a tax saving measure. The security provide by an insurance cover is rarely thought about. In such a scenario Internet can be an effective medium for educating the consumers about insurance. It serves as a single window for disseminating product, process and procedural information to the consumers. Product development and target marketing through the Internet: 7
With increase in the number of insurance companies there will be a need for market segme segmenta ntatio tion n and subseq subsequen uently tly produc productt design designed ed for each each of them. them. In such such a scen scenar ario io Inte Intern rnet et can can be an effe effect ctive ive chan channe nell for for push pushin ing g prod produc uctt spec specifi ific c information to a particular market segment. Consumer feedback about a particular product as well as suggestions for different types or covers can also be generated through the Internet. Retail marketing is a commonly expected concept and the providers of the retail products and service will try out for larger market and market share. There would be cut through competition and the real benefit would be to the customers in terms of bette betterr produc products, ts, distrib distributio ution, n, pricin pricing, g, post post transa transacti ction on servic service e and techno technolog logy. y. Technology will perhaps be the single largest driver of the retail thrust. The entire strategy will evolve around the absolute ability of the organization. The customer will demand for greater convenience of excess to the product/ service and all at low cost of delive delivery. ry. Theref Therefore ore the use of techno technolog logy y and specif specifica ically lly the Intern Internet et with with realigned strategies would be one of the key factors to success. Constraints of locations, timing and accessibility would not be a hurdle for either customers or businesses.
Maintaining the database: - The most important factor that is affecting the insurance industry is the marinating the database of the customers. The insurance industry having a huge list of the customers. In order to maintain it in manual format it is really the work of stupidity. With the change in time the computers has taken the work of this things. Thus with the development of the technology it has becoming possible to maintain such huge database very easily. A person can switch over to the computer and get the details of the customer very easily. Thus maintaining the database has really become easy due to the development in technology.
E-business insurance in India: - The Internet has played a vital role in transforming the business of the 21st century. Computers are now being used extensively for creating a storing data, information with the help of complex and sophisticated technological tools tools in every every kind kind of busine business. ss. This This change change having having been been widely widely accep accepted ted,, the advan advantag tages es are numer numerous ous such such as fast fast proce processi ssing ng improv improved ed.. Effic Efficien iency, cy, cost cost reduction among several other benefits. However, with every positive change, there is an evil attached and technology is no exception. In technical is an evil attached and technology technology is no exception. exception. In technical technical terms, increased increased sophisticatio sophistications ns of technology brings with it, an increased factor of risk involved. The risk can be of various attributes, for example, the risk of data being lost due to a virus attack, the theft of important and confidential information and so on, which ultimately results in losses for the business entity. With this change in the business process, insurers
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have to devise new methods for assessing, underwriting and servicing claims for the so-called e-business insurance. Insurers face challenges to ascertain risks, in order to quantify them because such risks don’t have any past data, which makes it all the more difficult for actuaries. Moreover, what financial impact a particular risk can have is very difficult to be deter determin mined. ed. For For example example,, if some some hacker hackers s obtain obtain credit credit card card inform informati ation on of few customers, it’s a loss for banks, their credibility, customers and also their brand. Will an insurance policy cover all of this is million dollars question hence; the difficulty is to design a cover first of all, which really answers the needs of customers. But even after designing and pricing such products with difficulty, the challenge to underwrite and handle claims for such policies remains existent.
Impact on distribution channels: - Distribution channels are the most important part of the insurance industry. The scenario is continuously changing in this industry. In futu future re the the cust custom omer ers s are are expe expect cted ed to be more more tech techno nolo logy gy – orie orient nted ed,, bette better r informed, more knowledgeable and more demanding. The insurers will have to offer all types of channel to customer and it is the customer who will have the right to choos choose e the channe channell suitin suiting g him/ him/ her. her. Dual Dual income income familie families s with with young young childr children, en, sing single les s with with long long work workin ing g days days and and flex flexii-ti time mers rs all all dema demand nd high high leve levell of sophistication and ease when it comes to service. Hence the companies have to be very careful and cautious in catering to the needs of these customers who provides a good amount of business to the insurers.
Than Thanks ks to the the tech techno nolo logi gica call adva advanc ncem emen entt and and incr increa ease sed d de regu regula latio tion n and and sophistication, the carriers and producers can now reach the customers in different ways as has been proved in the US market and other developed nations the web is extensively used for the access of information but when it comes to the purchase of policy, the offline mode is preferred.
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KEY STRATEGY TO SUCCESS... In order to succeed in any of the business it is very necessary to make and follow the strategies. Strategies are very important for any of the business. Following are the general strategies, which are recommended: r ecommended: One approach is to focus upon product quality, which will instil confidence in minds of the customers that they would be offered best product from out of the several available products.
customers need, would involv involvee a heavy investment investment in The other approach , is to focus on the customers developing relationships with policyholders. Under this approach, one can expect a range of products and services designed to give the customer what he specially desires. The third approach is of greater market segmentation under which the population should be divided into several several homog homogene eneous ous groups groups and produc product, t, and service servicess would would be targeted targeted towards towards such such selecte selected d market markets. s. The effort would would be to “tie” “tie” clients clients to their their compan companyy- by custom customized ized combination of coverage, easy payment plan, risk management advice, and convenient quick claim handling.
company ny should should design design produc products ts that that will will make make Marginal Marginal Different Different Product: Product:The compa comparison-shopping difficult. It could offer a wide variety of covers with marginal differences and varying prices, whose terms and conditions are difficult to compare for consumers who may not have sufficient experience in purchasing insurance and who would find it difficult to make a clear choice. If the consumer is offered a unique policy, he will have no alternative coverage with which can be compared. Given the combi combinat nation ion policy policy,, which which can can offer offer protec protectio tion n agains againstt a number number of losse losses, s, the consumer will find comparison even more difficult. diffi cult. Design Designing ing New Str Strat ategi egies: es:It canno nnot be sati satisf sfie ied d with with con concent centra rati ting ng on the the conso consolida lidatio tion n of their their exist existing ing marke markets, ts, but have have to achiev achieve e furthe furtherr growth growth and penetratio penetration. n. It must, therefore, therefore, concentra concentrating ting on strengthen strengthening ing existing existing points points of servi service, ce, design designing ing new new channe channell of distrib distributio ution, n, direc directt conta contact ct with with their their ultima ultimate te custo customer mers, s, and front front line line employ employee ee empowe empowerme rment. nt. It also also needs needs to refres refresh h its marketing set up. It should give priority to tapping the market, left unexploited.
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LEGAL FACTORS AFFECTING LIFE INSURANCE CORPORATION: CORPORATION: Capital requirement: The paid up equity of an insurance company applying for registration to carry on life insurance business should be Rs 100 Crores. Renewal of registration: -
An insurer, who has been granted a certificate of registration, should have the regi regist stra rati tion on rene renewe wed d annu annual ally ly with with each each year year endi ending ng on Marc March h 31 afte afterr the the comme mmence ncement ment of the the IRDA IRDA Act. ct. The appli pplic catio tion for for rene renewa wall shoul hould d be accompanied by a fee as determined by IRDA regulations, not exceeding one forth of one percent of the total gross premium income in India in the preceding year or Rs 5 Crores or whichever is less, but not less than Rs 50000 for each class of business as per Section 3-A. Requirements Requirements as to Capital: -
The minimum paid up equity capital, excluding required deposits with the RBI and any preliminary expenses in the formation of the country, requirement of an insurer would be Rs 100 crore to carry on life insurance business and Rs 200 crore to exclusively do reinsurance business as per Section 6.
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KEY STRATEGY TO SUCCESS ... In order to succeed in any of the business it is very necessary to make and follow the strategies. Strategies are very important for any of the business. Following are the general strategies, which are recommended: r ecommended: One approach is to focus upon product quality, which will instil confidence in minds of the customers that they would be offered best product from out of the several available products.
customers need, would involv involvee a heavy investment investment in The other approach , is to focus on the customers developing relationships with policyholders. Under this approach, one can expect a range of products and services designed to give the customer what he specially desires. The third approach is of greater market segmentation under which the population should be divided into several several homog homogene eneous ous groups groups and produc product, t, and service servicess would would be targeted targeted towards towards such such selecte selected d market markets. s. The effort would would be to “tie” “tie” clients clients to their their compan companyy- by custom customized ized combination of coverage, easy payment plan, risk management advice, and convenient quick claim handling.
company ny should should design design produc products ts that that will will make make Marginal Marginal Different Different Product: Product:The compa comparison-shopping difficult. It could offer a wide variety of covers with marginal differences and varying prices, whose terms and conditions are difficult to compare for consumers who may not have sufficient experience in purchasing insurance and who would find it difficult to make a clear choice. If the consumer is offered a unique policy, he will have no alternative coverage with which can be compared. Given the combi combinat nation ion policy policy,, which which can can offer offer protec protectio tion n agains againstt a number number of losse losses, s, the consumer will find comparison even more difficult. diffi cult. Design Designing ing New Str Strat ategi egies: es:It canno nnot be sati satisf sfie ied d with with con concent centra rati ting ng on the the conso consolida lidatio tion n of their their exist existing ing marke markets, ts, but have have to achiev achieve e furthe furtherr growth growth and penetratio penetration. n. It must, therefore, therefore, concentra concentrating ting on strengthen strengthening ing existing existing points points of servi service, ce, design designing ing new new channe channell of distrib distributio ution, n, direc directt conta contact ct with with their their ultima ultimate te custo customer mers, s, and front front line line employ employee ee empowe empowerme rment. nt. It also also needs needs to refres refresh h its marketing set up. It should give priority to tapping the market, left unexploited. Move towards Rural Market :
It is one of the most important suggestions; rural market is still uncovered by this sector. LIC should move towards the rural market. Insurance penetration can be achi achiev eved ed by tapp tappin ing g the the negl neglec ecte ted d Rura Rurall Mark Market ets. s. Ther There e is vast vast pote potent ntia iall for for insurance growth in the rural sector. A recent survey by foundation for research, training and Education in insurance (FORTE) suggests that insurance can be sold profitably to rural communities in India. The survey reveals that
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There is distinct hierarchy of needs in rural areas.
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Rural people find security in groups.
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The saving habit is very strong in rural areas.
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Average saving across the most important socio-economic strata comes to 30-35% of annual income or Rs. 13,500 annually, which is significant.
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There is high level of awareness about life insurance and fairly high-level about 36% already own life insurance.
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51% of these who own life insurance would like to buy more.
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Amongst the savers, a significant percentage does not save through formal financial modes or institutions.
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Rural buyers of insurance prefer a half yearly mode of premium payment to coincide with the time of the harvest.
MOTIVATION OF SALES FORCE:
LIC should constantly be involved in the process of motivating the sales force in the turbulent times. The following strategies are recommended: •
Building relationship is real perk. One should be sure to build in networking times for agents during the program-in addition to entertainment and education.
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Web should be frequently used for creating gift ideas.
•
•
Hold sales contests in the fourth quarter. It is the best times to motivate agents who want to qualify for a trip. Consider a contrast within the contest ‘for- top-tier producers; additional rewards for additional milestones that are met, such as air and guest room upgrades.
Use of Internet:
The present scenario is such that the products sold with the help of Internet. The technological advancement is such that force the companies to take such steps. Still the full-fledged use of Internet is not done in our country. As suggestion earlier the Internet based life insurance will help the companies to reduce the transaction cost and time. At the time it can improve the quality of service to its customers, which is the mission mission of the company. company. Company Company should should concentrate concentrate on the quality quality of the premium received this will help the companies to reduce its underwriting losses. Appointing of proper and efficient agent as well as effective direct marketing could do this. this. By way of traini training ng the excessi excessive ve staff, staff, which is a major major problem problem in the company, the company could reduce management expense to a large extent. 13
CONCLUSION
PEST Analysis is a useful tool for understanding the ‘big picture’ of the environment in which you are operating, and for thinking about the opportunities and threats that lie within it. By understanding your environment, you can take advantage of the opportunities and minimize the threats.PEST is a mnemonic standing for Political, Economic, Social and Technological. These headings are used firstly to brainstorm the characteristics of a country or region and, from this, draw conclusions as to the significant forces of change operating within it. This provides the context within which more m ore detailed planning can take place, so that you can take full advantage of the t he opportunities that present themselves.
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BIBLIOGRAPHY
Web site: -
www.irdaindia.org www.licindia.com www.incometaxindia.gov.in
Newspaper: -
Economic times
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POLITICAL FACTORS AFFECTING LIFE INSURANCE CORPORATION CORPORATION ROLE OF THE GOVERNMENT: GOVERNMENT’S OBJECTIVES FOR LIBERALIZATION LIBERALIZATI ON OF LIBERALIZATION OF INSURANCE: INVESTMENT DECISIONS MANDATED BY GOVERNMENT: TECHNOLOGICAL FACTORS AFFECTING LIFE INSURANCE CORPORATION: LEGAL FACTORS AFFECTING LIFE INSURANCE CORPORATION: KEY STRATEGY TO SUCCESS... POLITICAL FACTORS AFFECTING LIFE INSURANCE CORPORATION: CORPORATION: KEY STRATEGY TO SUCCESS... OTIVATION OTIVATION OF SALES FORCE: CONCLUSION CONCLUSION BIBLIOGRAPHY
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