the trust within

8/4/2019 The Trust Within

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Case Study of the Life Insurance Corporation of India (LIC)

Noel MachadoMay 2010


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Case Study of the Life Insurance Corporation of India (LIC)

This Research report

1

, is in three main parts:1. Overview of performance at LIC2. Nature, Antecedents and Consequences of Trust

3. The bridge between business strategy & HR practices: Trust at LIC

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The Life Insurance Corporation of India, established in 1956, is an extraordinary organisation.

LIC operates at very large scale and efficiency2:

There are only four countries in the world with a population greater than the number of LICscustomers (208.10 million)3.

With revenues of US$ 43834 million, LIC is the 8th largest life-insurance company in theworld, and bigger than 325 companies of the Fortune 500 list. (Table 1). Its assets of USD192.49 billion exceed GDPs (IMF, 2009) of over 75% countries of the world.

In the ten years since 2000, LIC increased its revenues by 385% and valuation-surplus by194%. At the same time, it has reduced key costs (as a percentage of premium income):operating expenses by 42% and payroll by 61% (despite salary increases and withoutretrenchment). (Table 2).

LIC is an organisation of national importance:

LIC contributes about 3.2% to Indias GDP and annually deploys over 15% of its funds ininfrastructure projects & social investments. In a developing country where social-security isvirtually non-existent, LIC plays an invaluable role in managing the savings and risks of policyholders.

LIC insures about 19% of Indias population and contributes the lions share (over 60%) toIndias life-insurance penetration ratio4 and life-insurance density5. In 2007, the countrys life-insurance penetration ratio at 4.00, was close to the worlds average (4.40) and the best among

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1Noel Machado led the research and wrote this report. Noel is a visiting professor associated with the Tata Institute of Social Sciences,the Mumbai Business School, the Symbiosis Centre for Management & Human Resources Development, and the School of InspiredLeadership. The research project was funded by the Society for Human Resources Management (SHRM) India (www.shrmindia.org).

2 Unless otherwise stated, LIC data is for the fiscal ending March 31, 2009. Currency conversion @ US$ 1 = INR 45.69

3There are 223 countries in the world (United Nations, 2009). Countries with population greater than number of LIC!s customers are

China, India, United States and Indonesia.

4 Premium as a percentage of GDP

5 Premium per Capita


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BRIC nations (Table 3). From 2001 to 2007, Indias life-insurance density increased about344% (from US$ 9.1 to US$ 40.4) while the worlds average increased approximately 52%(Table 4). Such growth is commendable especially considering Indias GDP-per-capita isgrowing about 7.5% annually (OECD, 2007).

LIC also contributes to augmenting the financial savings in the country. Life funds accountedfor about 2 percent of financial savings of households in 2002-03 and this has increased toabout 18 percent in 2007-08 ... contributing to the total savings of the country (Kannan, 2010).In a recent customer survey, 88% respondents in India said they use insurance primarily as ameans to improve personal finances, compared with 11% of respondents from maturemarkets (Cap Gemini and EFMA, 2008).

Although LIC invests only upto 15% of its funds in equities, it remains the single largestsecondary-market investor in India. It is also the largest holder of government securities.

LIC creates significant value for its Customers and dominates the life-insurance industry inIndia:

LIC dwarfs the other 21 life-insurance players in India. It closed the fiscal 2009 with 2966offices, 115 thousand employees, approximately 1.4 million agents and 322.5 million lives(policies) under coverage. Despite losing its monopolistic position in 2000, LIC continues togrow and out-beats competition. In 2009, LIC retained over 70% market-share6. Itsinvestment-income alone is greater than the combined premium-income of its competitors.

In comparison with its competitors, LIC returns 5% more surplus to its customers7. Despite themassive scale of its operations, LIC delivered remarkable claims-settled ratios: 99.74% (maturity& survival benefit) and 97.79% (death claims).

In 2008, for the fifth consecutive year, LIC ranked first as the most trusted service brand in theEconomic Times brand-equity survey of India. In 2009, LIC ranked first among Indias top-50service brands (Pitch/IMRB international survey).

Look at LIC from any perspective and you will find spectacular performance. LIC is fully owned bythe Indian government; and given the popular perception that privately-managed organisationsperform better, LICs stellar success and dominating growth is intriguing.

What makes LIC so extraordinarily successful? Why do millions of customers trust LIC? To whatextent do LIC employees trust each other?

Between November 2009 and March 2010, I had individual meetings with twenty-three LICians toexplore the central hypothesis:

LIC has institutionalized a culture of Trust within its organisationwhich is what causes its extraordinary success.

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6 based on Number of Policies sold

7LIC returns 95% of its valuation surplus to its policy holders and pays the remaining 5% to its sole shareholder (i.e. the Government ofIndia)


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It was sharp 12:15 p.m. on February 18, 2010, that I was ushered into the office of T. S. Vijayan. The45 minutes that followed were, for me, an experience of unexpected opposites co-existing inharmony. Vijayan had a spring in his step that seemed out of place with a very calm disposition. I

also felt it odd that a well-built, over 6 feet tall, impeccably attired man - was as soft-spoken andunassuming as he.

As Chairman of LIC, Vijayan is among Indias most powerful business leaders. I had imagined thatsomeone responsible for assets worth more than US$ 192 billion, would be hurried and have a short-attention span; that the thousands of people who defer to him would have habituated him to feel &behave superior to others. Unlike other business leaders of India, Vijayan is rarely seen in themedia ... and I had been informed that he is a private person. The interview did not start asexpected: my voice-recorder refused to work and while I fiddled with it for what was anembarrassingly long minute, I noticed that Vijayan sat patiently and reassuringly. And, as we begantalking, I was pleasantly surprised with the spontaneity, simplicity and unreservedness of his

responses. Yes, Vijayan was everything I did not expect. Early in the conversation, the Chairman ofLIC defined Trust in a way I had not encountered in academic literature:

It is easy to talk of Trust when everything is smooth. People get used to their comfortsand habits, like a dirty blanket that no one wants to change ... such Trust can become apressure to maintain the status-quo. Trust at LIC is a story of innovation and conviction - astory of Courage!

The Nature of Trust

It is important to recognize that the concept of Trust is relevant only in the context of vulnerability and

risk. If there were no risk then the question of trust would not arise ... without vulnerability, there isnothing to trust.

Behaviorally speaking, Trust is a process which involves:

1. The willingness to take risk; and2. Actual taking of risk

From a psychological perspective:

1. Trust is a state of mind characterized by the sense of certainty, order, safety and assuredness -

which enables one to take risk; while ...2. The lack-of-trust involves the sense of insecurity, uncertainty, disorder, ambiguity and -

unwillingness to take risk.

Therefore, one could say that management of risk is the management of trust! What better place tostudy trust than at an organisation which manages risk, and says, Trust - thy name is LIC!

Antecedents & Consequences of Trust

Over the last fifty years or so, western academicians have sought to explain risk-taking (or trusting)behaviour. However, there dont seem to be any contemporary Indian (or Asian) models of Trust.Western literature varies based on the scholars disciplines such as psychology, sociology,management or economics.

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Early behavioral conceptualizations were simplistic, and generalized trust as a trait -something ascribed or conditioned but fixed (the view that a person is either trusting/trustworthy, or not). Subsequent discourse in psychology suggested that trust occurs in therelational process between individuals.

Management theory has been quasi-recursive8 with some confusion about whether the chickencame first or the egg. For example: do you trust people because of their competence

(antecedent), or do people become competent (consequence) when they are trusted? Otherantecedents explored by management theorists include integrity, benevolence andpredictability/consistency.

Sociological theory about deviance and criminology has approached trust from a social-controls perspective; while theories about social-change have explored the role of values &identity in social order.

Economists on the other hand have been more concerned with consequences of trust and haveshown that Trust leads, among other things, to co-operation.

From western literature, it seems that proxies for the presence of trust are: co-operative inter-personalrelations, controls & good governance, order & predictability, competence, benevolence, integrity,and shared values & identity.

What is it that makes people trust?

Answers to above question might just be hidden in the etymology of the words Insurance andPolicy. Despite the varied cultures and history of the world, all societies singularly use the terminsurance policy.

Insurance Policy (Western Etymology)

The words insurance and policy originate from Greek:

en = to makesuer = sure or safepolicy = governance or controls

Therefore, insurance policy can be considered a synonym for Trust.

Control theory9 is consistent with above etymology - that in the face of risk, if controls that canmanage the risk are instituted, then one is more willing to take the risk. For example: a limit-priceon a stock-purchase order, such that you will not buy above the specified limit, is that control which

manages risk and enables one to trust. This approach suggests that trust is a cognitive process. It isanother interesting coincidence that Containment theory10 was first proposed by Walter Reckless[sic]. Reckless (cited by Kelley, 1996) said that deviant behavior occurs when social and personalcontrols are weak. Such theories assume that human behaviour is rational ... that higher/bettercontrols cause conformity of behaviour and therefore the sense of predictability or safety in society.

One of two people - given the same controls - may take the risk while the other might not. Forexample,!a person spends all her money in the belief that she will have (or receive) money whenevershe needs it. She doesnt have any specific control mechanism but hasnt yet been proven wrong ...thereby reinforcing her trust around spending. However, others may not agree with such beliefs and

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8

A routine or process - of which a part requires the application of the whole.

9 in Dynamical systems

10 in Sociology: Criminology


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consequently may be more prudent than her. This example indicates that trust is very challenging tomeasure because:

1. Trust can be non-rational and is not absolute2. People can and do trust even without controls, and the converse is equally true3. The idea of an enduring culture of trust is conceptually at odds with its temporal nature4. There is a reciprocal relationship between the antecedents and consequences of Trust5. One cannot measure trust itself - any measurement is projected from presenting symptoms

or proxies

Moreover, at the inter-personal level, the idea that controls cause trust is dissonant with the conceptthat independence (sense of freedom) causes trust. It is the general human experience that we trustthose people most who love us unconditionally (without controls).

Insurance Policy (Ancient Indian Etymology)

Verse 22 in the 2nd Chapter of the Bhagavad Gita11 speaks of Yogakshemam Vah!myaham.

Yoga = to achieve (what one does not have; quasi-endowment)kShema = to protect or preserve (what is possessed; quasi-risk-cover)Yogakshema = Insurance (to achieve and protect)Vahamyaham = to carry (responsibility)

The verse translates to:

As for those who worship Me, thinking of Me alone and nothing else; ever attached to Me, Ibear the burden of getting them what they need.12

Persons who, meditating on Me as non-separate, worship Me in all beings; to them thus everzealously engaged, I carry what they lack and preserve what they already have.13

The Indian scriptural understanding of Insurance is dramatically different from western models.Whereas, western etymology of insurance and academic literature about trust, focus on Controls asantecedents of trust; the Bhagavad Gita speaks of Trust as the starting point with no mention of anycontrol or cause. A leap of courage or faith is posited as the pre-requisite for insurance. Theseparation of result from ones effort - the rejection of causality - such that responsibility for results isreposed in God. The belief in oneness (non-separateness from God and from all beings) suggests anequal respect, even unconditional compassion, for others as for oneself. Interestingly, traditionalwestern models of insurance only considered risk-cover; while the Gita first alludes to endowmentand then to risk-cover.

This Case study is based on an integrated model of Trust (from contemporary Western and ancientIndian perspectives); it explores the degree to which the following five themes of Trust (Figure 1)14 areobserved at LIC:

CourageCollaborationCompassion

ControlsCredibility

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11 composed between the 5th and 2nd century BCE

12

Translation by Mahatma Gandhi

13 Translation by Swami Swarupananda

14 Figure 1 provides a summary of HR and Business practices at LIC - classified as per themes of Trust proposed by the Author


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This study considers HR policy (official rules, processes i.e. controls) to a limited extent; and explores

cultural norms (unwritten, unregulated HR practices) in greater depth. Such HR practices (classifiedwithin the five themes of trust) are studied in the context of LICs business strategy & practices.

Firm resolve, faith in oneself & colleagues ... the protection of values without fearor favor, and consistent follow-through of convictions even when it means treadingthe unknown or unfashionable path.

Most management scholars and business strategists advocate specialization and division-of-labour asthe means to building efficiencies at Scale. The industrial revolution is a prime example of largebusinesses achieved through division-of-labour; and this strategy of specialization remains dominanteven today.

However, LIC has quite courageously done the opposite: large-scale success at LIC is engineered, notby specialists, but by generalists - who are products of the counter-intuitive HR practice of managingscalar risk through job-rotation. LIC does not also practice lateral hiring (a popular approach to talentacquisition & growth); instead it invests in shaping officer-recruits (over a period of 8 to 10 years) intogeneralists-cum-entrepreneurs who appreciate its overall business and interdependent needs ofmultiple stakeholders.

Each year, about 10% of its workforce is relocated to new roles and/or functions (via transfers and/orpromotions). Last year, over 10,500 employees were moved across 2996 offices spread all over India- and much of this mobility was effected during April and May 2009. Such rotation occurs at alllevels in the officer cadre and also at the level of Managing Directors, MD15.

In a voice filled with conviction, Thomas Mathew16 said to me:

If someone talks of a problem in Gauhati, I can visualise that ... I was there. Not onlyme ... we all are like that, we can relate to it. It is only job rotation that helps us know theculture, the ethos.

The scale and frequency of job-rotation causes hardship to those who are transfered and to those thatare not. Often, Transferees have to relocate to new cities where the local language, food and culturecan be quite different from ones own. The spouse and children of the transferee also face challengesof change. If the transfer has been to a function (department) one has not worked in before, thenthere is an additional learning-curve to cope with. This also places demands on those who are nottransfered - like parting from colleagues they might have become friends with - and having to supportthe learning of new colleagues who are transfered-in to their office/function. It is important torecognize that India remains a culture where people have strong family ties - and it is never easy toleave ones parents, siblings and other loved ones behind.

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15

LIC has three Managing Directors whose portfolios are rotated every two years or so.16 Thomas Mathew, Managing Director (Investment - operations, monitoring and accounting, risk management and research; pensionand group schemes, marketing (CLIA), finance & accounts, office services & estates, engineering, HRD, Audit, ManagementDevelopment Centre)


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Despite the personal cost and the professional challenges involved in transfers, every person I met atLIC supported the practice of job-rotation. A Senior Divisional Manager who had 16 transfers in his32 years of employment with LIC said job-rotation had enriched him. Views of some other LICiansare below:

Specialization can sometimes make people insensitive to the overall Vision and causeconflict of interest17 ... it would make jobs monotonous18

Job rotation helps in multi-skilling and in building leadership qualities19 ... it enables oneto have a birds-eye view of all departments and then you cannot be taken for a ride; itsupports the holistic growth of a person20 ... it meets the needs of both the organisationand the individual21 ... Transfers should be brought down to lower cadres also22

We have taken generalists and churned out specialists: in fund management, actuarialsciences, technology and engineering23 ... LIC is an organisation that makes specialistsout of generalists and generalists out of specialists24

In preparation for their new roles, LIC offers employees a five-day induction and that too for people atselect career-levels only. I cannot imagine that the 5-day induction fully prepares any individual for anew job; and since large-scale rotations are effected all at once, some people have to wait for a yearor more to receive their induction. Meanwhile, as one Branch Manager said, you are put into thewater and there you have to swim.

It may very well be that information technology, IT, helps LIC succeed at large-scale transfers. LICscommitment to technology is another courageous saga. The corporation is a technology pioneer:through out its history, LIC adopted the most advanced computing technology available at that pointof time. LIC bought their first mainframe computer in 1967 when maybe one or two otherorganisations in India had one. They continued their IT investments even through the early nineties

when they ran into opposition from Unions. Vijayan explained how they overcame resistance:

People genuinely believed that IT would lead to job losses; they used the phrasecomputer man-eater. But somebody stuck his neck out ... nobody remembers the nameof this leader, and people gradually saw the benefits. Now everybody including Unionleaders, are proud of our technology

LICs conviction and investments in technology must be seen in the context of those early days (sixtiesand seventies) when there were no technology-outsourcing companies, nor were there any software-products for the Insurance sector. Therefore, LIC was not just investing funds in technology, it wasrotating its employees (mostly non-engineers) into roles where people learnt programming and

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17 D. Tarafdar, Executive Director - Customer Relationship Management, CRM

18 Ruta Ajgaonkar, Senior Branch Manager

19 Kalyani Sridharan, Divisional Manager - New Business

20 D. K. Mehrotra, Managing Director (Marketing, marketing (ULIP), (B&AC), Direct Marketing, field personnel training, product training,microinsurance, international operations, corporate communications, health insurance, inspection).

21 S. K. Thakur, Senior Divisional Manager

22 An Assistant Administrative Officer, AAO

23

A. K. Dasgupta, Managing Director (Personnel, information technology - Business Processes and Software Development; Actuarial,underwriting and reinsurance, customer relationship management, new projects, CPIO, Legal and HPF, Board Sectt., Golden Jubileefoundation, LIC consultancy services).

24 N. Mohan Raj, Executive Director - Investment Operations


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developed their own software. In 1980, Vijayan was one of the people selected and transfered into,what then was called EDP (Electronic Data Processing). By this time, IT companies were sellingsoftware development services. Vijayan recalled when in 1983 CMC proposed that LICs IT functionbe outsourced to them, M. G. Diwan25 had remarked as long as I am alive, this work will remainwith us.

LICs relentless commitment was not simply about procuring technology ... it was about developingthe core-technology themselves. Instead of outsourcing, LIC sends its professionals to organisationsthat offer software training (including CMC), and whats more: LIC practices insourcing i.e. itborrows technology professionals (from leading IT companies) to act as in-house coaches to LICsprofessionals.

LIC started networking its branches in 1994 when bandwidth was hugely expensive. By the year2000, they had networked all Branches (more than 2000 in number) spread all over the country. InNovember 2006, LIC launched Indias biggest data-warehouse, a 60-terabyte solution that updates afew million transactions in real-time, and is bigger than that of any Insurance company of the world.When I enquired about the core principle that has guided LICs technology agenda, Tarafdar promptlyreplied Lay the infrastructure for tomorrow!

So, are induction and technology the sufficient conditions (controls) that enable practices of job-rotation and generalization to succeed? Will only technology & training cause people in new roles tobuild trust in new relationships with colleagues, agents and customers?

I remained intrigued with how LIC manages to generate trust within itself and with customers to faroutperform a competition that has adopted the proven path of specialization ... until I heard aSenior Divisional Manager say:

I owe my success at LIC in no small measure to the many assistants & juniors whocoached me without any quid pro quo.

To be inclusive and cooperative ... to work jointly and willingly, without coercionor inducement; to help each other ... such that shared goals are more importantand everything else including hierarchy or personal rewards are not.

Dominant HR perspectives about on-the-job Coaching indicate that it is the role of a Manager to

coach his/her subordinates. Like in all successful organisations LIC Managers also coach their teams.In addition, LIC has elaborate manuals26 which provide detailed descriptions of processes &responsibilities, and are invaluable to the newly hired/transfered employee. However, what makesLIC unique is that its culture is embedded with the practice of Juniors coaching Seniors.

Kalyani Sridharan was of the view that in your new post, naturally, you have to depend on your sub-ordinates and the manual. Nalini Ananthanarayan27 said, You get advice, guidance and supportfrom Seniors, but the real operational work you learn from manuals and Juniors. When knowledgecan be considered as power, how is it that LIC people trust their seniors enough to part withknowledge and coach them? Is it not better for a junior to have a dependent-boss?

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25

At that time, LIC!s Executive Director - Actuarial (later, Chairman)

26 Earlier, Manuals were in printed form; these have been replaced with electronic versions

27 Assistant Divisional Manager - Claims


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The following transcript from my interview of a Branch Manager, BM, is typical of the conversationsIve had on this subject:

BM: In my various jobs, I have learnt from bosses, colleagues and subordinates ...but I think I learnt more from subordinates.

Me: Why did your Juniors teach you ... wouldnt it have been better for them if theyknew more than you?

BM: That was never the case ... they were very free to part with their knowledge.

Me: What is the reason for that?

BM: Perhaps ... they wanted a person who could manage things well.

What such examples do not indicate is that upward-coaching occurs at LIC without official policy,pressure or incentive. When I asked Mohan Raj why Juniors help their Seniors, he replied saying:

See, in LIC it is necessary that a Junior should help you; because sometime you may betransfered to a new department, or to a new place where the work-culture is different,and sometimes you may be going to a new place where the language itself is different.How can you succeed without their support?

Juniors dont have to help - but then, it is sort of the ethos of the organisation. Everybodyhelps. And, in some cases it may happen the other way also ... first they will test you:whether you know the procedures, and they will want to know how sharp you are. If youare competent then they will help you

Some LIC people may coach their bosses if they consider them competent; others may offerunconditional help. Whatever the case, people at LIC undoubtedly place a premium onperformance and collaboration. These efforts of upward-coaching are widespread and discretionary -demonstrating that LIC has a highly engaged workforce. Importantly, without upward-coaching, job-rotation would not work ... if job-rotation didnt work then LICs strategy of generalization &entrepreneurship would have no chance to succeed.

Academicians agree that collaboration is a predictor of success. However, does collaborationmediate the relationship between job-rotation and performance? In other words, does job-rotationlead first to collaboration which in turn causes success? If so, then job-rotation can be considered anintentional and powerful HR strategy for collaboration.

Collaborative success is not about people agreeing with each other; on the contrary, difference andcreative-conflict is essential to innovation and performance. Job-rotation reduces possibilities ofbuilding turfs and of accumulating vested-interest; it enhances diversity and interdependence; itcauses development of a macro perspective and possibly also enables people to separate issues frompersons. In Mohan Rajs words, there are disagreements at work; but due to transfers, everyoneknows that there is no local axe to grind and afterwards the relationships get stronger. Severalpeople at LIC spoke about the quality of their relationships with colleagues. Mathew said LIC people not only help each other in their careers but also at a personal level; while Tarafdarexpressed, there is an emotional element to relationships at LIC ... people care for each other.Ananthanarayan commented Personal relationships continue for a long time and in some cases thefamilies also become friends.

The nature of collaboration which I noticed at LIC continued to fascinate me. Although in this study, Ifocussed on that which LIC excels at, I was also curious about how LIC manages situations of poor

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performance. People (in any organisation) can perform poorly in a range of contexts, includingnewness to job, different attitude, difficult bosses, tough market conditions, inadequateresources, free riding and personal challenges. For similar reasons, people at LIC also perform atvaried levels of excellence; but it is their responses to the subject of performance-related-incentive,PRI, that really surprised me.

Before discussing what LIC people said about PRI, let us consider that internationally, performance-pay is prevalent in private corporations as well as government entities. Proponents of PRI say that itencourages individual excellence - that it rewards performers and discourages free-riders. Criticsargue that PRI attributes performance (or its lack) to the individual while discounting the role ofsystemic factors; that it compromises sustainability and discourages collaboration.

The Indian private-sector largely links performance-pay to individual performance. Indiasgovernment-sector has belatedly adopted PRI: pubic-sector enterprises, PSU, began implementingPRI after 2000; while the countrys government services implemented PRI in 2007 (All India ServicePerformance Appraisal Report Rules, 2007).

An independent study led by faculty of IIM-Ahmedabad recommended within group individual

performance based payment to exceptional performers (max 5% of employee strength) at thediscretion of the supervisor and added that this will to some extend [sic] neutralise effects of freeriders benefiting at others expense. We leave this to the ministry to decide. (Varkkey et al, 2008).

LIC is governed by pay rules28 that are different from Indian PSUs. Its employees currently receivelittle PRI29 as one of my interviewees said, it is not worth talking about.

In a world that swears by merits of performance-pay, I was eager to know whether LIC people wantedPRI and in what form might they want it. When I asked, everyone supported the idea of PRI but mostpeople qualified that it should not be linked to individual performance. The more interactions I hadwith LIC people the more intrigued I was. Increasingly, LIC people favored group incentives and were

against individual rewards.

The most popular theory about cooperation is Game theory (from Economics); it is based on thebelief that people are rational and that they are motivated by the prospect of maximizing their self-interest. From my meetings at LIC, game theory did not seem to fit. I wondered if people at LIC werealso not concerned with distributive justice i.e. the idea that rewards should be distributed justly?Would Interdependence theory explain the happenings at LIC?

Interdependence describes peoples patterns of control within a dyadic relationship, thatis, in ways they need each other (or not) to attain valued goals. Power is not typicallyabsolute ... together they can have mutual control over each others outcomes

- The Handbook of Social Psychology (2010)30

In my view, interdependence occurs not only among people; reciprocity between people and theirorganisation (i.e. alignment between individual & organisational objectives) is also interdependence.

Mehrotra had said to me, our performance is the result of team work, and today I dont have a fairmechanism to attribute any share of collective performance to an individual. Varsha Shelar31 had

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28 LIC was incorporated by an Act of India!s Parliament (1956) and its pay regulations are different from those of other government-owned entities

29

PRI at LIC is negligible: last year, Class I Officers received annualPRI of about US$ 325 each

30 citing Thibaut and Kelley (1959). The Social psychology of Groups, New York: Wiley

31 Assistant Administrative Officer, AAO


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spoken of the interdependent nature of work at LIC. Ananthanarayan was of the view that, notonly between departments, but our work within departments is also interdependent.

V.D. Sudames32 words illustrate how interdependence has shaped the strategy, relationships andculture at LIC:

First, ... despite my years of experience in LIC, I am unable to develop a system tomeasure individual performance at any level. For example: if I am to be rewarded onBusiness Volume would I open a Branch that would give LIC returns say after 10 yearswhen I have retired? Presently, we do that ... emotions are the driving force and we investin the long term; but individual incentives may cause greed. I am also human ... would Inot be tempted to seek short-term results for personal gain, instead of the future of LIC?

Second, I treat my people as a team, all members are equal to me and everyone feels thatI am close to them. If there is money in between, then I dont know if I will be able todevelop such relationships.

Third, I have faith in my higher-ups today. I know that whatever they do, they do only for

LIC ... they receive no personal gain. That is the real strength of LIC.

It seems to me that LIC people value inclusion, equality, and collective goals - where the individualswho do not perform as well as others, do not receive any less pay; rather, the collaborative cultureserves as encouragement to raise ones performance. Collaboration at LIC is undoubtedly themediator which causes their practice of job-rotation to lead to superior performance. Vijayanscryptic words reveal - an uncommon understanding of how large-scale, sustainable organisations arebuilt - as well as compassion for the individual:

Whenever we have got results, it has been team effort ... I will go for group incentiverather than individual ... the growth of the organisation comes from the growth of the

person at the bottom

To be understanding of another, of his situation and needs ... to go the extra mileand reach out a hand ... to forgive and be supportive ... to care!

I first asked the Managing Directors and Chairman of LIC whether they forgive people and in what

context they might do so. Here is what they said:

It is absolutely necessary to forgive people in every context; because if you are carryingall the baggage in your head then obviously it is difficult to move on. Forgiveness issomething like cleaning your cassette and recording afresh. It applies to all sorts ofsituations: within the organisation and outside the organisation. (Dasgupta)

In my own career, I knew my bosses to be supportive and forgiving ... this is ourculture. (Mathew)

I dont expect 100% perfection, but I definitely believe there should be 100% effort. A

person should try ... he may not succeed in the first go, and its fine; but the effort andsincerity should be demonstrated. (Mehrotra)

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32 Senior Divisional Manager


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I have a weak memory for certain things - I dont remember if someone has done wrong.I remember people for their qualities and achievements. (Vijayan)

The above sounded like the proper things to say. So I explored further; I asked LICians if they weresupported for mistakes instead of being penalised. Some were hesitant, few said that they had notcommitted any serious mistake, others were forthcoming with examples as below:

In 1987 (pre-networked era; when data was on stand-alone machines) a young LICian atAurangabad, mistakenly deleted all records (and also the operating system) from thecomputer. A couple of his colleagues (one peer and another junior) worked with thisdistraught LICian to recover the data.

A colleague (from the underwriting department in Mumbai) had misread and approved anapplication that should have been declined/revised. A written explanation was sought,and when it was known that the individual was coping with unreasonable amounts ofwork, the work was rationalised and he wasn't penalised.

About 20 years ago, a customer in south-India had stopped remitting premiums and sohis policy had lapsed. On the day he died, his relatives renewed the policy; andsubsequently they submitted a Claim which was honoured by LIC. While investigation ofthe claim by the superior office, it was found that the acceptance of the renewal premiumwas technically incorrect, but considering the lapse in the then manual systemof!maintaining renewal premium receipts, the matter was closed without penalising thecashier and others involved in the transaction.

When things dont work as intended, it is easy to attribute fault to people and not consider the largercontext. I also cannot imagine that everyone who erred at LIC was forgiven ... surely there must be

people that deserved support & understanding, but did not receive it. However, the larger pictureseems to be one of compassion. What is clear to me is that LIC does not ignore errors; at the sametime it does not rush to find fault with people. Its diligence in understanding the causes ofinadequate performance involves inquiries like: Did the technology fail? Is the person overworked?Does he repeat the same mistakes? Are the processes good enough? Have we provided adequatetraining & resources? Would others have made the same mistake in the circumstance? Did we makea mistake by putting her in this situation? They dont have any checklist with above questions - theysimply look at the larger picture.

The culture at LIC is not only one of understanding but also that of mobility based on potential.While dominant approaches to staffing (and mechanisms such as assessment centers), seek evidenceof past/current competence - LICs practice of job-rotation is based on the belief that human beings

have limitless potential. That is why, based on their interest and aptitude (i.e. potential) LICians areassigned to roles they have never discharged before and then they are supported to succeed.

It is probably because of the supportive & holistic approach to managing performance that LICsustains its culture of courage & innovation. However, there is one mechanism of performance-appraisal at LIC that seems incongruous with this culture - it is a relic of an old government practice;one that is cloaked in secrecy - the annual Confidential Report, CR or ACR.

The CR is a report written annually by ones immediate boss about ones performance and it is notdisclosed to the appraisee. LICs processes require that the bosss boss review the CR - and if s\hefinds it to be biased then it is not placed on record. The CR plays an important part in promotion

decisions, such that promotions of individuals with adverse CRs are deferred.

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Varkkey et al (2008) had remarked effectiveness and credibility of the existing ACR system, that isbased on the philosophy of control and secrecy has been questioned and viewed negatively. Theprocess is viewed as unreliable, since it fails to distinguish between performance levels and is notlinked to any other HRM system than promotions.33

It seemed to me that in its secrecy, the CR practice was disrespectful of the individual, it could notbuild trust and was far from compassionate. I suspected that most LIC people would be opposed toit. What about CRs might they be against: would they say that the content of CRs is biased &incorrect ... would they fault the absence of transparency ... would they be against its use forpromotion decisions? One senior Manager was quite clear that, CRs should be transparent andmade open. However, responses of all other LICians were surprising:

Majority of the confidential reports are very positive even if the performance of theindividual is average (Mathew)

We were all party to the ACR practice: we got promotions because of the CR, we gave promotions on the basis of the CR. People who complain about CR may have validreasons. We take it for granted, but for a person who is good and misses a promotion, it

causes a lot of pain. So, though the subjectivity of the CR cannot be ruled out, I will notsay that a CR was totally biased. And if at all they err, most people err on the safe side i.e.to help a person. You may write something positive about me which I may not be evenaware of; but you will never use it to deny me a promotion because that is not the culturehere ... and this should be the experience of 99% of the people. (Mohan Raj)

The CRs may not provide the complete reflection of a person. Many a times people aresomewhat overrated. The general feeling is that if I can contribute to someone elsescareer growth then why not overrate a little. If we find a system that can give a moreaccurate reflection of a person then maybe we can do away with CRs and adopt that; butwe need some system or media to be able to pick out a person and say he should be

promoted. (Nalini Ananthanarayan)

!"#$%&'()*+LIC,!-&./0!-12+!'.3!4!*(!!*.!.5!6!'7!*82!9+!problem:3;!). !I have spent 23 years inLIC. CR (?!@(!:(?!AB4 *7C!!'%D!:3;, *7C!E':(D".(!F%G&(! 9+:3; /0H!D(I!,.-&.!J*!=7!D(.!#&K$!9+LJ!6!'7A:H!:, /J&(!*+ 'M A:*(!CR >.(D! N@O!*PQ?'.!RB(!:3;!37&(.#&K(!N@O!37'()!-S3!*(!!H!D(I,!37'()- company*(-12(*.THF%J37'().!EBF%JCR:3;!(@('7!9+*82!problem:3;.(Deepa Dhongde34)[Translation: I think that if you are doing good work in LIC you will not have any problemwhatsoever. I have spent 23 years in LIC. It doesn't matter whether the CR is shown toyou or not. No one is going to write anything terrible on your CR, (even if you have hadone or two fights, the Senior will consider why should I spoil someones CR?), this willnot happen. Why do fights happen: fights are about work - about doing something goodfor the company. That is why there is no problem if they dont show the CR.]

As above, most of the LICians I met were agreeable to the CR practice. Vijayan told me that theywere in the initial stages of piloting a 360-degree feedback process. He said that such feedbackwould be used for development purposes only and that it would start at his level. I am not sure 360-degree feedback would be easy or useful for LIC. Although it will not be used for appraisals orpromotions, 360 is the polar opposite of ACR. There remains a fine line between beingcompassionate to another and being transparent with ones feedback; therefore the decision to initiate360-degree feedback is a courageous one and a good example of change starting at the top.

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33The report did not comment on the ACR practice at LIC, but the general ACR practice in India!s government organisations

34AAO - Programmer, IT


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Of all the departments I have worked in, the most fulfilling experience has been in Claims is whatone senior LICian told me. LIC probably has the best claims-settled ratio35 of any Life Insurer in theworld. Among Life Insurers in India, LIC has repudiated only 0.64% death claims; while privateinsurers have on average repudiated 7.27% claims - the highest repudiation rate being 48.48% (Table5).

These ratios in themselves may not mean much, but considering the scale of LICs operations and thefact that LIC settles about 2 claims every second, one cannot but wonder how LIC manages to deliversuch extraordinary performance. As I met more LICians, the stories began to unravel. My favouriteconversation is the one with Uday Mayekar, who at the level of Record Clerk, was the junior-mostLICian I interviewed36. I was amazed that despite being in a junior position, Mayekar spoke withconfidence and conviction ... as if he was LICs spokesperson ... as if he owned the wholecorporation.

Me: B!#7*7Ccustomer*+!policy mature37&@+37, U.customerTclaim:3;"=

employeeW('()customerH=(.[. !A\.W(Hemployee]>'()*+customer)@(:3;). -&.:3;.5&('7/W^D(W^S(V*70^2'()*+S7/=!+:(:3;).[The money would remain with us, but it is not to be retained. We have to pay it to them. We dontwant to keep the money with us.]

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35 Claims-settlement ratios of LIC: 99.74% (maturity & survival benefit) and 97.79% (death claims)

36 Mayekar joined LIC in 1995, at the position of "Peon!. He was subsequently promoted to the position of "Record Clerk! in OfficeServices (Personnel Department) where he presently manages Leave and other electronic records of employees.


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Such stories abound at LIC, but you have to ferret them out as LIC people dont talk much aboutthem. Each time I enquired about this practice of proactively locating Customers whose paymentswere due, the voices of LIC people dropped a bit - as if they were hesitant. Mayekar did not use theword compassion, nor did any other LICian. Now this might sound exaggerated or dramatic - butsuch conversations seemed to suggest when you give to the needy, do not let your left hand knowwhat your right hand is doing, so that your giving may be in secret37 ... do not nullify your charityby demands for gratitude or showing off to people...38. In a day and age when it has becomefashionable for companies to tom-tom their CSR39 initiatives and other voluntary efforts, LIC standsapart in its reticence.

Little has it been known that during events like the Tsunami, the Bhuj earthquake, the 26/11 attacks ...LICians searched for its policy-holders from lists of dead published by government agencies, andreached out to next-of-kin quietly handing cheques for sums assured.

LICs claims-achievement fame is not really in its remarkable settlement-ratios. It is the silent mannerin which the ratios are achieved that reveals the true character of LIC and its people.

Policies, procedures, rules & regulations ... their specificity, clarity, accessibility andcomprehensiveness ... to reduce risk and manage work in a responsible,disciplined, standardized, orderly and predictable manner!

The Insurance industry in India is highly regulated, with legislation as old as 1938 (The InsuranceAct). LIC was itself incorporated by an Act of Parliament (LIC Act, 1956) and for over 40 years

remained the sole Life Insurer in India. The Insurance Regulatory and Development Authority, IRDA,was established with the passing of the IRDA Act in 1999 when the Insurance industry was opened toprivate sector. Presently, the IRDA remains that statutory body which issues day-to-day orders andregulations for the Indian Insurance Industry.

One might say that statutory regulations are the controls that engender Trust for LIC people and itscustomers. However, most frauds around the world occur under the nose of regulation. Controls arenecessary but they are not the sufficient condition to ensuring Trust. Moreover, India is considered tohave high corruption in the public-sector (Transparency International, 2009); but never in its historyhas there been any scandal about LIC. Despite the huge number of transactions of every kind(investments, claims etc) that are undertaken in LIC on a daily basis, LIC has a squeaky clean anduntarnished record.

To build an ethical and successful corporation in the context of external (i.e. government) controldoesn't sound like an easy task. Since inception, the government had appointed civil servants to thepost of LIC Chairman; the sole exception being T. A. Pai, a technocrat and banker, who was appointedin 1970. It was a long sixteen years after inception, in 1972, that K. R. Puri became the first LICian tobe promoted Chairman.

On more than one occasion LIC nearly missed being cannibalized. In 1979 there were murmurs thatthe government intended to reorganize LIC. On February 28, 1981, the then Finance Minister R.Venkataraman announced the governments decision to split LIC into five independent organisations -

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37

Bible, Matthew 6:3

38 Qur'an, 2:264

39 Corporate Social Responsibility


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with the supposed interests of operational efficiency and promoting competition. The Bill was twicetabled in Parliament but continued to face opposition ... it was only in 1985 that the governmentfinally rescinded the proposal. These five years with a Damocles sword were a traumatic experiencefor LIC and its employees (Kumar, 1991). During these external moves to break up theirorganisation, LICians at all levels remained united in their opposition to the Bill; and LIC wasindependently and quietly achieving radical transformation. In May 1980, it had appointed ProfIshwar Dayal as a Consultant to guide the change effort. An Organisation Improvement Cell, OIC,[made up of LICians] was set up to work with Prof. Dayal (Kumar, 1991). The biggest impact of thatchange effort was on how control was exercised in LIC. Formerly, the Divisional office was the mainoperating office while the Branch functioned more as a location for sourcing applications androuting claims. The OIC changed all that in one stroke - by devolving control to the Branches.

Decentralization of power led to a cultural change at LIC: Branches became profit centers whereLICians were empowered to make decisions. As employees experienced greater sense ofresponsibility & a richer career experience, the levels of customer-service and business-performancebegan to rise. This transformation in culture was supported by increasing investments in training,technology and process-improvement.

Today, all core business processes are codified in departmental Manuals; these are periodicallyimproved and updated through Circulars. LICians speak with pride about the quality of their processmanuals. Ananthanarayan said, Our manuals and circulars are very precise ... very exhaustive.Sridharan was of the view that, work procedures are simplified, manuals are clear, the technologyand work is constantly re-engineered.

Technology plays a significant part in controlling operations at LIC. Processes are technology-enabled and manuals are online, thereby ensuring standardization and reducing human error. ITprofessionals acknowledge the value of data-accuracy for customer service ... as Dhongde remarked,If my data is clean then my servicing of policy holders will be reliable. LIC also has an expresshelpline40 for online (web-based) support to employees around the country.

Expertise in process management & technology not only enables effective controls; it is also a sourceof competitive advantage for LIC. Vijayan told me how they are able to launch a new product,within three to five days after IRDA approval, simultaneously across 2996 offices.

The practice of job-rotation helps balance controls and flexibility: on the one hand, it createsentrepreneurs for the organisation while providing variety, challenge, creativity and growthopportunities for the individual; and on the other, it precludes creation of individual turfs or fiefdomsthereby facilitating greater independence in the organisation. Mathew told me of how in the spiritof shared responsibility the Central management committee41 meets on the 1st Saturday of everymonth and there are other fixed days when the Zonal, Divisional and Branch managementcommittees meet. LIC has also constituted Policy-holders (i.e. customers) councils at the Divisional

level; these five-member councils generally meet every quarter and include one woman, oneindividual from SC/ST42 and one Consumer Activist.

Over the years, LIC has built an organisation of discipline, rigour and excellence, where externalcontrols play a limited part. LICs credibility is largely due to its commitment to development, serviceand self-regulation, where the system is larger than the individual.

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40 located at LIC!s Central Office

41The Central management committee comprises the Chairman, Managing Directors, All Zonal Managers and Executive Directors

42SC/ST: These are communities of "scheduled! castes and tribes of India and their inclusion is based on policies of affirmative action


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A dual quality: of being trusted & believed in ... and at the same time, of beingconvincing or believable. An integrated sense of identity such that what we do isnot different from who we are!

LIC continues to invest in its employees in ways that most companies do not, and employees trust LICenough to spend their entire careers with the corporation. Therefore, it seems that the employer-employee relationship at LIC involves mutual trust.

We have discussed how in the early eighties, LIC transformed itself by empowering its employees; butthe story of commitment to employees began at inception.

At the very first conference of zonal managers held on September 30, 1956, that is,within one month after establishing of the Corporation, questions concerning the training

of development personnel and allied matters were discussed ... the Western Zone was thefirst to organise its permanent training centre in Bombay which commenced working inSeptember 1958 (Bhave, 1970).

In the early seventies, during his tenure as Chairman, T. A. Pai had remarked:

Behind the published balance sheet of ay institution showing assets and liabilities, everyone working for the institution could either be an asset or liability. It would be aworthwhile exercise to convert every liability into an asset. With this end in view, it isobligatory on the Corporation also to afford opportunities to the employees to developthemselves for the growth of their capacities by providing them with facilities for trainingand development

(Kumar, 1991).

The culture of creating development infrastructure and investing in employees continues at LIC. Atthe fiscal ending 2009, LIC had 141 internal Training centers; and of the 40,251 people trained thatyear, only 1.84% (743 people) were trained at external facilities43.

Above numbers tell their own story but what fascinated me most was that LIC also invests in peoplewho are close to retirement. In the current fiscal, of the 1150 senior managers44 between the age of55 and 58 years, 1010 managers completed a four-day training programme titled Achieving PersonalExcellence. Here is what Vijayan said about this initiative:

A 55 year old ADM or DM would have received four promotions and have done a lot of

hard work for LIC. It is possible that in some cases the technology or process hasovertaken him; for example, a junior person will be faster on the keyboard and mayappear more efficient. But they have much to contribute ... I dont want them to feelweak in the link, I dont want them to atrophy for 5 years ... I believe this organisation isabout people!

LIC also leads the worlds companies in upward-mobility of women employees. Among Fortune 500companies of the year 2009, women made up 13.5 percent of executive officer positions (Whitney,2010). A recent report of the Inter-Organisation Network, ION, puts the percentage of womenexecutive officers in the USA at 13.5% (ION, 2010). However, at LIC, 25% of the current Executive

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43 Data from Pages 59 and 68 of LIC!s Annual Report for year ending 2009

44 in the Grades of Assistant Divisional Manager, ADM, and Divisional Manager, DM


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Directors are women45. Here again, this simple percentage doesnt convey the entire picture ... thelarger context is that there are only 17.49% women officers in LICs Class 1 cadre, yet there are 25%women in Directorial positions (see Table 6).

Trust engenders reciprocity and it is no wonder that some of the brightest people in the country havebeen attracted to join LIC and to stay with the Corporation until retirement. Annual voluntary attritionat LIC has remained less than 0.3% even after privatization of the insurance industry (Table 7).Importantly, LICs strategy of generalization would not have succeeded without this ability to retainpeople over years, even decades.

Historically, LIC has offered a holistic value proposition where total rewards included: job security, areasonable work-life balance, opportunity to serve a larger cause in the country, and job variety.However, compensation currently paid to LICians could become a matter of disenchantment. In thedays before deregulation, the compensation & benefits to LICians, though modest, would set themapart from most people. However, since the early nineties, the Indian economy has grownexponentially, job-variety & opportunities have increased manifold and peoples aspirations seem tohave changed. The nature of the psychological contract between employers & employees hasbecome more like in the West i.e. not so much about job security but one of high pay.

The above context accentuates the condition that despite superlative performance, compensation toLIC people has lagged the market. A comparison with public and government sector organisationsindicates that LIC people earn less. The last pay-revision at LIC was effected as of the year 2002. In2007, the next pay-revision was due but is yet to be announced46; meanwhile government-sectoremployees have been upgraded to more respectable compensation as per the Sixth Pay Commissionrecommendations (2008). Causes for delays in pay revision remain a mystery to me, but inability topay does not seem to be a probable reason (see Table 2 for LIC performance data). To attract andretain the brightest talent from future generations, it seems that LIC would need to offer compensationthat is commensurate with its performance and to reiterate its holistic employee value proposition.But, what about current LICians ... how do they seek resolution of their grievances?

Industrial strife at LIC is virtually unheard of. Except for phases in the seventies, the Management andUnions of LIC have enjoyed a good rapport. LIC now has 10 employee Unions, which on the rarestof occasions resort to industrial-action such as a Strike that curiously lasts for an hour or at most aday. The wonder at LIC is that strikes hardly affect business goals. One reason is that Policy holdershave a 30-days grace period within which to pay premiums - so a days strike does not cause any realinconvenience to the customer. Moreover, all Unions do not strike at the same time or day; as aresult LIC offices continue to transact business and meet customers needs. Existing policies are notaffected, new business is never lost ... because LICs sales occur through Agents & channels likeBanks; in the worst-case scenario, these can be processed a day later.

Importantly, the most incredible incidents I have heard are of people arriving at their offices after 6

p.m. i.e. at the end of a strike day, only to complete their work. The rare strike of LICians seems tobe devoid of antagonism and does not disrupt anything; it appears to be a token of their solidarity andneed to be heard. These examples demonstrate the sheer credibility of LICians - that they fulfill theirresponsibilities even whilst they believe that their genuine grievance has not been addressed. Surely,such a performance culture is unheard of.

There is far too much that is different at LIC; such as their business strategy of achieving scale throughgeneralization, the HR strategy of job-rotation, people practices of collaboration & upward-coaching,equal opportunities for women, superlative claim-settlement ratios, superior processes & technology(developed in-house), training & development of people who are close to retirement, a climate of

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45Nine of thirty-six Executive Directors at LIC, are women

46 At the time of writing this report, wage negotiations between the Management and Unions of LIC were underway. Once concludedthese are subject to approval of the Government of India


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industrial harmony, self-regulation, high integrity & transparent business practices, wide-spreaddiscretionary effort by employees, a courageous and compassionate work ethos ... and so on.

How can LIC trust itself to be so different and yet succeed?

I wondered if perhaps, there might be a single overriding theme; maybe a belief or value whichprovides LIC the courage to be different ... a super-ordinate identity shared by LICians, from whicharises their culture of credibility and spectacular success. If so, then what might it be?

The first clue to above question lay in the late eighties and early nineties. I had heard that then,LICians were given the option of choosing either a pension scheme or provident fund, PF, as theirretirement plan. This option was also given to employees of government-owned banks. Those werethe days when PF contributions in India accrued a princely interest of 12% per annum. One wouldimagine that most people would opt for PF, which is exactly what happened in the banks; however,84% of LICians chose pension schemes. To me this decision epitomizes the deep belief that LICianshave in what they do and stand for i.e. Insurance.

I asked LICians what is it that you ultimately do in LIC? At this stage of research, the answers did

not surprise me. Person after person said the same thing, albeit in different words. Here are fewexcerpts:

Our purpose, as C. D. Deshmukh47 said, is to spread the gospel of insurance to everynook and corner of the country and to channelize savings to Nation buildingactivities (Sudame)

We are not working in LIC, we live in LIC. Settling a claim is our moment of truth ...we are trustees of widows property! (Sridharan)

Investment is secondary ... we protect widows money! (Dhongde)

The first lesson we learn at LIC is that we are trustees of widows money. We are toldthe money doesnt belong to you or anyone else. The main theme through out theorganisation is to keep our moorings on security and our sense of responsibility tosociety! (Vijayan)

Through my interactions with LICians, I found that they have taken seriously the trust that has beenreposed in them, and they are living up to it. LICs special culture - and indeed everything that thecorporation does - seems to emanate from this larger identity that its people deeply share and believein.

I also reckon that Trust holds the secret of LICs sustained performance. Trust is the bridge betweenLICs business strategy and HR practice ... like a loom, upon which is being woven LICs exquisitesaga of courage, collaboration, compassion, self-control and credibility.

What an extraordinary and marvelous organisation LIC is ... like no other ... a perfect jewel!

"

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47 C. D. Deshmukh was India!s finance minister from 1950 to 1956. He played the key role in nationalizing the Insurance sector and infounding LIC.


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Table 1: Comparison of LIC with the Global Fortune 500 (2009)

Industry

Rank

Company Name Global 500 RankRevenue

US$ Million

1 Japan Post Holdings! 11 198700

2 Assicurazioni Generali! 47 103103

3 AXA! 73 80257

4 Nippon Life Insurance" 96 66621

5 MetLife! 132 55085

6 China Life Insurance! 133 54534

7 Dai-ichi Mutual Life Insurance" 139 52012

LikelyRank

Company NameLikely Global 500

RankRevenue

US$ Million

Industry: 8Country: 2

Life Insurance Corporation of India! 175 43834.67

Country

Rank

Company Name Global 500 RankRevenue

US$ Million

1 Indian Oil 105 62993

2 Tata Steel 258 32018

3 Reliance Industries 264 31792

6 State Bank of India 363 24578

!:Stock; ":Mutual. LIC data for fiscal ending March 31, 2009. Data for other companies from the July 20, 2009 issue of Fortune.Source: http://money.cnn.com/magazines/fortune/global500/2009/performers/industries/fastgrowers/

Table 2: LIC performance data, 2000 to 2009 [Source: LIC]

Fiscal endingRevenue

(US$ million)Valuation Surplus

(US$ million)Number ofEmployees

Payroll Cost!(%age to premium income)

OperatingExpenses"

(%age to premium income)

2000 9789.80 1380.17 122867 9.52 21.16

2009 47554.03 4059.79 114916 3.67 12.15

%age Change 385.75 194.15 -6.47 -61.45 -42.58

!Payroll cost includes salary and other benefits to employees" Operating cost includes commission to agents, salary & other benefits to employees and other expenses ofmanagement

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Table 3: Life Insurance Penetration Ratio, 2007 [Source: IRDA]

Developed Countries Developing Countries

Penetration (%) Penetration (%)

United States 4.20 Brazil 1.40

United Kingdom 12.60 Russia 0.10

Switzerland 5.70 Taiwan 12.90

France 7.30 Hong Kong 10.60

Germany 3.10 Malaysia 3.10

South Korea 8.20 Singapore 6.20

Japan 7.50 Thailand 1.80

India 4.00

PR China 1.80

Sri Lanka 0.60

Pakistan 0.30

Bangladesh 0.50

South Africa 12.50

Australia 3.80

World 4.40

Table 4: Percentage change in Life Insurance Density (US$), 2001 to 2007 [Source: IRDA]

Developed Countries Developing Countries

2001 2007 % Change 2001 2007 % Change

United States 1602.00 1922.00 19.98 Brazil 10.8 95.3 782.41

United Kingdom 2567.90 5730.50 123.16 Russia 33.2 6.1 -81.63

Switzerland 2715.70 3159.10 16.33 Taiwan 760.9 2165.7 184.62

France 1268.20 2928.3 130.90 Hong Kong 1249.7 3031.9 142.61

Germany 674.30 1234.1 83.02 Malaysia 129.5 221.5 71.04

South Korea 763.40 1656.6 117.00 Singapore 713.2 2244.7 214.74

Japan 2806.40 2583.9 -7.93 Thailand 34.1 70.8 107.62

India 9.1 40.4 343.96

PR China 12.2 44.2 262.30

Sri Lanka 4.3 10.2 137.21

Pakistan 1.2 2.6 116.67

Bangladesh 1.0 1.9 90.00

South Africa 377.2 719.0 90.62

Australia 1040.3 1674.1 60.92

World 235.0 358.1 52.38

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COURAGE

PSYCHOLOGY

MANAGEMENT

SOCIOLOGY

ECONOMICS

Controls

Contractual safeguards

BHAGAVADGITA

Interdependence

Reciprocity

Competence

Integrity

Benevolence

Predictability

Collectivism

Values & Identity

Governance

Consistency

Beliefs & AttitudesCOLLABORATION

COMPASSION

CONTROLS

CREDIBILITY

+ve Expectations

Altruism

Firm resolve, faith in oneself & colleagues ... the protection ofvalues without fear or favor, and consistent follow-through ofconvictions even when it means treading the unknown orunfashionable path.

Conviction

No fear

To be inclusive and cooperative ... to work jointly and willingly,without coercion or inducement; to help each other ... suchthat shared goals are more important and everything elseincluding hierarchy or personal rewards are not.

To be understanding of another, of his situation and needs ... togo the extra mile and reach out a hand ... to forgive and besupportive ... to care!

Policies, procedures, rules & regulations ... their specificity,clarity, accessibility and comprehensiveness ... to reduce risk andmanage work in a responsible, disciplined, standardized, orderlyand predictable manner.

A dual quality: of being trusted & believed in ... and at the sametime, of being convincing or believable. An integrated sense ofidentity such that what we do is not different from who we are.

Non-duality

Achievement

Protection

Vulnerability

Co-operation

Identification

Generalization & entrepreneurship

Mobility: Job rotation

Technology focus

Technology insourcing

Mobility: Job rotation

Upward coaching

Team performance-incentive

Interdependence

Holistic view of Performance

Forgiveness & recognition of potential

Performance Appraisal: Confidential Reports

Proactive Claims settlement

Decentralization and Empowerment

Process engineering & documentation

Technology strategy

Self-regulation & Independence

Training, development and retention

Equal opportunity: Women in leadership

Industrial relations

Super-ordinate identity and values

Figure 1: The five themes of Trust and related HR & Business Practices

Reputation


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Table 5: Death Claims settlement as at December 31, 2009 [Source: IRDA]

CompanyNumber of Policies

on which Claims Paid

Claims Repudiated

Number Percentage

Aegon Religare 8 16 48.48

Aviva 1191 84 6.29

Bajaj Allianz 8963 628 3.79

Bharti Axa 151 82 24.77

Birla Sunlife 3296 435 10.78

Canara HSBC 25 8 14.81

DLF Pramerica 3 1 16.67

Future Generali 78 48 17.84

HDFC Standard Life 2340 126 4.49

ICICI Prudential 9469 311 2.59

IDBI Fortis Life 55 28 20.44

INGVysya 1205 66 4.64

Kotak Mahindra 1303 64 3.91

Max NewYork 2399 466 10.92

MetLife 533 221 23.02

Reliance Life 5302 364 5.88

Sahara 278 47 8.36

SBI Life 3895 687 13.52

Shriram 313 159 17.97

Star Union 10 Insufficient data!

Tata AIG 1970 633 21.61

Private Total 42787 4474 7.27

LIC of India 452430 3255 0.64

! Authors Note: The original IRDA report indicates that 50% Claims (10 in number) have been paid; the other10 Claims seem to be pending and may not have been refused.

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Table 6: Gender distribution of LIC employees, as per Career-level, 2009 [Source: LIC]

Career Level

Male Female

Number Percentage Number Percentage

Class I(Officer all levels)

19284 82.51 4088 17.49

Class II(Development Officers)

24341 97.41 646 2.69

Class III(Clerical cadre)

45804 71.37 18378 28.62

Class IV(Record clerk and Peon)

1890 79.58 485 20.42

TOTAL 91319 79.47 23597 20.53

Table 7: Voluntary Attrition at LIC, 1999 to 2009 [Source: LIC]

Fiscal ending No. of employees

Voluntary Attrition!

Number Percentage

1999 124385 130 0.10

2000 122867 220 0.18

2001 120158 249 0.21

2002 118495 199 0.17

2003 117138 185 0.16

2004 115715 159 0.14

2005 114588 205 0.18

2006 113184 238 0.21

2007 113710 254 0.22

2008 114045 294 0.26

2009 114916 95 0.08

!Includes early, voluntary retirement

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the trust within

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