INTRODUCTION TO THE STUDY

1.1 Intro
The Indian Life Assurance Companies Act, 1912 was the first statutory
measure to regulate the life insurance business. In 1928, the Indian Insurance
Companies Act was enacted to enable the Government to collect statistical
information about both life and non-life business transacted in India by
Indian and foreign insurers, including provident insurance societies. In 1938,
with a view to protecting the interest of policyholders, the earlier legislations
were consolidated and amended by the Insurance Act, 1938 with
comprehensive provisions to regulate insurers.

The Insurance Act, 1938 was the first legislation governing not only life
insurance but also non-life insurance to regulate the insurance industry. The
demand for the nationalization of the life insurance industry gathered
momentum when a bill to amend the Life Insurance Act, 1938 was
introduced in the Legislative Assembly in 1944. However, life insurance in
India was nationalized much later on January 19, 1956. The Parliament of
India passed the Life Insurance Corporation Act on June 19, 1956, and the
Life Insurance Corporation of India (LIC) was created on September 1, 1956
with the objective of spreading life insurance, in particular to rural areas and
to socially and economically disadvantaged classes with a view to reach all
insurable persons in the country, providing them with adequate financial
coverage against death at a reasonable cost1.

Today LIC functions with 2048 fully computerized branch offices, 113
divisional offices, 8 zonal offices, 992 satellite offices and the corporate
office. LIC also has a network of around 13,37,064 individual agents, 242
Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on
31.3.2011) for soliciting life insurance business from the public.

1.Insurance Regulatory Development Authority of India (IRDA) , Hand

Book of Insurance ,2022-23 Mumbai p60

1
 The slogan of LIC is "Zindagi ke saath bhi, Zind Agi ke baad bhi”. Its main
asset is its staff strength of 1.15 lakh employees and including about 21,000
class-I officers2. Meanwhile, LIC is also planning to expand its overseas
presence by setting up a subsidiary in Singapore. LIC already has presence
in countries like the UK, Mauritius, Kenya, Nepal and Sri Lanka. In the
Middle East, LIC is present in Saudi Arabia, Kuwait, Dubai, Abu Dhabi,
Oman and Qatar business in overseas and has regional offices in Fuji,
Mauritius and the UK.

LIC’s Wide Area Network covers 109 divisional 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 Centre
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 policyholders3. 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.

1.2 INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI

Governor R.N. Malhotra- was formed to evaluate the Indian insurance
industry and recommend its future direction. The Malhotra committee was
set up with the objective of complementing the reforms initiated in the
financial sector. The reforms were aimed at creating a more efficient and
competitive financial system suitable for the requirements of the economy
keeping in mind the structural changes currently underway and recognizing

2.Insurance Regulatory Development Authority of India (IRDA) , Hand Book of

Insurance ,2021-22 Mumbai p60

3.Ibid

2
 that insurance is an important part of the overall financial system where it
was necessary to address the need for similar reforms.

In 1994, the committee submitted the report and some of the key
recommendations included4:

I) STRUCTURE

• Government stake in the insurance Companies to be brought down to

50%.

• Government should take over the holdings of GIC and its subsidiaries so
that these subsidiaries can act as independent corporations All the
insurance companies should be given greater freedom to operate.

II) COMPETITION

Private Companies with a minimum paid up capital of Rs.1bn should be

allowed to enter the sector.

• No Company should deal in both Life and General Insurance through a

single entity.

• Foreign companies may be allowed to enter the industry in collaboration

with the domestic companies.

• Postal Life Insurance should be allowed to operate in the rural market.

Only one State Level Life Insurance Company should be allowed to

operate in each state.

III)REGULATORY BODY

• The Insurance Act should be changed.

• An Insurance Regulatory body should be set up.

• Controller of Insurance- a part of the Finance Ministry- should be made

independent.

III.INVESTMENTS

• Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.

3
4.Life Insurance corporation of India (LIC) , Action plans, Mumbai ,2020-21p112

• GIC and its subsidiaries are not to hold more than 5% in any company
(there current holdings to be brought down to this level over a period of
time).

IV.CUSTOMER SERVICE

LIC should pay interest on delays in payments beyond 30 days.

Insurance companies must be encouraged to set up unit linked pension plans.

Computerization of operations and updating of technology to be carried out in

the insurance industry.

The committee emphasized that in order to improve the customer services and
increase the coverage of insurance policies, industry should be opened up to
competition. But at the same time, the committee felt the need to exercise
caution as any failure on the part of new players could ruin the public confidence
in the industry. Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.100 crores.

Reforms in the Insurance sector were initiated with the passage of the IRDA
Bill in Parliament in December 1999. The IRDA since its incorporation as a
statutory body in April 2000 has fastidiously stuck to its schedule of framing
regulations and registering the private sector insurance companies. Since being
set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations5. The other decision taken simultaneously to
provide the supporting systems to the insurance sector and in particular the life
insurance companies was the launch of the IRDA online service for issue and
renewal of licenses to agents. The approval of institutions for imparting training
to agents has also ensured that the insurance companies would have a trained
workforce of insurance agents in place to sell their products.

1.3 Concept

Today there are 23 life insurance companies operating in the country.

List of Life Insurers

Apart from Life Insurance Corporation, the public sector life insurer, there
4
 are 23 other private sector life insurers, most of them joint ventures between
Indian groups and global insurance giants.

Life Insurer in Public Sector

1. Life Insurance Corporation of India

Life Insurers in Private Sector

Insurance Industry in the year 2000-2021 had 23 new entrants, namely:

1.4 Charts

The life Insurance Corporation of India has a five-tier organizational

structure as shown in following chart:

CENTRAL OFFICE (1)

ZONAL OFFICES (8)

DIVISIONAL OFFICES (113)

BRANCH OFFICES (2048)

SATTELITE OFFICES (1169)

The board of the corporation is constituted by the central Government after every
two years and the numbers of the members of the Board does not exceed 16.Out
of these members one is appointed as Chairman and three are appointed as
managing Directors of the Board The chairman acts as Chief Executives of LIC.
The Chairman and Managing Directors are full time employees of LIC and they
constitute the highest decision making body known as Board of Directors of the
Corporation. The corporation constitutes various committees under the life
insurance act viz., Investment Committee, Executive Committee and Advisory
Committee, Development Advisory Committee and Budget Advisory
Committee). The Chairman of the Corporation is the chairman of all these
committees6.

5
5.Life Insurance corporation of India (LIC) , Action plans, Mumbai ,2021-22 p130

The Central office of LIC is in Mumbai which is known as financial capital of

India. The Central Office confines itself mainly to giving broad policy directions
and decisions. It has direct executives’ responsibility over a limited field.
Investment policy and investing of funds in accordance with that policy is the
soe responsibility of the central office. The formulation of underwriting
standards, setting up of premium rates and underwriting of large proposal which
are beyond the limits of the operating divisional offices particularly policy for
large sum assured and policies on lives of sub-standard nature are also attended
by the central office. Submission of statutory returns to the Government,
standardization procedure, forms, drawing up of prospectus, premium rates,
policy conditions and making arrangements with regards to reinsurance are other
responsibilities looked after by the central office. Inspection and internal
auditing of various offices is also done by central office. In general, policy
decisions are made by the Chairman of the Corporation with the help of the
Executives Committee and various other committees.

For the execution of the policies and decisions, LIC has divided the whole
country in different zones. Each Zonal office is responsible for LIC’s business in
its own geographical limits.

Initially, five zonal offices were opened at Mumbai (western), Delhi (Northern),

Kanpur (Central), Calcutta (Eastern) and Madras (Southern) as per the

requirements of the Life Insurance Act. However, later three more Zonal Offices,
namely South- Central at Hyderabad, North- Central at Bhopal and East-Central
at Patna were opened thus increasing the total number of Zonal Offices to eight.

The Zonal Offices are working under the supervision of Zonal managers, who
are charged with the responsibility of execution of Central office’s plans and
policies, supervising and directing the affairs and business of Zonal offices and
providing feedback to the central Office7.

6. Insurance Regulatory Development Authority of India (IRDA) , Hand Book of

6
 Insurance ,2022-23 Mumbai p110

The zones are further divided into Divisional offices. Each Zonal Office has
some Divisional Offices under it. Each Divisional Office is headed by a
Divisional manager who is assisted by Manager in-charge of individual
department. The role of Divisional office has been restricted to planning and
controlling the various activities in the divisional area.

Operational unit of the Corporation is the Branch Office which is a centre of

profit and growth. It is the branch Office which is responsible in its area of
operation for sales and services. Branches are the profit centres of the
corporation being guided and controlled by the Divisional offices. At present
there was 2048 Branch Offices working in whole of India8.

With a vision of providing easy access to its policyholders, LIC has started
establishing Satellite offices during 2005-06. These satellite offices which are
attached to respective parent branches are basically an extension of large parent
branches for services to policyholders. Processing of new proposals and
collection of renewal premium are main functions of these offices. Each satellite
office is

manned by 2-3 people, all employees of the company, depending on the need of
that particular area. These offices are launched mostly in small towns adjoining

the rural areas.

The Economic Times Brand Equity Survey 2010 rated LIC as the No. 4 Service
Brand of the Country. Though in the year 2010 is ranked at 4, the organization is
consistently among the top rated service company of the India. From the year
2006, LIC is continuously winning the Readers' Digest Trusted brand award .
According to The Brand Trust Report 2011, LIC is the 8th most trusted brand of
India.

7. Bank of India (RBI), Report on Currency and Finance, Mumbai, p36

8.Insurence Regulatory Development Authority of India (IRDA), Annual Reports,

7
Mumbai 2022-23 p72.

15. GRIEVANCE REDRESSAL MACHINERY

In a vast organization like LIC, catering to the various needs and aspirations of
millions of policyholders, grievances of customers do arise occasionally. In order
to redress these grievances LIC has established an elaborate Grievance Redressal
Mechanism9 and the details are as under:

Grievance Redressal Officers have been designated at all levels of the

Organization:

At the Branch level : The Sr. /Branch Manager

At the Divisional level : Manager, CRM

At the Zonal level : The Regional Manager CRM

At the Central level : The Executive Director CRM/Chief (CRM)

For P&GS policies

At the Zonal level : The Regional Manager (Pension and Group

Schemes) in case of P & GS Policyholders can personally contact these

designated Officials and seek redressal of their grievances. The respective

Grievance redressal Officers are available at their Offices for personal
interviews with the customers on all Mondays between 2.30 p.m. to 4.30
p.m., except on holidays without prior appointment. Customers can meet the
Grievance Redressal Officers on other days also with prior appointment. The
names of the Grievance Redressal Officers are displayed in the respective
Offices and are periodically published in the local newspapers.

8
9. Bank of India (RBI), Report on Currency and Finance, Mumbai, 2021-2022, 50

Even in these cases, an opportunity is given to the claimant to make a

representation for consideration by the Review Committees of the Zonal
office and the Central Office. As a result of such review, depending on the
merits of each case, appropriate decisions are taken. The Claims Review
Committees of the Central and Zonal Offices have among their Members, a
retired High Court/District Court Judge. Policyholder Councils and Zonal
Advisory Boards

In the entire 109 Divisional Centre’s, Policyholders' Councils have been

established. Three policyholders of the area represent the interest of the
policyholders and interact with the Divisional Management on consumer
concerns. Similarly, at all the seven Zonal Centre’s, Zonal Advisory Boards
are functioning.

III) Citizens' Charter

LIC has adopted a Citizens Charter through which it reiterates its

commitments to the customers and the standards for general procedures, the
standards for policy servicing, the standards for easy access to information
for customers and the standards for fairness in dealing with the customers
have been laid down.

1.5 Growth of LIC

LIC had five zonal offices, 33 divisional offices, 212 branch offices and a
corporate office in the year 1956. Subsequent to its nationalisation, re-
organization of LIC took place and large numbers of new branch offices
were opened in order to expand the operations and place a branch office at
each district headquarter. From about Rs. 2 billion of NBP in 1957, the
corporation crossed Rs. 10 billion in NBP in the Fiscal Year 1969-70, and in
another 10 years it crossed the Rs. 20 billion NBP mark10.
9
 Today, LIC continues to be the largest life insurer even in the liberalized
scenario of Indian insurance being opened up to private players. LIC is the
largest life insurer in India in terms of GWP, NBP, number of individual
policies issued and number of group policies issued for Fiscal 2021.

LIC had 286 million in force policies under Individual Business (within
India) as at March 31, 2021, which is greater than the 4th largest country
population-wise as of CY 2020. Further, as at September 30, 2021, LIC had
a market share of 64.49% in NBP (individual and group) as compared to
next largest competitor who had a market share of 7.79% in NBP (individual
and group). As at September 30, 2021 LIC operates through 8 zonal offices,
113 divisional offices and more than 4,700 branch/satellite and mini offices.
NBP for LIC in Fiscal 2021 was over Rs. 1.8 trillion, representing 66% of
the aggregate industry NBP. The Indian life insurance industry had only one
player – LIC – during CY 1956 to CY 2000. However, post- privatisation in
CY 2000, private players started entering the industry and by 2000-01, four
private players had setup operations. HDFC Standard Life was the first
private company to enter the industry in 2000-01, followed by ICICI
Prudential Life, Max Life Insurance and Aditya Birla Sunlife Insurance in
the same year. Only four new private players entered between 2002 to 2005,
post which there was a surge again, with eight players setting up businesses
till CY 2009. Edelweiss Tokio Life Insurance was the last entrant in the
industry in 2011. Out of the 23 private players registered with IRDAI as on
March 31, 2021, 20 players have joint ventures (JVs) with foreign partners.
Also, in September 2021, HDFC Life announced that it will acquire Exide
Life Insurance.

10.Insurence Regulatory Development Authority of India (IRDA), Annual Reports,

Mumbai 2022-23 p100
10
 Chart 1.1:Trend in Total Premium for Overall Industry

Rs billion Rebound Accelerated growth phase

Growth stagnation phase CAGR (FY16 to FY20)
8,000 High growth
CAGR CAGR Total premium: 12%
phase CAGR
Total premium: Total NBP: 17%
7,000 Total premium: 17%
3% premium: 6,287
NBP: 14% 5,729
6,000 NBP: -2% 8%
5,081
NBP: 8% 4,588
5,000 4,185
3,669
4,000 3,143 3,281
2,655 2,916 2,871 2,872 2,589 2,783
3,000
2,014 2,218 2,147
1,561 1,750 1,939
2,000 1,387
930 871 1,093 1,258 1,142 1,070 1,196 1,131
754
1,000

-
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Total premium NBP

Source: IRDAI Annual Report, company report, CRISIL Research

Robust Growth of Life Insurance Industry During Fiscals 2007 to 2011

Total premium and NBP witnessed strong CAGR of 17% and 14%,
respectively, between Fiscals 2007 and 2011, owing to the aggressive foray
by private players. Growth for private players was driven by ULIP sales
amid a buoyant capital market. Share of private players in total premium
increased from 18% in Fiscal 2007 to 30% in Fiscal 2011. To note, market
share and growth rates are as on end fiscal date unless specified, e.g., market
share in Fiscal 2007 denotes market share as on March 31, 2007. Further,
17% CAGR growth for total premium between Fiscals 2007 and 2011
denotes growth between March 31, 2007 and March 31, 2011.
India is the Fifth Largest Insurance Market in Asia and Has Exhibited

11
Consistent Growth in Insurance Premiums
Based on life insurance premium, India is the tenth largest life insurance
market in the world and the fifth largest in Asia, as per Swiss Re’s sigma No
3/2021 report for July 2021. The size of the Indian life insurance industry
was Rs. 6.2 trillion based on total premium in Fiscal 2021, up from Rs. 5.7
trillion in Fiscal 2020. The industry’s total premium has grown at 11%
CAGR in the last 5 years ending in Fiscal 2021. New business premiums
(NBP) grew at 15% CAGR during Fiscals 2016 to 2021, to approximately
Rs. 2.78 trillion. In fact, in Fiscal 2021 – a year impacted by the COVID- 19
pandemic, the NBP of the industry rose by 7.5%. Within the NBP, group
business premium grew at approximately 15.4% CAGR from Fiscals 2016 to
2021, whereas individual premium rose approximately 14% CAGR during
the same period.
Life insurance products can be classified on the basis of products and
customer segments. Historically, life insurance products were savings
oriented. Non-linked products are traditional products with a protection and
savings element built in or pure-protection products. Non-linked savings
products can be further segregated into participating products and non-
participating products. Participating products have variable returns, as these
partake in the profits of the participating business of the company. Linked
products’ returns, on the other hand, are tied to the performance of debt and
equity markets and are also savings- cum-protection products. For Fiscal
2021, non-linked products accounted for 86% of the total premiums. The
share of non-linked products was lower for private players, constituting 57%
of the total premium for Fiscal 2021.Life insurance companies offer
individual and group policies. Premium payments can be made in one go
(called single premium) or on a regular basis. Individual business accounted
73% of total premium and 41% of total new business premium for Fiscal
202111.

Chart 1.2:Types of life insurance products, by product and customer types

12
 * Classification based on new business premium (premium acquired from new
policies for a particular year) in Fiscal 2021
** Estimated on the basis of player-wise analysis
Source: Insurance Regulatory and Development Authority of India (IRDAI),
CRISIL Research
Classification of Insurance Products

Life insurance products meet a range of insurance needs such as protection,

savings, market linked savings, pension and health related benefits for
individuals as well as groups. Insurance companies must design products to
efficiently fulfil these requirements12.

11.Insurence Regulatory Development Authority of India (IRDA), Annual Reports,

Mumbai 2022-23 p150

13
 The following are the major categories of insurance products:

Participating products

For participating products, an insurer invests the premiums received in a

pooled participating fund to pay for certain fixed benefits as well as to share
the surplus in the form of bonus as a discretionary benefit. The distribution
of regular bonus can be in the form of a reversionary bonus. The
reversionary bonus is changeable from year to year for future years during
the tenure of the policy as experience emerges from the life cycle of the
policy. However, there are other forms of bonus such as terminal bonus and
loyalty additions. Policies under participating products provide a minimum
guaranteed return that is payable on death or maturity plus additional
discretionary benefit in the form of bonuses. Bonuses, once declared, vest in
a policy and become a guarantee.
Non-participating products
Non-participating products provide a fixed amount of benefits on contingent
event(s) covered under the product. The policyholders do not participate in
profits or losses of the underlying business and therefore the product is also
known as without profit product. This category includes pure term products
(covering death benefit only), savings product (providing survival benefits in
addition to death cover), and immediate or deferred annuity (providing series
of payments).
Unit-linked insurance products (ULIP)
ULIP is a long-term investment product. The returns under ULIP are directly
linked to changes in the underlying investment, so the investment risk and
reward is directly attributable to the policyholder. Therefore, unlike non-
linked products holders, a ULIP holder can monitor the performance of the

12. Life Insurance corporation of India (LIC) , Action plans, Mumbai ,2021-22 p150

14
policy through the net asset value (NAV) released by the companies
regularly. The policyholders have the flexibility to choose the proportion of
equity and debt in their investment portfolio based on their risk profile, and
switch between different asset classes available under the product, based on
assessment of market conditions and risk appetite. Customers can also
choose the level of life cover allowed within a product.
Health insurance products
Life Insurers are allowed to sell defined benefit health insurance products to
cover health related risks. Health insurance products may cover a specific
disease such as cancer or a combination of diseases and the benefits are
payable in case of hospitalization or undergoing surgeries.
Group protection products
On the group platform, the product may be protection or savings under
linked and non-linked category. Group term plans provide benefits of life
insurance coverage to a group of individuals and the sum assured is paid to
the member’s nominee upon the death of the member. The policies are
offered to a group such as employer-employee, non-employer- employee,
banks, professional and microfinance institutions. Typically, group products
have a one-year term and need to be renewed upon expiry. However, the
product can be under regular premium and may be allowed to be accepted in
lump sum. There can also be other variety of products such as coverage
against loans, such as car loan, home loans, and education loans. The
creditors’ protection products are typically long term and aligned to the
tenure of the loan, and the death cover is aligned to the outstanding loan
cover over the term of the loan.
Other group products
 Group gratuity plans help the employer reduce business cost and
take care of employer’s long-term gratuity expenses by earning a
return on the employer’s money.
 Group leave encashment schemes help the employer manage
future leave encashment liability in case of an employee’s death,
retirement or resignation/termination, in addition to providing
security.

15
 Group superannuation products help employees save for retirement and
provide them with a corpus at the time of retirement.

Riders
Riders are add-on covers to the base policy at an additional cost to facilitate
additional benefits linked to accident, critical illness, premium waiver
benefit etc. The rider benefits and eligibility criterion for a customer are
subject to certain regulatory terms and conditions.

Total Premium has Grown at an 11% CAGR in the Last Five Years Ending
FISCAL YEAR 21

Life insurance premium has grown at an 11% CAGR from Fiscals 2016 to
2021. The double-digit growth in premium can be attributed to expansion in
the distribution network, introduction of different government schemes and
financial inclusion drives. These factors have increased awareness about the
need for insurance and propelled industry growth.

LIC holds a 64% share by total life insurance premium and grew at 9%
CAGR from Fiscals 2016 to 2021. Private insurers grew at a 18% CAGR
growth during the same period.

Chart 1:3: Strong growth in total premium for the life insurance industry

16
Source: IRDAI Annual report, company reports, CRISIL Research

New business premium has grown at 15% CAGR in the past five years with
LIC and private insurers growing at 14% and 18% CAGR, respectively. In
Fiscal 2021, amid the COVID-19 pandemic, NBP grew approximately 7%
reflecting the impact of the economic slowdown. During the first six months
of Fiscal 2022, NBP growth remained low for the industry with y-o-y
growth of 6%.

Chart:1.4: Trends in new business premium growth

17
Source: LI Council New Business Performance report, CRISIL Research

LIC continues to account for around two-thirds of the industry’s premium

LIC accounts for approximately 2/3rd market share in terms of both GWP and
NBP in the life insurance industry for Fiscal 2021, driven by its individual agent
network especially in rural areas, wide range of products and a sense of trust
created by brand LIC among individuals. Private sector players, however, have
been gaining market share, supported by their diversified product mix and
strong distribution through bancassurance partners. Private players have
increased their focus towards individual NBP and increased their market share
from 44% in Fiscal 2016 to 50% in Fiscal 2021.

In group NBP, LIC continues to dominate the market, accounting for more than 75%
of the market share for Fiscal 202113.

Introduction to HRM Practices in LIC

Today, the business environment faced drastic changes including globalization, the use
of technology and information systems, the opening and expansion of markets, the
changing pattern of competition and the rapid and sustained development of the global
economy. In order to keep pace with growth and development and to achieve
organizational excellence, organizations have had to pay attention to strengthening their
organizational capacities. Human Resources management (HRM) is the administrative
activity that identifies the needs and resources necessary for the success of a project, as
well as providing numbers and competencies compatible to those needs to achieve
organizations’ objectives.

13.Government of India, Economic Survey, New Delhi 2022-23, p115

18
HRM is concerned with policies and functions required to carry out the activities needed
by organizations to conduct successful businesses and accomplish functions in a rapidly
changing businesses environment.
HRM in public and private sectors organizations have faced considerable challenges due
to political, economic, social and technological changes that have become a burden to
HRM departments to carrying out their duties14. Therefore, investing in HR development
has become one of the HR department's most important roles in order to cope with
changes in the business environment. HRM is vital to government institutions as they are
provide services to a wider sector of society. This, in turn, depends on the effectiveness
of the HRM in identifying competencies, skills, training and development needs of the
required employees in providing the required services.
Based on the above, the modern management trends together with organizational
excellence are in line with the growing interest in HRM practices, which represent a
comprehensive HR strategy of an organization. Therefore, there is a need for an HRM
strategy to plan, train and develop the staff and acquire the necessary skills based on the
adoption of organizational excellence comprising: excellence of leadership, excellence of
subordinates, organizational structure, and cultural excellence. The HRM practices have a
mutual relationship with organizational excellence in which one affects or depends on
another, and therefore, it is important to correlate the HRM practices with organizational
excellence.

HUMAN RESOURCE MANAGEMENT IN LIC

MANAGEMENT DEFINITION:
Management is the art of getting things done through and with the people in formally
organized group.

14.Government of India , Statistical Abstracts, New Delhi,2021-22 ,pp55-60

19
 Management is the process of designing and maintaining an environment in which
individuals working together in groups efficiently accomplished selected aims.
HRM DEFINITION:
Human Resource Management (HRM) is the function within an
organization that focuses on recruitment, management and providing direction for the
people who work in the organization. Human Resource Management can also be
performed by line managers. Human Resource Management is the organizational
function that deals with issues related to people such as compensation, hiring,
performance management, organization development, safety, wellness, benefits,
employee motivation, communication, administration, and training. It refers to the system
approach to the problem in any organization.
Figure 1.5 The Conceptual Framework of HRM Practices

FUNCTIONS OF HRM:
The functions of HRM can be easily classified into two
categories.
(I) Managerial functions
a) Planning.
b) Organizing.
c) Directing.

20
 d) Controlling.
(ii) Operative functions
a) Employment
1. Job Analysis.
2. Human Resource Planning.
3. Recruitment.
4. Selection.
5. Placement.
6. Induction or Orientation.
b) Human Resource Development
1. Performance Appraisal.
2. Training.
3. Management Development.
4. Career Planning and Development.
5. Inter Mobility.
6. Transfer.
7. Promotion.
8. Demotion.
9. Organization Development.
c) Compensation
d) Human relation
e) Human Resource Accounting
f) Human Resource Audit
g) Human Resource Research

SCOPE OF HUMAN RESOURCE MANAGEMENT:

Human Resource Management facilitates in identifying the right king of people,
socializing them in most appropriate way. Training and developing them in the right
direction, assigning the tasks which are best suited for every individual so as to bring out
their best. Motivating them to make their contribution and creating conditions for the
people to enjoy their work.

21
 Human Resource Management approach improves the organization efficiency
work culture, job satisfaction of people, better understanding and human relations in
cardinal industrial relations and better productivity. HRM has great scope to improve
organization climate and efficiency.
HRM PRACTICES IN LIFE INSURANCE SECTOR
Human Resource management has got four crucial ingredients to be
taken into consideration15.
They are as given below:
 Individual (person).
 Role.
 Teams.
 Organization.
These are four important ingredients at the primary level of the organization.
Individual:
Individuals are responsible for running the front & back operations of
the organization.
Main Individuals who come under the life insurance sector are:
1. Agents of LIC & Development Officers.
2. Insurance Consultants & Unit Managers.
3. Insurance Consultants & Agency Managers.
These are the main persons responsible for running the front end (Marketing Operations)
of the organization.
Role:
Role of the person is very imp in an organization.

Armstrong, M. A. Handbook of human resource management practice. New Delhi:

Kogan Page India 2015 pp 5-12

22
Role states that each person has to play a very imp role in the organization
related to a particular process within that organization
Each person is given his/her respective role in the organization.

Ex: Role play is imp in Sales & Marketing & also Leadership process related to the
organization.

Teams:
Teams are yet another crucial aspect related to the organization.

In a Life Insurance Sector there are:

1. Training Team.
2. Recruitment Team.
3. Coordination Team.
4. Management Team.
These teams are essential to run the organization in a smooth manner.

Organization:
Organization is the founding pillar of that field or industry.

In its inception the category classified for an organization is:

(a) Profit motive organization.
(b) Service motive organization.

Organization has to serve on the ‘Professional Methodology’.

Individual Efficiency:

Under Life Insurance the individual has the capacity of becoming ‘whatever he/she
wants’.

23
Primary Process: Under primary process the person remains ‘Agent – Agent’.
Secondary Process: Under secondary process persons starts from ‘Agent – CLIA’
at
Marketing & Sales Side.
Corporation Side: Corporation side the person has got chance from ‘BM to Zonal
Manager’.

Individual Effectiveness:

• Under Life Insurance Sector it is to do with the objectives of the

organization & what should be the objectives of the ‘Individual’.
• Individual has to perform the given tasks which are to be stated under the
duties of the organization.
• Under Marketing: Entire Sales Objectives.

• Under Organization: Entire Administrative objective related to org & also

sales etc.
• This would prove the effectiveness of a person handling the objective.

Individual Style:

• In a Life Insurance Sector all the life insurance organizations work on the
style of ‘Convergent’.
• The meaning of Convergent is ‘Thinking & Doing’.

• It is not only important to the insurance consultant who sells the policy but
also for the organization to expand its operations in the long run.
• Convergent has got 2 aspects 1. Related to the Investor 2. Related to the
organization.
Individual Leadership:

In Life Insurance Sector ‘Leadership’ is present at every level of the organization16.

24
In every setup level of life insurance co there are:
1. Corporate Office – Chairman.
2. Zonal Office – Zonal manager.
3. Divisional Office – Sr. Divisional manager.
4. Branch Office – Branch Manger or Chief Manager.
5. In addition to this Satellite branch manger for satellite branches.

Role Competencies:
Role becomes much more important when you take into consideration ‘Competencies’.
Under Life Insurance Sector there are two classifications of competencies:
1. Organization’s competency.
2. Individual’s competency.
Competency is very vital for the long run of the organization & it’s individual.
Internally it is the strength of the organization & externally it is a threat to its
competitors.

Role Motivation:

• Under Life Insurance Sector the main motivator towards the marketing &
sales side is the most ‘Premier Insurance Consultant’. At an organization side
they are ‘Chief Manger, Sr. Divisional Manager, Zonal Manager & the
Chairman’.
• From time to time they are external faculties which come into consideration.

• They are on the expense of the organization & that these faculties would
perform the said act.

16.Insurence Regulatory Development Authority of India (IRDA) , Hand Book of

Insurance ,2021-22 Mumbai pp 110-112

25
Role Frustration:

• In Life Insurance Sector at an organization the biggest threat is ‘Sales’ &

after ‘Sales Service’.
• An Insurance Consultant happens to sell the policy but could not provide after
sales service related to the ‘Policy Servicing’.
• Very few people happen to understand this and take the profession seriously.

• After which they are kicked out of the organization in the organizations
manner.

Role Success:
Success in Life Insurance Sector is at every level.
They are based on 2 categories:
1. Marketing & Sales (Insurance Consultants).
2. Administrative Board (DO to Chairman).
At an administrative side the success rate is very high.
After which people are directly recruited at a very high positions.

Teams – Life Insurance:

Teams in LIC have got their special presence at every level.
They can be named as:
1. Training Team.
2. Recruitment Team.
3. Management Team.
Management Teams are present on every level of organization.
To give the green signal on the strategies they have the board along with the chairman to

26
decide.

Organization – Life Insurance:

• Organization has got the ability to go not in the performing times but also in
the testing times.
• Communication is the key for the growth of any organization.

• The life insurance organization has to be a learning organization.

• It also needs to change from the changing times in the prescribed sector.

• Its development is the development of the organization.

TRAINING PROCEDURE IN LIFE INSURANCE SECTOR:

Training:
Training is a process where in the efficiency of the employee or an agent is enhanced.
It is a learning process that involves the acquisition of knowledge, sharpening of skills,
concepts, rules, or changing of attitudes and behaviours to enhance the performance of
employees.
Need of Training:
It is generally classified into three levels.
1. Organizational Level.
2. Individual Need.
3. Operational Level.
The resources which are required for running the organization are understood by ‘Need
of Training’.
Organizational Level:
1. Internal Environment: The factors for internal environment are:
(a) Organizational Procedure.
(b) Structure.

27
 (c) Weaknesses.
2. External Factors:
(a) Opportunities.
(b) Threats.

Individual Level:

• This is done when the organization comes to a conclusion that there is a

difference between the expected performance & actual performance.
• This performance for every individual which is within the organization.

• The employer checks whether the respected employee is performing at a

desired level.

Operational Level:

• The job which is being assigned to the designated individual of the

organization.
• Job Analyst: He/She is the person who takes the responsibility of making
everyone understand the job or their work within the organization.
• He is also responsible not only for assigning the present tasks but also the
future tasks related to the organization in any field.

Objectives of Training:
These objectives can be understood as:
1. Trainer.
2. Trainee.
3. Designer.
4. Evaluator.
Trainer:

28
He/She is the primary person in the objectives as they would be the first person to
confront the objectives & the trainees of the respective organization.
Trainee:
He is the person who gets trained to understand his/her work; secondly it helps the trainee
to understand the training module or methodology.
Designer:
When the designer is convinced with the training module then he/she will buy the
training module for training & development of the organization.
Evaluator:
It is for measuring the importance of the trainee & its understanding with the module for
better performance.
Importance of Training:
The fifteen important aspects of training are:
1. Optimum Utilization of Human Resources.
2. Development of Human Resources.
3. Development of skill of employees.
4. Productivity.
5. Team Spirit.
6. Organization Culture.
7. Organization Climate.
8. Quality.
9. Healthy – Work environment.
10. Health & Safety.
11. Morale.
12. Image.
13. Profitability.
14. Organizational Development.
15. Aids Leadership, Motivation, Loyalty etc.

Training Procedure: Training procedure in life insurance companies are 2 fold:

1. Recruitment Training.

29
2. Training within the organization.
These trainings are very important for an employee or the insurance consultant working
for a life insurance company in India.
Training Procedure under Recruitment Training:
Under this there are two scenarios of taking up the training.
Scenario 1: Under this scenario the person who wanted to be an insurance consultant
working for life insurance corporation (Prior to IRDA Act 2000).
Scenario 2: Under this scenario the person has to undergo the IRDA training & become
an agent with the life insurance corporation or any other cooperating in India.
Training before IRDA:
Before IRDA: Before IRDA the person who terms himself as had only had to be an
Agent of LIC.
Training procedure: Training procedure would be once when the agent would get
himself/herself recruited by the development officer.
This would only be after the payment of Rs. 15 and a DD favoring Life Insurance
Corporation of India.
Training after IRDA Act:
 The IRDA act came into existence in the year 2000 on 6th January. It makes
compulsory that every person desiring to become an “AGENT” or
“INSURANCE CONSULTANT” of LIC or any other co. has to comply
with the said act.
 There is a procedure for taking up the IRDA training in life insurance subject.

Training Procedure as per the IRDA Act17:

Training methodology as per IRDA is as follows:
1. The person has to declare that he wants to become an Insurance Consultant in
any one of the 14 companies of IRDA.
2. The person has to be recruited by a Development Officer/Unit
Manager/Agency Manager.
3. He/she has to give minimum Rs. 150 to 200 as the training charges in any of
the centers specified.

30
 4. The person has to attend the 100 hours training (Prior 2007) & get an in-depth
knowledge of the subject of life insurance.
5. The person has to also take up the mock exams conducted by various centers

17.Insurence Regulatory Development Authority of India (IRDA) , Hand Book of

Insurance ,2021-22 Mumbai p120

all over India.

6. The person has to then at last take the IRDA exam subject to condition
minimum 75 % training attendance.
7. The person has to then report back to DO/UM or AM.

Recruitment Procedure of an Insurance Consultant:

1. IRDA exam: After the IRDA exam the Insurance Consultant working for an
organization would get a license & would have to report to a particular
branch.
2. Then the Insurance Consultant would have to sell the respective plans & also
the group insurance schemes as per a life insurance co working in Indian
union.

Training Within the Organization:

 Training within the organization is under taken by the development officer.

 In private companies there are Unit Managers & Agency Managers.
 The branch manager or the chief manager would give the further training on
the subject related to life insurance & its products & various updates on the
organization etc.

Product Training:

31
The product training is taken on a very exhaustive base.
They are generally 3 categories:
(a) Conventional products of the insurance co.
(b) Non – Conventional products of the insurance co.
(c) Group Insurance by the insurance co.

Insurance Consultancy:
Insurance consultant under Life Insurance Corporation banner has the growth of
becoming:

1. Insurance Consultant.
2. All India High Net worth Agent.
3. Wealth Manager.
4. CLIA (Chief Life Insurance Advisor).

Insurance Consultant:

 A person remains an Insurance Consultant at an entry level.

 He/She has to sell the policies related to life insurance co.
 He/She if in LIC of India gets commission scales ranging from 2 to 35 %.
 He/She if in the private insurance co also is entitled for a commission as well
as a handsome salary.

All India High Net Worth Agent – LIC of India:

 AIHNWA is an Agent who is serving the “HIGH NETWORTH

INDIVIDUAL”.
 HNWI: HNWI is an individual who earns more than 60,000 per month by any
profession he/she is skilled in.
 The insurance consultant has to attend the training session of AIHNWA at
ZTC Gurgeon.

32
  Then he is not only qualified but also certified as “AIHNWA”.
Wealth Manager LIC of India:

 Wealth manager is a person who is selected by corporate office; again the

person has to be an insurance consultant working for LIC.
 This training is again attended at ZTC (Gurgeon).
 Again the person is certified under the norms of the organization.

Chief Life Insurance Advisor – LIC of India:

 CLIA is currently the highest position in terms of marketing & Sales related to
life insurance consultant.
 The CLIA has to recruit agents under him & do the respective marketing &
sales related to life insurance policies of Life Insurance Corporation.

Commission Scale:
The commission scales are different under different plans of life insurance.
 Whole Life Plans: If PPT is more than 15 years then it is 25 % the applicable
bonus is paid to the insurance consultant @ 40 %.
 Money Back Plans: The first year commission is 15 % & bonus commission is
40 %.
 Term Assurance Policies: Less than 15 years then the first year are 7.5 % &
No bonus to these plans.
 Ulip Plans: Under ULIP plans of LIC the rate is 10 % & 7.5 %, in the same
LIC policy under ULIP for single premium it is 2 %.
 Annuity Plans: Under annuity plans of LIC there are 2 % for immediate
annuity. For deferred annuity it is 7.5 % & in both cases no bonus for
insurance consultant.

Other Benefits of Agent:

33
  Fringe Benefits: In order to qualify for the fringe benefits there are 2
conditions:
Condition no 1:
 45 lives of S.A 15 lakhs to become a BM club manager.
 90 lives of S.A 40 lakhs to become a DM club member.
 115 lives of S.A 60 lakhs to become a ZM club member.
 170 lives of S.A 1 Crore to become a Chairman club member.
 In the entire year for BM – 523, DM – 275, ZM – 170 & Chairman its 242 in
a financial year.
Condition no 2:
 BM club: 5 lakhs S.A & 120 lives in a financial year with FYC 20,000 on
every live & 30,000 on the RC base.
 DM club: 10 lakhs S.A & 230 lives in a financial year with FYC 35,000 on
every live & 55,000 on the RC base.
 ZM club: 15 lakhs S.A & 370 lives in a financial year with the FYC 70,000 on
every live & 80,000 RC base.
 Chairman’s club: 25 lakhs S.A & 550 lives in a financial year with the FYC 1,
10,000 on every live & 1, 00,000 RC base.

Fringe Benefits:
Fringe benefits are the benefits divided as:

 Office Allowance: BM – 1,000 P.A , DM – 8,500 P.A, ZM – 17,000 P.A,

Chairman – 30,000 P.A
 Call Charges: BM – N/A, DM – N/A, ZM – 300 local calls & Chairman – 300
local calls + rentals charges.
 Sales & Promotional Gifts: BM – 180, DM – 500, ZM – 840 & Chairman’s
Club – 1400.
 Letter Heads & Envelops: BM – 300, DM – 500, ZM – 750 & Chairman’s

34
 Club – 1000.
 Visiting Cards: BM – 100, DM – 150, ZM – 200 & Chairman’s Club – 250.
 Out of Pocket Expenses: BM – 200, DM – 400, ZM – 1100, CC – 2500.
 Vehicle Advances: 2 wheeler (Purchase price, deduction 60 monthly
installments).
 Purchase price or 7.5 % of 2 years RC or Rs. 3, 50,000 (8 years).
 Purchase price or 2 years.
 Housing Loan: 5 % P.A or 7.5 % P.A for a MRP loan of Rs. 10, 00,000 by
LIC of India under the portfolio of LIC HFL.
 ZM – 8, 00,000 & for CC – 8, 50,000.
 Group Term Insurance: BM – 18750 P.A (Up to 60 years of Age), DM –
37,500 P.A, ZM – 75,000 & CC – 1, 25,000 P.A (S.A).

Housing Finance Agents:

 Sale deep for 15 years.

 Certificate from branch/divisional authorities for 15 years.
 Municipality permission.
 Municipality plan approval.
 Estimates from civil engineers.
 Income certificates.
Based upon the above conditions the housing loan is released from the LIC HFL.
Process Training:

• Process Training is related to the organization, its setup.

• It covers the history of the organization, its various aspects which are related
to marketing, sales & after sales services.
• Finance & Human resources aspects also.

• Along with that it would also cover various aspects related to underwriting
etc.

35
 • For a individual which is 24 years old a policy would be issued if that
individual would get 1 passport size photograph, 1 address proof & 1 Date of
Birth along with the premium amount.
• For a 32 year old individual the underwriting procedure would be 1 passport
size photograph, 1 address proof, 1 date of birth certificate & a general
examination by the authorized physician under the governance of LIC.
• If the investor is an NRI person then he/she should do from a foreign
physician who should be minimum MBBS.
• After this examination & payment of premium the policy bond would be
issued.

Product Training:
When it comes to Life Insurance sector, life insurance sector in any insurance
organization has got 3 product trainings.
(a) Conventional plans of the co.
(b) Non Conventional plans of the co.
(c) Group Insurance schemes of the co.
Conventional Plan Category:
1. Whole Life Plans.
2. Ltd. Payment Endowment Plans.
3. Children Plans.
4. Special Plans.
5. Pension Plans.
Non Conventional Plans Category:
1. Bima + plan.
2. Jeevan + plan.
3. Money + plan.
4. Market + plan.
5. Health + plan.
6. Money + I plan.

36
7. Market + I plan.

Group Insurance Schemes:

1. Group Insurance.
2. Group Gratuity Scheme.
3. Group Super Annuation Scheme.
4. Group Leave Encashment Scheme.
5. Group Savings Linked Insurance Scheme.
6. Janashri Bima Yojana (JBY).
7. GMRA (Group Mortgage Redemption on Assurance).

Insurance Broking:
When an insurance consultant is given training related to the process & also related to the
product he/she also gets to know about ‘Insurance Broking’.
Insurance Broking: Apart from the regular life insurance co’s doing the business of life
insurance, it is to be noted that even banks are selling life insurance.
At the time of opening a bank account, the person in that bank needs Rs. 1,000 to open
the account.
After which over a period of time the respective bank would approach the account holder
for insuring him/her through the bank account.
Premiums are paid by the bank account directly & every month it is deducted.

Portfolio Advisory:
In an Insurance co the use of portfolio advisory is taken into consideration.
As it is used widely in 3 portfolios:
1. Life Insurance Portfolio.
2. Mutual Funds Portfolio.
3. Health Insurance Portfolio.

Soft Skills Development:

37
Soft Skills Development is initiated by an organization which is external to the insurance
organization.
There are many organizations which are into soft skills so an insurance consultant has to
go in for some courses.
Irrespective of the private insurance company which gives a bit of soft skills into
insurance, the insurance consultants have to go & get trained externally.
RECRUITMENT AND PLANNING IN LIC:

 Recruitment is a process where a qualified person, with a specialized skill set

is taken on board by the co.
 Planning has got to do with the process & the people who have the ability to
take care of these processes.
These two are the main functions of Human Resource Department.
Organization Setup:
Organization Setup in Life Insurance Corporation under Life Insurance portfolio has
got18:
1. 1 Corporate Office.
2. 8 Zonal Offices.
3. 105 Divisional Offices.
4. 2048 Branches.
In addition to the above information LIC has got 500 + Satellite Offices or Satellite
Branches.
Corporate Office Setup and Recruited People:
In corporate office there are different recruitments in various departments of the
organization.
They are as given below:
Actuarial Board: It is the ‘Actuarial or the Actuarial Head’
This department is into:
(a) Actuarial Research
(b) Product Design
(c) Valuation.

38
 Audit: The second most department is the Audit which is taken care by the internal
auditor.

Board Secretariat: Board Secretariat is into 2 planning:

(a) Public Relations.
(b) Government References.

18.Insurence Regulatory Development Authority of India (IRDA) , Hand Book of

Insurance ,2021-22 Mumbai p150

Corporate Communication: This department is into 2 functions:

(a) Corporate Communications.
(b) Publicity.
Corporate Planning: Corporate Planning department is into 3 functions:
(a) Corporate Planning.
(b) Plan Finalization.
(c) Operational Research.
CRM: This dept at the corporate office has got 3 functions to perform:
(a) Queries from Customers.
(b) Complaints Tracking.
(c) Customer Service.
Finance & Accounts: F/A has got 5 functions within the organization:
(a) Corporate Accounts.
(b) Financial Budget.
(c) Finance.
(d) Provident Fund & Pension.
(e) Income Tax.
HRD/OD: HRD & Organizational Department is under the supervision of Chairman &

39
the 3 MDS.
Inspection Dept: The inspection dept has got 3 functions:
(a) Over viewing inspection operations.
(b) Inspection of Zonal Offices.
(c) All other related inspection corporate level jobs.
Investment Department: They are into:
(a) Investments related to funds.
(b) Investments related to Loans & Mortgage.
Management Development Centre: MDC has got 2 functions:
(a) Management Development Centre.
(b) Managerial/Executive Learning Programmes.

Marketing: Marketing Department has to take care of 3 functions:

(a) Planning & Review.
(b) Sales Promotion.
(c) ULIPS.

Health Insurance: The corporate office has Health Insurance portfolio also.

Underwriting & Re-Insurance: Corporate office has also got to take care of underwriting
decisions as well as Re-Insurance
They are more than 14 departments at the corporate office.

Zonal Office Setup and Recruited People:

Zonal Office: The various departments under Zonal Office are:
Actuarial Board: It is the Actuarial or the Actuarial Head
This department is into:
(a) Actuarial Research
(b) Product Design
(c) Valuation.

40
Audit: The second most department is the Audit which is taken care by the internal
auditor.

Board Secretariat: Board Secretariat is into 2 planning:

(a) Public Relations.
(b) Government References.

Corporate Communication: This department is into 2 functions:

(a) Corporate Communications.
(b) Publicity.

CRM: This department at the zonal office has got 3 functions to perform:
(a) Queries from Customers.
(b) Complaints Tracking.
(c) Customer Service.

F/A: F/A has got 3 functions:

(a) Zonal Office Accounts.
(b) Consolidation of Accounts.
(c) Provident fund & pension.

STC: Sales Training Centre & Training to Field professionals.

ZTC: Zonal Training Centre & Training to Field Personnel.

Health Insurance: It has got Health Insurance Portfolio.

Zonal office has got more than 9 departments.

Divisional Office Setup and Recruited People:

Divisional Office: Various departments in divisional office are:
Claims Department: They are:

41
(a) Death Claims processing.
(b) Consolidation of data from Branches.

CRM: They are:

(a) Customer Relations.
(b) Complaint Tracking.

F/A: F/A it has got 3 functions:

(a) Divisional office accounts.
(b) Consolidated accounts.
(c) Surplus fund transferred.

Marketing: Marketing has got 3 functions:

All jobs related to marketing.
(b) Publicity.
(c) Matters dealing with Agents/DOS.

NB: New Business Department is also having 3 functions:

(a) Underwriting.
(b) Actuarial Studies.
(c) Valuation.

P& MR: P & MR have 2 functions:

(a) Marketing Research.
(b) Planning.

Branch Office Setup and Recruited People:

Branch Office: At the Branch Office level you have got:
Claims: Claims have got 2 functions:
(a) SBC
(b) DBC

42
(c) MBC

F/A: The F/A has got 4 functions to perform:

(a) Cash Receipts/Payments.
(b) Banking.
(c) General Accounts.
(d) Preparation of Trail Balance.

IT Dept: IT department has got 2 functions:

(a) Computer operations.
(b) Computer operations applications.

NB: NB has got 3 functions:

(a) Underwriting.
(b) Policy Issue.
(c) Valuation.

OM: Office Management has got 4 functions:

(a) Office upkeep.
(b) Furniture & Stationery.
(c) Salary & Leave Records.
(d) Employee Records & Employee Matters.

43