Life Insurance Industry in India

I am more than an observer of Indian Life Insurance Industry (it has been 16 years now). It all started when my dad sent a copy of Malhotra committee's recommendations in 1993-94. I was a clerk (customer executive in today's terms) wondering what would happen to the scores of Indian policy holders. Employees unions in the public sector insurance companies were opposing the implementation of Malhotra committee recommendations.

• What were the problems quoted against LIC at a macro level? The committee blamed the industry players for not spreading insurance to the nook-and-corner of this vast country. Percapita Insurance coverage was low. Total premium in the life industry was less than 2% of GDP for decades. Policy holders were taken for granted and extended poor service when they visited offices of the public sector companies.
• What were the good things that went un-noticed? First, Its claim settlement ratio was always more than 95% and one of the best in the world. LIC employees were chansing claimants for submission of pending requirements. Second, For its size, it was corrpution free (still is!). Third, Employees, though frustrated, were intelligent. Fourth, it had a large rural presence.

Now after 16 years, what is the situation? Private Life insurance industry is 9 years old. There are 18 private players trying to reach to the same market segment (High networth Individuals). Many of the companies were clueless when the equity market was tumbling down. All of them were selling same type of products (unit linked). During pre-liberalization days, we used to talk about Insurance as a tax saving instrument. But mind it, LIC had / has plethora of products in its lineup. In the post-liberalized era, Insurance sales folks talk about Investment options.

Already there is a talk of consolidation in the industry (read as Mergers and Acquisitions). An interesting thought could be "Will LIC look at Acquisition as one of its choices to gain its lost share of HNI customers?"

Now the private players have reached a stage where they have to take stock of the situation and change their strategy. I would like to analyze the following in my blogs:

• What needs to be done?
• Who should do it?
• How it may be approached?