General Insurance Corporation of India


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Case Details:

Case Code : BSTR111
Case Length : 31 Pages
Period : 1992 - 2002
Organization : General Insurance Corporation of India
Pub Date : 2002
Teaching Note :Not Available
Countries : India
Industry : Insurance

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS

The Pre-Liberalization Era

GIC was set up as a holding company in 1972 as per the General Insurance Act 1972, under which the general insurance industry in India was nationalized. Before nationalization, the general insurance business in India was more urban-centric and served only organized trade and industry. Therefore, GIC was established with a mission to offer need-based insurance to the rural population. (Refer Table I). At the time of nationalization, there were 107 Indian and foreign insurers offering general insurance products...

Organizational Structure

GIC was a holding company, separate from its subsidiary companies. It was responsible for broad policy matters that could affect the general insurance industry in India. The company did not offer any direct insurance policies except the aviation insurance policies of Air India, Indian Airlines, Hindustan Aeronautics and Crop insurance. From the reinsurance business, GIC received 20% of all direct business written in India by its subsidiaries. Apart from the four subsidiaries, GIC set up the GIC Asset Management Company to manage the GIC Mutual Fund, GIC Housing Finance, and Export Credit Guarantee Corporation...

The Post-Liberalization Years

In 1999, the IRDA Bill was passed by the Parliament, and the insurance industry was opened for private players, with equity participation of foreign companies limited to 26%. By 2000, a number of private players entered the general insurance market through joint ventures with leading foreign players. This resulted in increased competition and GIC was forced to make several changes in its organizational structure and business strtegies. In January 2000, GIC took initiatives to deal with competition that had resulted from the deregulation of the insurance industry. The global consultancy firm PriceWaterhouse Coopers (PwC), and a chartered accountancy firm, MP Chitale, were appointed to restructure the GIC and its subsidiaries...

Restructuring of GIC

The management consultants appointed by GIC laid down four options for its organizational restructuring:

• Merge all the four companies or form two companies, with one exclusively conducting corporate business;
• Follow the Malhotra Committee recommendations by delinking the four subsidiaries from GIC, and give them operational independence;
• Allow equity crossholdings among the four subsidiaries; and
• Entrust one geographical region to each of the four outfits.

Products and Services

General insurance may be described as a way to reduce or eliminate risk of loss to property. The risks covered by general insurance included fire, the perils of the sea, death and accidents and burglary. Any risk arising from these may be insured against at a premium that commensurates with the risk involved. Thus, insurance is collective bearing of risk. GIC offered a variety of general insurance products (Refer Exhibit I).

General insurance was categorized as:

Fire Insurance
Fire insurance was designed to provide financial protection against loss or damage of property due to fire and other perils specified in the policy...

Marketing

GIC did not seem to have formulated any concrete marketing strategies until the government of India had announced the liberalization of the Indian insurance industry. Since the company enjoyed a monopoly status in the market, it did not focus on marketing. Moreover, as some of the general insurance policies were mandatory, the company did not need to market them. GIC did not seem to focus on providing better service to the policyholders also. In the pre-liberalization era, most of the agents and development officers were more interested in getting more customers and there were many complaints about poor customer service...

Excerpts Contd... >>

  

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