1.1 background of indian insurance...

CHAPTER - 1 INTRODUCTION

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1.1 BACKGROUND OF INDIAN INSURANCE INDUSTRY

The story of insurance is probably as old as the story of mankind. The same

instinct that prompts modern businessmen today to secure themselves against

loss and disaster existed in primitive men also. They too sought to avert the

evil consequences of fire, flood and loss of life and were willing to make some

sort of sacrifice in order to achieve security. Though the concept of insurance

is largely a development of the recent past, particularly after the industrial era,

yet its beginnings date back almost 6000 years1.

In India, insurance has a deep-rooted history. It finds mention in the writings

of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya

(Arthasastra). The writings talk in terms of pooling of resources that could be

re-distributed in times of calamities such as fire, floods, epidemics and

famine. This was probably a pre-cursor to modern day insurance. Ancient

Indian history has preserved the earliest traces of insurance in the form of

marine trade loans and carriers’ contracts. Insurance in India has evolved over

time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment

of the Oriental Life Insurance Company in Calcutta. This Company however

failed in 1834. In 1829, the Madras Equitable had begun transacting life

insurance business in the Madras Presidency. 1870 saw the enactment of the

British Insurance Act and in the last three decades of the nineteenth century,

the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were

started in the Bombay Residency. This era, however, was dominated by

foreign insurance offices which did good business in India, namely Albert Life

Assurance, Royal Insurance, Liverpool and London Globe Insurance and the

Indian offices were up for hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance

Companies in India. The Indian Life Assurance Companies Act, 1912 was the

first statutory measure to regulate life business. In 1928, the Indian Insurance


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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 the Insurance public, the earlier

legislation was consolidated and amended by the Insurance Act, 1938 with

comprehensive provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished principal agencies.

However, there were a large number of insurance companies and the level of

competition was high. There were also allegations of unfair trade practices.

The Government of India, therefore, decided to nationalize insurance

business.

An Ordinance was issued on 19th January, 1956 nationalizing the life

insurance sector and Life Insurance Corporation came into existence in the

same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75

provident societies—245 Indian and foreign insurers in all. The LIC had

monopoly till the late 90s until the insurance sector was reopened to the

private sector.

The process of re-opening of the sector had begun in the early 1990s and the

last decade has seen it been opened up substantially. In 1993, the government

set up a committee under the chairmanship of RN Malhotra, former Governor

of RBI, to propose recommendations for reforms in the insurance sector. The

objective was to complement the reforms initiated in the financial sector. The

committee submitted its report in 1994 wherein, among other things, it

recommended that the private sector be permitted to enter the insurance

industry. They stated that foreign companies are allowed to enter by floating

Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999,

the Insurance Regulatory and Development Authority (IRDA) was constituted

as an autonomous body to regulate and develop the insurance industry. The


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IRDA was incorporated as a statutory body in April, 2000. The key objectives

of the IRDA include promotion of competition so as to enhance customer

satisfaction through increased consumer choice and lower premiums, while

ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for

application for registrations. Foreign companies were allowed ownership of up

to 26%. The Authority has the power to frame regulations under Section 114A

of the Insurance Act, 1938 and has from 2000 onwards framed various

regulations ranging from registration of companies for carrying on insurance

business to protection of policyholders’ interests2.

Insurance industry had ten and six entrants in life and non-life sector

respectively in the year 2000-2001. The industry again saw two and three

entrants in the life and non-life business respectively in the year 2001-2002.

One additional entrant was made both in the life and in non-life business in

2004 and 2005 respectively. At present there are fourteen companies each in

Life and General Insurance. The Funds earlier generated by the state owned

insurers have been diversified with other new insurers.

Private and Foreign entrants in the Insurance Industry made others difficult

to retain their market. Higher customer aspirations lead to new expectations

and compel him to move towards the insurer who provides him the best

service in time. It becomes less viable for them even to maintain the functional

networks or competitive standards and services. To survive in the Industry

they analyze, the emerging requirements of the policyholders and they are in

the forefront in providing essential services and introducing novel products.

Thereby, they become niche specialists, who provide the right service to the

right person in right time3.

The insurance sector is a colossal one and is growing at a speedy rate of 15-

20%. Together with banking services, insurance services add about 7% to the

country’s GDP. A well-developed and evolved insurance sector is a boon for


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economic development as it provides long- term funds for infrastructure

development at the same time strengthening the risk taking ability of the

country4.

1.2 PRESENT SCENARIO OF INSURANCE IN INDIA

The insurance market has witnessed dynamic changes which includes

presence of a fairly large number of insurers both in life and non-life segment.

Most of the private insurance companies have formed joint venture partnering

with well recognized foreign players across the globe.

There are now 29 insurance companies operating in the Indian market – 14

private life insurers, nine private non-life insurers and six public sector

companies. With many more joint ventures in the offing, the insurance

industry in India today stands at a crossroads as competition intensifies and

companies prepare survival strategies in a detariffed scenario. There is

pressure from both within the country and outside on the government to

increase the foreign direct investment (FDI) limit from the current 26% to

49%, which would help JV partners to bring in funds for expansion.

There are opportunities in the pensions sector where regulations are being

framed. Less than 10 % of Indians above the age of 60 receive pensions. The

IRDA has issued the first licence for a standalone health company in the

country as many more players wait to enter. The health insurance sector has

tremendous growth potential, and as it matures and new players enter,

product innovation and enhancement will increase. The deepening of the

health database over time will also allow players to develop and price products

for larger segments of society.

India with about 200 million middle class household shows a huge untapped

potential for players in the insurance industry. Saturation of markets in many

developed economies has made the Indian market even more attractive for

global players. The insurance sector in India has come to a position of very


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high potential and competitiveness. Indians who have always seen life

insurance as a tax saving device, are now suddenly turning to the private

sector that are providing them new products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After

the entry of the foreign players the industry is paying a lot of competition and

thus improvement of the customer is required service in the industry.

Computerization of operations and updating of technology have become

imperative in the current scenario. Foreign players are bringing in

international best practices in service through use of latest technologies

The insurance agents still remain the main source through which insurance

products are sold. The concept is very well established in the country like

India but still the increasing use of other sources is imperative. At present the

distribution channels that are available in the market are direct selling,

corporate agents, group selling, brokers and cooperative societies.

Customers have tremendous choice from a large variety of products from pure

term (risk) insurance to unit-linked investment products. Customers are

offered unbundled products with a variety of benefits. More customers are

buying products and services based on their true needs and not just

traditional money back policies, which are not considered very appropriate for

long-term protection and savings. There is lot of saving and investment plans

in the market. However, there are still some key new products yet to be

introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for insurance

products. A research conducted exhibited that the rural consumers are willing

to dole out anything between Rs 2,900 and Rs 3,500 as premium each year. In

insurance, the awareness level for life insurance is highest in rural India, but

the consumers are also aware about motor, accident and cattle insurance5.


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1.3 BACKGROUND OF HUMAN RESOURCE

MANAGEMENT

The early roots of human resource management in Indian could be traced

back to 1920’s. The Royal Commission on labor recommended in 1931 the

appointment of labor officers in order to protect workers from the evils of

jobbery and indebtedness, to check corrupt practices in recruitment and

selection in Indian industry, to act as a spokesman of labor and to promote an

amicable settlement between the workers and management. After

independence, the Factories Act 1948 made it mandatory for factories

employing 500 or more workers to appoint welfare officers. The Act also

prescribed the qualifications and duties of welfare officers.

In view of legal compulsions and the enumeration of duties, the entire

approach of organizations toward their personnel was to comply with the laws

and keep the welfare officers busy with routine functions. Meanwhile, two

professional bodies i.e., the Indian Institute of Personnel Management

(IIPM), Calcutta and National Institute of Labour Management(NILM),

Mumbai were established during the 1950’s.

In the 1970’s concern for welfare shifted towards development aspects of

human resources. In the 1980s, professional began to talk about new

technologies, HRM challenges and human resource development. The two

professionals bodies, IIPM and NILM were merged to form the National

Institute of Personnel Management (NIPM) at Calcutta. In the 1990s, the

emphasis shifted to human values and productivity through people. Reflecting

this trend, the American Society for Personnel Administration (ASPA) was

renamed as the society of Human Resouce Management (SHRM). Thus,

beginning in 1920s, the subject of HRM has grown into matured profession6.


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Table1.1 Evolution of HRM in India

EVOLUTION OF HRM IN INDIA

PERIOD DEVELOPME

NT

OUTLOOK EMPHASIS STATUS

1920-1930 Beginning Legalistic Statutory,

Welfare,

Paternalism

Clerical

1940-1960 Struggling for

Recognition

Technical Paternalism Administrati

ve and

Legalistic

1970-1980 Achieving

Sophistication

Professional

and legalistic

Regulatory

conformance

Managemen

t

1990s Promising Philosophica

l

Human values,

productivity

through people

Executive

Source: Gupta Shashi K., Joshi Rosy, “Human Resource Management”, Kalyani Publishers,

Ludhiana-Guwahati, 2006, III Revised Edition, pg 2.8.

Human resource management is the management of people at work. It

involves both the management and operative functions. Operating functions

include procurement, development, compensation, integration and

maintenance of personnel. It is a source of strength and aid. It reflects a new

outlook, which views organization manpower as its resource and assets. It is

that process of management which develops and manages human element of

the enterprises7. So, human resource is considered as an important element in

HRM thinking8.

Human resource management not only confines itself to the selection of right

type of person at right job but also helps to build a team spirit where

employees satisfy their aspirations by developing themselves and contribute to

the accomplishment of organizational goals9. The different dimensions of

human resource management are as follows: -

Manpower planning

Job analysis and job design

Recruitment

Selection


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Training and development

Job evaluation

Performance appraisal

Motivation

Morale

Communication

Leadership

1.4 LEADERSHIP DYNAMICS

“Leadership is the integrated sharing of vision, resources, and

value to induce positive change”10.

It is an important element of directing function of management. Wherever

there is an organized group of people working towards a common goal, some

type of leadership becomes essential. To be a successful leader, a manager

must possess the qualities of foresight, drive, initiative, self-confidence and

personal integrity. Different situations may demand different types of

leadership11. The leadership process is simple yet powerful. The leader

develops a vision for the organization and shares it with the other

participants. Then all participants engage in sharing vision, resources

(human/time resources, information/knowledge resources, and

financial/capital resources), and value. All of this is bound together by the

vision and its logical implementation12.

Lawrence A. Appley remarked that the time had come to substitute the word

leadership for management. Although the concern for leadership is as old as

recorded history, it has become more acute during the last few decades due to

the complexities of production methods, high degree of specialization and

social changes in modern organization13. Leadership dynamics is committed

to encourage you to develop the leader in you -- to become an active

participant in shaping your future and the future of others. In fact for most of

us, at times leadership can be a long and sometimes difficult journey - a


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strenuous uphill climb14. The two main dimensions of leadership dynamics are

as follows:

1.4.1 LEADERSHIP STYLES

Leadership style is the result of the philosophy, personality and experience of

leaders. It also depends upon the types of followers and the conditions

prevailing in an organization. According to their attitude and behavior

patterns leaders are mainly classified as under15: -

1.4.1.1 AUTOCRATIC OR AUTHORITARIAN STYLE

LEADER:

An autocratic, also known as authoritarian style of leadership implies yielding

absolute power. Under this style leader makes all the decisions that relate to

the group and is probably the only source of influence in the group’s

activities16. His most effective techniques in maintaining this leadership

position is by withholding knowledge of goals, not sharing information

required for the task, and not providing feedback to members on their

progress. As he is the only group member with complete knowledge of all

functions and accomplishments, the members are dependent upon him for

goal achievement17.

1.4.1.2 LAISSEZ-FAIRE OR FREE- REIN STYLE LEADER:

Under this type of leadership, maximum freedom is allowed to subordinates.

They are given free hand in deciding their own policies and methods to make

independent decisions. The participative process, although time-consuming,

effectively encourages each member’s input and familiarity with the

problem18. The leader gains additional information from group members as

well as a greater commitment to the decision than would occur under

authorization conditions19.


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1.4.1.3 DEMOCRATIC OR PARTICIPATIVE STYLE

LEADER:

The Democratic or Participative style of Leadership implies compromise

between the two extremes of autocratic and Laissez-faire style of leadership.

Under this style, the supervisor acts according to the mutual consent and the

decisions reached after consulting the subordinates. He allows subordinates to

make all suggestions20. His role becomes that of a general supervisor who

establishes merely the broad policies and outline of things to be done and then

delegates the implementation to his subordinates21.

1.4.2 TRADITIONAL LEADERSHIP THEORIES

Different authors hold different views on the qualities that are considered

essential for effective leadership. Some emphasis on the personal attributes

and traits of leadership, while the others emphasize on the situation in which

the leadership is to be exercised. A few theories of leadership are as follows: -

1.4.2.1 GREAT MAN THEORY:

In the early part of the 20th century, leadership traits were studied to

determine what made certain people a great leader. The theories that were

developed were called ―great man‖ theories because they focused on

identifying the innate qualities and characteristics possessed by great social,

political and military leaders (e.g., Mohandas Gandhi, Abraham Lincoln and

Nepolian). It was believed that people were born with these traits and only the

―great‖ people possessed them. During this time, research concentrated on

determining the specific traits that clearly differentiated leaders from

followers.22

1.4.2.2 TRAIT THEORY:

This theory says that some of the qualities of the leaders are inborn; others

can be developed by management through proper training programmes. There

are various researchers who described different leadership traits which are

essential to become a leader23.


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Table1.2 Trait theory

Stogdill

(1948)

Mann

(1959)

Stogdill

(1974)

Lord,

DeVader

and Alliger

(1986)

Krikpatrick

and Locke

(1991)

Intelligence

Alertness

Insight

Responsibilit

y

Initiative

Persistence

Self-

confidence

Sociability

Intelligence

Masculinity

Adjustment

Dominance

Extroversion

Conservatis

m

Achievement

Persistence

Insight

Initiative

Self-confidence

Responsibility

Cooperativenes

s

Tolerance

Influence

Sociability

Intelligence

Masculinity

Dominance

Drive

Motivation

Integrity

Confidence

Cognitive

ability

Test

knowledge

Source: Northhouse G.Peter, “Leadership theory and practice”, Response Books, Sage Publication, New Delhi, Third edition 2003, Pg18.

1.4.2.3 CONTINGENCY MODEL:

Widely respected as the father of the contingency theory of Leadership, Fred

Fiedler developed the leadership contingency model. Fielder’s theory assumes

that leaders are predisposed to a particular set of leadership behaviors.

Leaders are either task oriented or relationship oriented. He suggested that

three major situational variables determine whether a given situation is

favorable to leaders (i) their personal relations with the members of their

group (leader-member relations) (ii) the degree of structure in the task that

their group has been assigned to perform (task structure) and (iii) the power

and authority that their position provides (position power). Leader-member

relations describe the quality of the relationship between the leader and the

subordinates24.

1.4.2.4 SITUATIONAL MODEL:

Hersey-Blanchard’s situational model also advocates linking leadership styles

with various situations so as to ensure effective leadership, but its perspective

of situational variables is different as compared to Fielder’s Model. This model

was not based on any empirical studies. Hersey and Blanchard feel that the

leader has to match his style with the needs of maturity of subordinates which


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moves in stages and has a cycle. This model is also known as life cycle theory

of leadership and is based on an interaction among three factors (i) task

behavior (ii) relationship behavior (iii) the maturity level25.

1.4.2.5 PATH GOAL THEORY:

Although path goal theory and Fielder’s theory are both contingency theories,

they view the contingency relationship differently. Robert House advanced his

situational theory of leadership based on Ohio state leadership studies and

Vroom’s expectancy model of motivation. According to this theory, leaders are

effective because of their impact on follower’s motivation, ability to perform

effectively and satisfactions. The theory is called Path-Goal because its major

concern is how the leader influences the followers’ perceptions of their work

goals, personal goals and paths to goals attainment. The theory suggests that a

leader’s behavior is motivating or satisfying to the degree that the behavior

increases goal attainment and clarifies the paths to these goals26.

1.4.2.6 MANAGERIAL GRID:

Robert R. Blake and John S. Mouton developed the managerial grid which has

been used as a means of managerial training and of identifying various

combinations of leadership. : (i) Concern for people, and (ii) Concern for

production. There are five representative styles of leadership on the

managerial grid:

1.4.2.6.1 IMPROVISHED LEADERSHIP (1.1):

The first style (1.1) is the improvished management under which the manager

is least concerned with either people or production.

1.4.2.6.2 COUNTRY CLUB LEADERSHIP (1.9):

The Country club management (1.9) which means the management has great

concern for their people but lacks production orientation.


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1.4.2.6.3 TASK LEADERSHIP (9.1):

―Efficiency in operations result from arranging conditions for work in such a

way that human elements interfere to a minimum degree‖. In task

management (9.1) the managers are highly concerned for production. Their

concern for people however is minimum.

1.4.2.6.4 TEAM LEADERSHIP (9.9):

―Work accomplishment is from committed people interdependence through a

common stake in organization purpose leads to relationships of trust and

respect‖. The managers having high concern for production as well as people

fall under this style.

1.4.2.6.5 MIDDLE OF THE ROAD (5.5):

―Adequate organizational performance is possible through balancing the

necessity to get out work while maintaining morale of people at satisfactory

level‖. The managers of this style have medium concern for both people and

production and try to maintain the balance betweenthe two27.

1.4.2.7 LIKERT’S SYSTEM MANAGEMENT:

Rensis Likert was the Director of Michigan Institute of Social Research, U.S.A.

He conducted extensive research for 14 years with the help of 40 researchers

in the field of leadership. Likert treats the organization as a complex system

based on the principle of supporting relationships, in which decision-making,

leadership, motivation, communication and control move together. He

classified leadership styles into four categories:

1.4.2.7.1 EXPLOITATIVE AUTOCRATIC:

In this style, there is no participation of workers because these leaders have no

confidence and trust in subordinates.


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1.4.2.7.2 BENEVOLENT AUTOCRATIC:

There is no proper confidence in subordinates and the relationship is that of a

master and servant.

1.4.2.7.3 DEMOCRATIC:

The subordinates are allowed to participate in decisions involving their lives.

Leader does not have full confidence in them.

1.4.2.7.4 PARTICIPATIVE:

In this style the confidence and trust in subordinates is full and they

meaningfully participate in decision-making28.

1.4.3 EMERGING LEADERSHIP THEORIES:

1.4.3.1 LEADER-MEMBER EXCHANGE THEORY:

The Leader member exchange theory is called the ―Vertical dyad linkage

theory‖. According to this theory, the leaders do not treat all their

subordinates in an equitable manner. LMX theory makes the dynamic

relationship between leaders and followers. LMX theory was first described

28years ago in the works of Dansereau, Graen, and Haga (1975), Graen and

Cashman (1975), and Graen (1976)29.

Fig1.1 Dimensions of Leadership

SOURCE: Adaption from “Relationship-Based Approach to Leadership: Development of Leader-Member Exchange (LMX) theory of leadership over 25 years: Applying a Multilevel, Multi-Domain Perspective”, by G.B.Graen and M.Uhl-Bein, 1995, leadership Quarterly, 6(2), 219-247.

FOLLOWER

LEADER

DYADIC

RELATIONSHIP


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1.4.3.2 CHARISMATIC LEADERSHIP THEORY:

Robert House’s theory of Charismatic leadership developed a set of testable

propositions concerned with identifying the traits of Charismatic leaders, the

behaviors used by these leaders and the conditions under which such leaders

may merge. House contended that the identification of leader traits, leader

behaviors and situation characteristics that may result in the emergence of

charismatic leaders is important because these type of leaders have

extraordinary effects on followers30.

1.4.3.3 TRANSFORMATIONAL LEADERSHIP:

According to Bernard M. Bass, transformational leadership emphasizes four

behavioral components: idealized influence, individualized consideration,

inspirational motivation and intellectual stimulation.

1.4.3.3.1 IDEALIZED INFLUENCE:

The transformational leader serves as a role model for followers. Because

followers trust and respect the leader, they emulate the leader and internalize

his or her ideals.

1.4.3.3.2 INDIVIDUALIZED CONSIDERATION:

The transformational leader recognizes variations in skills, abilities and

desires for growth opportunities among subordinates. A key part of

individualized consideration is the degree to which the leader shows genuine

interest in the subordinates.

1.4.3.3.3 INSPIRATIONAL MOTIVATION:

Transformational leaders have a clear vision that they are able to articulate to

followers. These leaders are also able to help followers experience the same

passion and motivation to fulfill these goals.


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1.4.3.3.4 INTELLECTUAL STIMULATION:

The transformational leader’s ability to build high awareness of problems and

solutions. They stimulate their subordinates to image new and different future

states for the group31.

Every organization, whether for profit or non-profit, depends on successful

and effective leadership to provide direction. Every organizational issue, every

management decision that is made or postponed, is ultimately a product of

leadership. Find an organization achieving excellence and you will find

leadership effectiveness. Find failure, and you will find leadership failure as

well11. The concept of leadership becomes more relevant when it comes to

service sector like life insurance, where a customer requires recurring services

with utmost satisfaction. Unlike normal business of tangible products,

customer satisfaction is difficult to manage in life insurance sector, as it comes

through continuous service from an employer for years together. Be it delivery

of policy, premium deposits, death claims, payment on maturity or any other

vital updated information. This is next to impossible if organizations are not

led effectively. So, in the above context, the dynamics of leadership becomes

more crucial and would collapse if not handled properly with utmost care.

1.5 ORGANISATIONAL PROFILES:

The study incorporates two organizations representing public and private

sectors. Both the chosen organizations are leaders in their respective sectors.

A brief profile of the selected organizations can be summarized as follows:

1.5.1 LIFE INSURANCE CORPORATION OF INDIA

The Parliament of India passed the Life Insurance Corporation Act on the 19th

of June 1956, and the Life Insurance Corporation of India was created on 1st

September, 1956, with the objective of spreading life insurance much more

widely and in particular to the rural areas with a view to reach all insurable

persons in the country, providing them adequate financial cover at a

reasonable cost.


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Today, LIC functions with 2048 fully computerized branch offices, 100

divisional offices, 7 zonal offices and the corporate office. LIC’s Wide Area

Network covers 100 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 Centres 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 policyholders, 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. The

Corporation directly operates through its branch offices at Port Louis in

Mauritius, Suva & Lautoka in Fiji and at Wembley in the United Kingdom.

LIC continues to be the dominant life insurer even in the liberalized scenario

of Indian insurance and is moving fast on a new growth trajectory surpassing

its own past records. The organization still remains the largest life insurance

company accounting for 64% market share. The number of employees

working for the corporation as on 31st March 2009 is 1,14,916. LIC offers a

wide variety of products which fulfills the needs of different segments of the

society. As at the end of the financial year 2008-09, the corporation had 52

plans available for sale. During the year the corporation introduced 6 new

plans viz. Money Plus-1, Market Plus-1, Jeevan Bharti-1, Child Fortune Plus

and two closed ended plans viz Jeevan Astha and Jeevan Varsha32.

The corporation aimed at providing life insurance services primarily to the

rural masses and the socially and economically backward sections of the

Indian society. It also aims at promoting the people for saving their money,

and offers attractive savings features along with various insurance policies.

During the financial year 2006-07, the total number of Life Insurance


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Corporation of India policy holders were more than 200 Million, which was

equal to the population of fourth largest populous country in the world at that

time.

Life Insurance Corporation of India has a number of subsidiaries which helps

it in leveraging its potential to the maximum, providing an enhanced set of

diversified services to its customers. These subsidiaries include LIC

International, LIC Nepal, LIC Lanka, LIC Housing Finance and LICHFL Care

Homes33.

1.5.2 BAJAJ ALLIANZ LIFE INSURANCE

Bajaj Allianz Life Insurance Co. Ltd. is a joint venture between two leading

conglomerates- Allianz AG, one of the world's largest insurance companies,

and Bajaj Auto, one of the biggest two and three wheeler manufacturers in the

world. Bajaj Allianz Life Insurance has over 40, 00,000 satisfied customers, a

countrywide network of 876 offices, assets under management Rs. 5,500 cr.

and shareholder capital base of Rs. 700 cr.

The company’s headquarter is in Pune. The Allianz Bajaj joint venture was

incorporated on 14th march 2001, between Allianz AG and Bajaj Auto Ltd. The

German promoter Allianz AG is one of the leading global insurance companies

with its headquarters in Munich, Germany. It was established in 1890 and has

over 700 subsidiaries and approximately 120,000 employees worldwide. The

Allianz group network extends over 70 countries in Europe, the South and

North Americas, Africa, Middle East and Asia pacific. It serves approximately

60 million clients around the world and provides some form of insurance

coverage to almost half of the fortune 500 companies; almost 60 percent of

sales are generated outside Germany. Its core business is in life insurance,

general insurance, health insurance and asset management. It is worldwide

number one on the basis of gross written premiums and worldwide number

two-bye market capitalization.


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Bajaj Allianz Life Insurance Co. Ltd. was incorporated on 12th March 2001.

The company received the Insurance Regulatory and Development Authority

(IRDA) certificate of Registration (R3) No 116 on 3rd August 2001 to conduct

Life Insurance business in India. Bajaj Allianz Life Insurance Company

Limited is a Union between Allianz SE, one of the world’s largest Life

Insurance companies and Bajaj Auto, one of the biggest two and three wheeler

manufacturers in the world. Allianz SE is a leading insurance conglomerate

globally and one of the largest asset managers in the world, managing assets

worth over a Trillion Euros (Over R. 55,00,000 crores)34.

The organization’s market share is of 7.4 per cent among private sector life

insurers in 2003-04 in terms of first year and single premium collected In the

April to July quarter of 2003-04, as per the IRDA figures, BALICL had moved

up to the 3rd position amongst private insurance companies. Bajaj Allianz Life

Insurance Co. Ltd was granted renewal of IRDA Certification on 28th March

2006.

1.6 NEED OF THE STUDY

The insurance industry has been growing between fifteen and twenty percent,

but it lags far behind its global counterparts. The main reasons are as follows:

-

1. Lack of products as per market requirements.

2. Low awareness among the general public.

3. Term- Insurance Plans are not properly promoted.

4. Returns from Insurance Products are low.

5. Inefficient management and leadership.35

There is huge competition in the Indian life insurance sector between the

public and the private players. All big companies have jumped in life

insurance like Bajaj Allianz, ING Vysya, AMP Sanmar, ICICI Prudential, Birla

Sun life, TATA AIG, Kotak Mahindra, Max New York, Met life India and many

more. There is also a high-class competition between these private players.

The two challenges that are faced by the life insurance companies are of


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maintenance and growth. They need to improve leadership and they need to

check their leadership dynamics36.

Since, the profile of insurance sector has changed from traditional plans to

market linked plans, there are various challenges related to changing

leadership scenario. In order and to handle uncertainties of share market, to

maintain respective position, to grow and satisfy investors and to match their

expectations, refinement and reshuffling of leadership dynamics is quite

important, hence the present topic “Changing Scenario of Leadership

in Insurance Sector: A Critical Appraisal of Life Insurance

Corporation of India and Bajaj Allianz” is contemporary and selected

for the present study.

1.7 OBJECTIVES OF THE STUDY

In the light of assumption that a new modified leadership dynamics in

organizations can encourage considerably the moral and enthusiasm of

employees, the researcher in order to make study scientific and systematic,

has framed the following objectives to be achieved:

1. To study leadership styles prevailing in L.I.C. and Bajaj Allianz.

2. To examine theories of leadership followed in the organizations.

3. To know the effectiveness of leadership in the organizations respective

performance.

4. To analyze the impact of leadership in employees’ development in both

the organizations.

5. To conduct SWOT analysis and recommend some leadership tips for

further improvement


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Fig1.2 Conceptual framework of Leadership

1.8 CONCEPTUAL FRAMEWORK OF LEADERSHIP

In order to achieve these objectives the researcher has developed the above

stated model depicting relationship between the three important constituents

i.e. leadership styles, performance of organizations and employees’

development. The researcher has been also intended to study to what extent

leadership style is accountable in performance of the organizations and

employees development. To have microscopic view the researcher has studied

the impact of different factors on each other.

1.8 RESEARCH METHODOLOGY

To achieve the above stated objectives the researcher has collected both

primary as well as secondary data. For collection of primary data the

researcher has framed a self structured questionnaire based on selected

Leadership parameters and administered on selected sample profile as

follows:

H02

H01

H03

LEADERSHIP STYLES

PERFORMANCE OF

ORGANIZATIONS

EMPLOYEES’

DEVELOPMENT


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1.8.1 SAMPLE PROFILE

Table1.3 Sample Profile

S.NO.

CATEGORY

BAJAJ ALLIANZ LIFE INSURANCE

CORPORATION OF INDIA

DESIGNATION

POPULATIO

N

SAMPLE SIZE

DESIGNATION

POPULATION

SAMPLE SIZE

1. Top level managem

ent

SM, BM, AM, SOO

52 5

SDM, ADM, SBM,

AO, BM

188 19

2.

Middle level

management

DAM, AM

88 9 ADO, PDO, DO

252 25

3. Floor level managem

ent OE, SM 1760 176 STAFF 625 63

Total 1900 190 1065 107

Source: Primary survey

GRAND TOTAL (190+107) =297

1.9 JUSTIFICATION OF SAMPLE SIZE

As far as LIC (Life Insurance Corporation) of India is concerned there are

2048 branch offices, 100 divisional offices, 8 zonal offices and the corporate

office throughout the nation. So, the researcher in order to be specific, has

chosen Agra zone for the above study, which includes Agra CBO 1, 2, 3, 4, 5, 6,

Agra CAB, Agra DBO, Auraiya, Bhartna, Etawah, Farukhabad, Fatehabad,

Fatehgarh, Firozabad1, Firozabad2, Kannauj, Mainpuri, Sikhohabad, Tundla.

In case of Bajaj Allianz the entire network has been divided into 5 Zonal

offices and 15 State offices and Area offices. The researcher has selected Agra1

(Tundla, Etawah, Mainpuri) and Agra2 under U.P. State 3 office and Lucknow

Zonal office.

Since both the organizations are leaders in their respective sector, the

researcher has chosen Agra zone and Agra1 and Agra2 zone in order to equate

the population to some extent. As leadership styles are common, the


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researcher perceives the same impact on the entire network of both the

organizations. To be more specific 10 percent of the population has been

selected as sample size. The researcher executed the self-structured

questionnaire to the organization personnel at the above stated places. The

respondents have been selected by using stratified random sampling method.

For secondary data all related published materials has been used. In addition

to this, the researcher has consulted various institutions, libraries where the

researches are conducted in similar areas. However, research journals,

periodicals, research thesis, newspapers, policies framed by the organizations,

special issues published by other agencies have also been taken into account

for proper analysis, interpretation and generalization of findings of the

present study.

In addition to the above stated general research methodology, the researcher

was keen to use the following specific methodology for attaining the

objectives.

Table1.4 Objectives and Methodology to be used

S.NO. OBJECTIVES METHODOLOGY TO BE USED

1. To study leadership styles of L.I.C. and Bajaj Allianz.

Data collected through self-structured tool and analyzing the various conditions prevailing in the selected organizations.

2. To examine theories of leadership followed in the organizations.

Examining various aspects of the attributes and situations by collecting relative responses of the sample size chosen.

3. To know the effectiveness of leadership in their respective performance.

Choosing parameters responsible for effectiveness of leadership and comparing them on the basis of continuum or five-point scale.

4. To analyze the impact of leadership in employees development.

Magnifying the impact of leadership programmes introduced by organizations during the last five years.

5. To conduct SWOT analysis and suggest some leadership tips for further improvement.

Collecting adequate information from primary as well as secondary sources through survey.


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1.10 HYPOTHESES

In order to have scientific profile of changing scenario of leadership in related

organizations the researcher has tested the validity of the following null

hypothesis with reference to objectives and developed model:

H01 There is no difference in leadership styles prevailing in the

organizations.

To have a precise and in-depth analysis of various leadership styles, the

researcher has further categorized this null hypothesis into three sub-

hypotheses which can be stated as follows:

H01.1 There is no difference between the Autocratic style of leadership

between the two organizations.

H01.2 There is no difference between the Democratic style of leadership


H01.3 There is no difference between the Laissez-faire style of leadership


H02 Leadership styles followed in the organizations and

performance of organizations are independent to each other.

The researcher has further categorized this null hypothesis into three sub-

hypotheses which can be stated as follows:

H02.1 Autocratic style of leadership followed in the organizations and

performance of organizations is independent to each other.

H02.2 Democratic style of leadership followed in the organizations and


H02.3 Laissez-faire style of leadership followed in the organizations and



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H03 Leadership styles have no relationship with the development

of employees.

In case of third null hypothesis also, the researcher has framed three sub-

hypothesis which are as follows:

H03.1 Autocratic style of leadership has no relationship with the

development of employees.

H03.2 Democratic style of leadership has no relationship with the


H03.3 laissez-faire style of leadership has no relationship with the


1.11 STATISTICAL TOOLS

To test the given hypotheses and survey findings scientifically, the researcher

is keen to analyze data by using appropriate statistical methods like weighted

average, correlation, frequency distribution and suitable tests of significance.

1.12 LIMITATIONS OF THE STUDY

As one knows, limitations are found everywhere in every walk of life. All

accomplishments in life, big or small take place with some hurdles or

obstacles. Considering this universal thought, the researcher, in spite of

putting the best effort could not escape from certain limitations, which can be

summarized as follows:

The study is confined to Indian Insurance industry and includes only

top two leading organizations in their respective segment.

The sample was drawn from Agra, Aligarh, Mathura, Firozabad,

Mainpuri, Hathras etc. only, assuming that rest of country following

the same trends of leadership.


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While collecting secondary data, it was difficult for the researcher to

obtain some of the data due to some confidential or unknown

reasons.

Though the researcher has incorporated significant theories and

styles of leadership in the study, yet a few more upcoming styles and

theories could also be accommodated.


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REFERENCES

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6. Gupta Shashi K., Joshi Rosy, “Human Resource Management”, Kalyani

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Resource”, Tata Mc. Graw Hill Publishing Co. Ltd., New Delhi, 1993 I

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17. Lal Jauhari, “Leadership Styles and Power Sharing in Business Enterprise”,

Himalaya Publishing House-New Delhi, First edition 1985, pg.7




Himalaya Publishing House-New Delhi, First edition 1985, pg.8


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Himalaya Publishing House-New Delhi, First edition 1985, pg.8.

22. Northhouse G.Peter, “Leadership theory and practice”, Response Books,

Sage Publication, New Delhi, Third edition 2003, Pg15.

















31. http://psychology.about.com/od/leadership/a/transformational.htmwww.l

ic.org

32. www.lic.org

33. http://www.iloveindia.com/finance/insurance/companies/lic.html

34. iwww.bajajallianz.org

35. http://www.domainb.com/finance/insurance/allianz_bajaj_life/aims.html

36. Albanese Robert, “Managing towards Accountability for Performance”,

Richard D.Irwin Inc., Ontario, 1981, III Edition.

37. Winder E. Richard, “Five Dimension Leadership”, ASQ Quality Congress,

May 2000.

1.1 background of indian insurance...

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