Brand recall on top of insurance customers’ mind, LIC on top

Source: The Economic Times

Since a couple of years, the insurance space, and particularly the life insurance segment, has seen a lot of activity on the regulatory front. So far, the talk has primarily been centred around the cost angle - be it the regulator-induced lowering of Ulip charges, associated agent commissions or the resultant cost-cutting measures - adopted by the company. While companies may have hoped that customers will value the friendlier charge structure which will boost persistency ratios, it does not seem to be the case, going by an IMRB survey conducted between September and November 2011. According to the study, which was conducted across 18 towns and took into account 14 life companies, it is brand imagery that predominantly drives customer loyalty. 

Over 50% of the weightage goes to brand imagery, with the actually quality of experience bagging the second spot in the hierarchy. 'Surprisingly, charges (cost) is the least important factor. While it has been observed that customers across the board, almost always claim that they are unhappy with the charges levied, this has a very negligible influence on their continued patronage of the company,' states the report. '...companies with a strong legacy and those that have been in existence for a longer period of time enjoy the best imagery and consequently the highest loyalty levels.' Not surprisingly, LIC tops the list of companies when it comes to loyalty levels. 

This apart, the survey lists product, agent, service communication as the areas where companies can differentiate themselves from others. In terms of product, companies are by and large undifferentiated on the range of policies or benefits offered, but can set themselves apart on the basis of 'on how exhaustively and thoroughly their product features are communicated e.g. charges, disclaimers, returns, other terms and conditions,' it states. In addition, companies need to ensure that their agents do not oversell products, as it constitutes one of the gravest grievances of policyholders. In general, life insurers also need to make efforts to send alerts/ reminders and stay in touch with customers, an area where all companies seem to lagging behind. And, as far as advertisements are concerned, insurers need to focus on making these commercials more informative and educative, the study says. 

Government asks LIC to help banks

Starved of funds, government asks LIC to help capitalise small public sector banks

Source: The Economic Times

Sandwiched between an urgent need for capital and a financially wrecked owner, small state-run banks will knock on the doors of Life Insurance Corporation as they prepare to sell new shares to raise funds, said three people familiar with the plans. 

Dena Bank and Bangalore-based Syndicate Bank may be the first among nearly a dozen small public sector banks which will sell shares in the next few months to raise a few thousand crores, they said. 

LIC, the biggest institutional investor in the country with annual equity investments of about 40,000 crore, will walk along with the government in capitalising banks that are restructuring debt even as they are saddled with rising bad loans. 

The government, which is set to breach the fiscal deficit target of 4.6% of the gross domestic product by a percentage point, has committed to pump 18,000 crore into large lenders such as State Bank of India, Punjab National Bank and Central Bank of India. 

"There is a chance that LIC may step in to support the government," said a bank executive who hasn't got the government's commitment on capital. "The pricing will be based on a Sebi formula and will leave no room for speculation." 

A government starved of resources and a weak equity market, despite a 14% rise this year, is hampering fund-raising plans of public sector banks. With the government unwilling to let its stake fall, it is leaning on LIC to buy new shares, which would give it the comfort that it indirectly retains ownership in the banks. 

The Dena Bank board will meet on Monday to consider a share sale to insurance companies and government-sponsored mutual funds. 

Syndicate Bank, in which LIC holds more than 10%, will meet on Saturday to consider sale of shares.