The Life Insurance Corporation (LIC) was established in India with a view to provide an insurance cover against various risks in life. A monolith then, the corporation, enjoyed a monopoly status and became synonymous with life insurance. Its main asset is its staff strength of 1.24 lakh employees and 2,048 branches and over six lakh agency force.
LIC has hundred divisional offices and has established extensive training facilities at all levels. At the apex, is the Management Development Institute, seven Zonal Training Centers and 35 Sales Training Centers. LIC of India is one of India’s leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking to stock broking to mutual funds to life insurance to investment banking, the group caters to the financials needs of individuals and corporate. The LIC has a net of over Rs. 1,800 crore. With a presence in 82cities in India and it services a customer base of over 20, 00,000.
At the industry level, along with the Government and the GIC, it has helped establish the National Insurance Academy. It presently transacts individual life insurance businesses, group insurance businesses, social security schemes and pensions, grants housing loans through its subsidiary; and markets savings and investment products through its mutual fund. It pays off about Rs 6,000 crore annually to 5.6 million policyholders.
It has been started with the objectives of spreading Life Insurance widely and in particular to the rural areas, meet the various life insurance needs of the community that would arise in the changing social and economic environment.
Organizational Structure of LIC
The organization is the form having independent or co-ordinated parts for unit action for the accomplishment of common objectives. As such the organization relating to insurance business is a form having different functional divisional units with the ultimate aim of providing effective services to the customers of the insurance products. An effective organization is essential to share information and effectively execute the managerial decisions. The organizational structure differs for different types of business. The organization structure is based on the objectives or mission of the business organization. The organization should be structured with an aim to coordinate, not only with internal managers or groups, but also with the external world, the customers, authorities and other persons directly or indirectly interested in it.
The insurance business is concerned with the functions of marketing of insurance products and its related functions like premium collections and premium fixings, accepting the insurance proposals, issuing policy documents, maintain records relating t the policies issued everyday in chronological order, and also payment of claims. The claims department is associated with the receipt of claims and arrangement of claims investigations. After it is decided whether to make payment to the assured or to defer it, the insurance company may seek guidance from the panel of advocates. The insurance company needs to protect the company from the claims litigations of the clients by defending the claims in the courts and supervise other alternative dispute resolutions. Thus the insurance organization is associated with the marketing of policies, underwriting of policies, claims payment, claims defending and stiff matters. The delegation of duties to each unit with well-defined limitations, responsibilities and decision making are all related to the organizational structure and management.
Basic structure of LIC
Today, most of functions, nearly 90%, related to the marketing and other related activities of the insurance consumers are dealt and handled at the branch level. The branch office, depending upon its business, is headed by a manager and each function of insurance business like marketing, underwriting of policies, accounts, claims payments, staff and administration matters are identified as departments of the branch office with responsible officials such as Administration and Accounts Officers (AAO).
The managerial decisions are based on the information supplied by the AAO, the functional head at root level. All the functions of claims will be settled at the branch level. The AAO of life insurance business will deal with maturity and death claims. If the branch is smaller, all the types of claims will be dealt by one AAO and if the branch is bigger with good number of claims, they will be settled by, separate officials. At branch level, these officials have to maintain cordial relations and establish a system of sharing information with the other departments, relating to the policy documents, payment of premium and using the staff or the agents for the settlement of claims disputes. The branches maintain records relating to the claims payment and claims rejections. They wiill submit the reports to the Zonal Officer, who in turn will forward it to the Head Office or Corporate Office.
The branches report to their respective divisional office. If any branch gets a claim and there is a problem in identifying the correct claimant among the claimants, or otherwise, a dispute of risk crops up, which will be forwarded to the divisional office with its comments. The divisional office after receiving the papers, verifies them, applies legal knowledge and skills, or seeks advice from skilled persons and tries to solve the problems. The divisional office is responsible to settle the claims referred by the branch office and also report the same to the zonal office, which in turn will consolidate the data and submit the same as required by the statute or otherwise under any law to the government. The government will put the same for the approval of the both the houses.
At the division office level, the claims department generally deals with the claims, which are pending with the branches because of some disputes, or some claims which are of high value. The investment portfolio and establishment and maintenance of reserves for the purpose of claims payment or otherwise required under the law is the important function of the central office. Thus the organizational structure of the insurance business is most flexible and decided, based on the above said factors.