The wave of liberalisation sweeping India since 1992 has completely changed the way business was done in the country. With the elimination of the licensing system, corporates became free to choose the business  to enter and also decide the size of the operation.
Result: the dominance of government-owned companies, a legacy of the old socialistic model of development, dwindled  steadily. Today in most industries government companies are marginalised due to  competition. Most have gone sick unable to adopt  quickly with the rapidly changing world. 
Well, if this is the rule, there are exceptions too. One brilliant example is Life Insurance Corporation (LIC) of India, a 100 per cent government-owned company, which has bounced back after initial set back.
The opening up of insurance sector started in the late nineties when LIC had its complete monopoly in life insurance business. As the sector was opened up, in 2002 alone 11 private players entered the business. Now there are 15 private sector players and, at least, three more are planning to join the bandwagon. When the sector was opened up many large Indian groups in collaboration with established foreign companies entered life insurance business. At that time many strongly believed that LIC being a government-owned company will soon dislodge it from the number one position by the private sector.
As if, to prove the critics right right, LIC kept on losing market share as aggressive and nimble-footed private players were scooping away larger share of the market. LIC with its gigantic  employee base and old mindset was slow to react. Its market share came down gradually to 71 per cent.
Fighting back
Encouragingly enough, unlike other PSUs LIC did not succumb to competition. It actually fought back and re-gained lost market share. According to the data compiled from the journal of Insurance Regulatory and Development Authority (IRDA), LIC in 2006-07 collected Rs 55,934 crore by way of first year premium and accounted for 75 per cent of the market.
Sixteen private players together collected Rs 19,471 crore accounting for a fourth of the market. With this LIC has not only arrested the decline but regained a good 4 per cent markets share from 71 per cent in the previous year. Interestingly, LIC’s premium income which was earlier growing at around 20 per cent a year, saw a huge jump of 118 per cent in 2006-07. The private sector, on the other hand, grew by 90 per cent. (See Table).
Among the private players ICICI Prudential leads the pack followed by Bajaj Alianz, SBI Life, HDFC Standard, etc. Reliance Life was the fastest growing whose premium collection at Rs 930.46 crore was 382 per cent more than the previous year.   Going with the market trend, during 2006-07 LIC sold many more unit linked policies (where money is invested in stocks, private bonds and government bonds in various proportions).
As a result LIC’s first year’s premium from individual non-single premium at Rs 37,922 crore in 2006-07 was almost double of previous year. Its earnings from single premium at Rs 23,545 crore also doubled in the year.
These are no mean achievements for a huge company like LIC with an asset base of Rs 552,447 crore at the end of 2005-06. LIC is also world’s largest life insurance company in terms of policies, with a database of nearly 28 crore policies.
Turnaround strategy
With the private companies coming out with innovative insurance products emphasising more on protection (from untimely death) than savings, the market preference has changed in the last 3 to 4 years. LIC too launched a large number of new products with more emphasis on protection. It also cashed-in from the great demand for single premium policies where an investor pays the entire premium amount upfront.
In 2006-07, single premium accounted for 42 per cent of first year’s premium. Realising the need to provide variety of insurance products that meet the need of the customers, LIC had 42 plans available at the end of 2005-06. Being the oldest in the industry LIC has 10.52 lakh agents on its roll and the number of active agents being 9.88 lakh. It has the widest distribution reach through 2,048 branches, 101 divisions, 71 Pension & Group Business units and seven zonal offices. LIC’s reach in the rural areas is also enviable to the competition who focus mainly on urban areas.
LIC gets nearly a fourth of its business from the rural areas. Huge brand awareness and, of course, the tag of government-owned company add to LIC’s attractiveness as safest place for one’s money.
IT savvy
One of LIC’s major handicaps against the new breed private players was the lack of computerisation in its entire work process. To overcome this LIC recently spent huge amount of money to set up its Corporate Active Data Warehouse (CADW) which houses the entire IT infrastructure relating to all core applications of LIC.
The Data Center has been built with redundancies in each and every area so as to ensure that there is no single point of failure.
The focus now is to computerise all the customer service functions in the operating offices and integrate the applications to offer single window service to the customer. Broadly, the IT initiatives are aimed at creating a scalable infrastructure, connect all 2,048 branches through a wide area network and implement Enterprise Application Integration software to integrate diverse applications for real time update of information. To address customers’ needs, LIC has set up interactive voice centers in 60 cities and call centers in eight cities.
It is clear that far from being sloppy and vulnerable to cut throat competition, LIC is now an awakened giant on the move. The large, untapped life insurance market in India — insurance premium account for only 1.8 per cent of GDP against 8 per cent in South Korea’s and 6 per cent in UK, will provide enough room for everyone to grow.