It is a tribute to the Nehruvian vision that the large number of institutions created in the post-independent era have withstood the test of time and many of them have risen to global standards. From oil to steel, dams to highways, from the iconic IITs to the prestigious Institute of design, they have covered almost every segment of economic activity.
Jawaharlal Nehru, the first Prime Minister of India, described them as temples of modern India. Undoubtedly, India’s emergence today as an economic powerhouse rests on the foundation of these remarkable institutions created in the early years of free India. In 1947, India with a population of 345 million, a per capita income of ₹249.6 and literacy rate of 12% was one of the poorest countries in the world. Even amidst such an environment of deprivation and low income, Nehru felt the importance of social security and the need for promoting a culture of insurance. Thus, was born the idea of a state-run Life Insurance Corporation and LIC was established on September 1, 1956.
Initiative for women
LIC has steadily grown in the past six decades and today with over 290 million policy holders and an asset value of ₹38 lakh crore ($520 billion), it ranks as one of the largest insurance companies in the world. Yet, when LIC celebrated its 60th anniversary in 2017, its biggest achievement was hardly mentioned — the fact that LIC created large scale employment for women right from its inception in 1956. Thousands of women became LIC agents in the 1950s and 60s, when job opportunities were scarce. There was no entry barrier in terms of age or fixed time for work. Education requirement was a mere high school pass. Many of these women were housewives who could earn an extra income by selling LIC policies.
This was a period before the arrival of digital technologies and mobile phones. Very few households had landlines and these women had to sell the policies through personal contacts. In fact, most of them did not have any marketing experience, yet LIC was able to create a vast army of motivated agents and inspiring stories emerged from them.
Usha Sangwan, the first woman to become the Managing Director of Life Insurance Corporation of India described this initiative ‘‘as one of the great social experiments of the time, turning raw talents to mature professionals’‘. LIC had an innovative reward scheme for the agents, offering a membership of exclusive clubs based on their performances. These clubs ranged from Manager’s Club, progressively moving higher and higher to reach the top level of Chairman’s club. Many agents climb these stairs fast to reach the top level to earn substantial amounts as commission.
A milestone in the history of India’s insurance industry was the opening of the sector for private participation in the year 2000 and this caused widespread concern that LIC will find the competition tough and could very well be marginalised. Today, there are 24 private players in the life insurance space and many of them have foreign collaborations. Yet, LIC remains a colossus capturing 75% of the life insurance business in the country. Its claim settlement at 99.87% is far above the industry average of 84%.
Ms. Sangwan says, “much of the success has come from the incomparably dedicated twelve lakh agents. Many of them were women who have chosen a career that is essentially suitable for women’s personality and talent. Their success in spreading the value of insurance is unimaginable”.
Policies focused on savings
Innovation has been the single most important factor that underpins LIC’s marketing strategy. In a country of vast poverty and low income, LIC recognised from the beginning that it cannot sell insurance as a risk cover on premature death. It therefore devised policies focussing on savings and the need for children’s education and daughter’s marriage which are fundamentals to family values in India. These policies also ensured that a part of the premium paid was returned at regular intervals before the maturity period, providing liquidity for emergencies. They simultaneously covered risk caused by death. LIC also differed from its new generation competitors in its marketing style and culture. While the private players concentrated on technology-driven marketing, LIC’s approach was significantly people-centric.
Everything about LIC from its logo with its two hands protecting a flame to its focus on India’s rural population has a powerful impact on ordinary lives.
When Prime Minister Narendra Modi launched the highly publicised Pradhan Mantri Jan Dhan Yojana for financial inclusion of over 300 million of the rural population on August 15, 2014, LIC was already there with its policies covering a rural population of 200 million. It also established itself as a unique organisation among India’s public sector enterprises. Yet that uniqueness is hardly recognised in India.
Skill India Mission
In his biography of master filmmaker Satyajit Ray, Andrew Robinson says, “Indians have an incredible capacity of ignoring home-grown success stories until the rest of the world discovers them”. The fact remains that LIC kept a low profile inspite of its many-sided achievements. When the Prime Minister launched the Skill India Mission, many foreign agencies and institutions saw a honeypot there and rushed to put their hands in. Yet no institution was more equipped to take on this massive task other than LIC of India.
Its over a million strong agents provide case studies that touch real India. It is this treasure of real-life situations that can form the basis of a strong skilling mission. The distinguished management guru C.K. Prahlad once observed that these case studies should be a part of the syllabus of management schools of India and must replace cases borrowed from foreign universities. LIC’s training programme with its mix of online education and real-life case studies offer the best model for India’s skill development programmes.
In India, education is more a means to find a job than a process to acquire knowledge. LIC’s relevance comes from its track record of creating vast number of employment opportunities for ordinary Indians, male and female, urban and rural.
LIC is now at a transformational moment. Its listing on the bourses should lift LIC to be a part of the elite corporate community in India. Yet, the nation must not forget the fact that LIC was built on sweat and tears, pain and sacrifice of ordinary Indians. It is these democratic credentials that remain LIC’s most valuable asset.
(C. Sarat Chandran is Senior Fellow, London School of Economics)