1991 reforms through the eyes of an insurance agent
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Ram Krishan Taheem has been selling dreams for almost three decades now—or at least that’s how he describes his job as a sales agent for the Life Insurance Corp. of India (LIC). Most people have their first contact with an insurance company through people like Taheem, whose job is to help individuals and businesses select policies that provide the best protection for their lives, health and property.
Being an agent was not exactly his dream job. Why would it. “It wasn’t lucrative at all and agents weren’t really respected much,” says Taheem, 69. These days, Taheem says, people at least acknowledge the existence of an insurance agent. It wasn’t the case in the 1990s.
Taheem joined LIC in 1987, when the company had a monopoly on the insurance market in India. As much of a privilege as it was for the company, it wasn’t really easy for the agents to convince people why they needed insurance. “When you weren’t really earning much, why would you think of getting insurance? People didn’t have a lot of disposable income then,” he says.
Taheem has seen LIC flourish, face competition, struggle and still survive. After all, he worked with the firm both before and after the sector was liberalized, following the reforms of 1991.
Because of allegations of unfair trade practices by insurance companies, the government on 19 January 1956 issued an ordinance nationalizing the life insurance sector. LIC came into existence the same year, absorbing 154 Indian and 16 foreign insurers as also 75 provident societies. More than three decades later, in 1993, the government set up a committee to reform the insurance sector. In 1994, the committee recommended that the private sector be allowed to enter the insurance industry, including foreign companies preferably in the form of joint ventures. The law was passed in 2000, and the private sector was allowed to enter the industry. Foreign direct investment was also allowed in insurers, but capped at 26%.
Post liberalization, the number of participants in the industry rose from six (LIC, four public sector general insurers and General Insurance Corp. of India as the national reinsurer) in 2000 to the 53 that currently operate in the life, non-life and reinsurance segments in India, according to rating agency Crisil’s October 2015 report on the industry.
All around him, Taheem has seen India change—even LIC, where work was mostly done manually, at dusty desks buried under mounds of paper, has become computerized. The thin sheet of your current LIC document that needs to be laminated used to be a thick paper, like the ones in wedding cards. “You don’t see that now. Everything is computerized. Everything is saved in multiple places. Even if one memory gets destroyed, it is saved somewhere else. During floods or fires, we see how all our records are maintained. Earlier, you couldn’t imagine anything like that,” he says.
With limited disposable income, a policy of Rs1 lakh was a rarity and policies had short-term maturity period. Most of the time, it was the agents convincing their friends or friends of friends to buy an insurance policy, and those ranged from somewhere between Rs1,000 and Rs10,000.
“As the economy started growing, we saw even the middle class taking insurance policies worth lakhs. Those days, one in like 10,000 agents would manage to get a policy in lakhs,” Taheem says. It was only after 2003 that he got what he calls was a jackpot—a policy of Rs10 crore.
Those days, after applying for a policy, you had to wait for at least four months before being issued the documents. It was a long and tiring wait. And the reason why Indians wanted an LIC, was different. According to a paper Performance Of LIC Of India After Liberalization, by Bidyadhar Padhi and Mayadhar Satpathy, “The state-owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under-insured with no flexibility or transparency in the products. With the entry of the private insurers, the rules of the game have changed.”
When private insurers came into the market, they offered more options, introduced more transparency, giving LIC competition. In 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate the insurance industry, which was a big move considering insurance in India started without any regulations in the 19th century.
“Obviously there was some fear among the management, but we knew we were giants, we were solid, no one could easily take our place,” Taheem says. He says when there was a foreign collaborator, Indians trusted that company more. “After all, what we do is sell dreams no? In the West, you sell dreams which can become a reality. The regulator there is so strong, no one can cheat anyone. Here we still are figuring out what to do. It takes so long to penalize anyone,” he says.
Some of that is changing. The Internet arrived in India almost at the same time as India liberalized its economy. The growth of the Internet altered the relationship between agents and clients.
Also, as Taheem says, access to Internet made customers more aware, so much so that they couldn’t be fooled by agents.
Having spent half of his life with the company, Taheem still has a dream—of scoring another jackpot that breaks his own record of 2003; but all this, he says will obviously be done with utmost honesty, making sure he sells dreams that are realizable.
This is the 46th part in a series marking the 25th anniversary of India’s liberalization.
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