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Hrm in lic

  1. 1. According to: • Advance Leaners Dictionary, “the research is a careful investigation or enquiry especially through search for new facts in any branch of knowledge” • Redman & Mory, “Research is systematic effort to gain new knowledge. The research made for this project is by personally visiting the Life Insurance Companies and their HR Managers. Whole data for this project was collected from books, magazines and newspapers. 6
  2. 2. CHAPTER – 2 REVIEW OF LITERATURE INFORMATION – 1  RECRUITMENT AT LIC • EMPLOYEES Recruitment at LIC is done by the Central Office at Mumbai. The recruitment process for Assistant Administrative Officers (AAO’s) at LIC begins with the placing of advertisemnets in popular national and regional newpapers across the country. Candidates applying for the post of AAO’s sholud be between 21 and 28 years of age. They should hold a graduate/ postgraduate degree in any subject with minimum os 50% marks. Candidates from certain backgrounds (SC, ST, OBC) are given some concessions with regard to age and marks. Short-listed candidatesare asked to appear for an entrance examination. The entrance examination has two papers – one is of an 7
  3. 3. objective type and the other an esay type. The objective type paper tests intelligence, apptitude, mathematical knowledge, logical reasoning, general knowledge and awareness of political and cultural events. After the written test, candidates have to appear for interviews, which are conducted by LIC offices across the country. Based on yheir overall performance, candidates are selected.  TRAINING OF THE AGENTS IN LIC Training is give to become the agents of one and half month for fiv hours or for twenty five days for seven to eight hours. By completing this training the agnet is going to get the license to deal with th e products if Lic and can take the insunace of the people. People who only try to act as agent of LIC (who are not the actual agents) can be punished with sum of the penalty of some amount and any other thing. Strict action are taken against these people. INFORMATION - 2  PROMOTION POLOCIES IN LIFE INSURANCE COMPANIES 8
  4. 4. In insurance companies employees promoted to higher posts are placed on probation ranging from 6 months to 1 year depending upon the class (explained below) to which he belongs. The competent authorities may use their discretion to extent the probation to a maximum period of 2 years. An employee on probation is liable to be reverted to his earleir position without notice, however the period of probation will be counted as permanent service for all purposes. Promotions of the employees are done on the various classes, which are as follows: • Class 1: This class comprises of officials at the highest ranks in the organisation. Class 1 includes the chairman, the Managing Directors, the Executive Directors, the Zonal Managers, Seniors Divisional Managers, Branch Managers or administrative Officers to Assistant Branch Managers or Assistant Administrative Officers. • Class 2: This calss comprises of Development Officers. These development officers have agents under them who work on 9
  5. 5. commision and not on salary. This class brings in the business for LIC. • Class 3: This class comprises of all the administrative staff. Tyhey are Higher-Grade Assistants (HGA), Assistants, Record Clerks (RC), Cashiers and Machine Operators. • Class 4: This class comprises of the sub-staff. They are the Peons, Watchmen, Sweepers, Drivers, etc. INFORMATION – 3  POLICICES REGARDING EMPLOYEE CONDUCT AND DISCIPLINE The preparation and upgradation of the Personnel Manual of LIC is the responsibility of the Personnel and Industrial Relations Department. Given here below are some rules and regulation regarding employee conduct and discipline. Each of these issues are covered in detail in the manual but have been explained very breifly here: 10
  6. 6. • Obligation to maintain secrecy: An employee should not communicate directly or indirectly and official documents or information to any employee or other person to whom he is not authorised to communicate. • Participation in Demonstration: An officer of LIC is expected not to participate in any kind of demonstration, resort nor abet to any kind of a strike. • Private trading: Employees of LIC are not allowed to engage directly or indirectly in any kind of trade or business. They are not allowed to be involved in the promotion or managemnet of any other company registered under the Indian Companies Act. • Partly-time work: No wemployee is allowed to take any kind of part- time work for a private or public body. 11
  7. 7. • Acceptance of gift: An employee of LIC is not allowed to accept nor permit his wife or any family member to accept any gift of more than a trofling value. INFORMATION - 4  MAX NEW YORK LIFE – NOT PARTNERS FOR LIFE MAX New York Life’s (MNYL) philosophy is simple: reard performance. It applies this philosophy diligently (some might say ruthlessly) to its 900 employees and 4000 agents. For an agent who does well, Rs 10 lakh as annual commision income is common. They also get to attend special offsites, where fun, training and insights are combined in equal measure. The most successful ones get nominated for the Chairman’s gold pin or the Million Dollar Roundtable, aworldwide club for insurance agents who cross the $70,000 (Rs.5 lakh) mark in annual commision. Similarly, MNYL employes can expect lots of money, recognition, sprcial and other rewards if they do well. 12
  8. 8. At MAX laggards just don’t survive. There is no place for poor performers and mediocrity. Targets are stiff – 100% annual growth is common ai every level. Results are monitored monthly and discussed publicly. Key Result Areas (KRA’s) of the senior managers – from Managing Director Anuroop ‘Tony’ Singh downwards – is placed on the company intranet. The employee turnover rte is over 25%. This does not worry Tony Singh who sees it as necessary blood-letting for a high- performance organisation. However, those employees who siurvive take great pride in being part of the organisation. MNYL is not just about the money you make. Tony Singh makes sure that the rewards fot the high performers go beyond just soulless cash. He meets every one of the company’s employees at least twice ayear at presentations organisaed at the 20 offices across the country in which he discusses the vision and the values of the company. (Source: Businessworld, 1 September, 2003.) 13
  9. 9. CHAPTER - 3 INTRODUCTION OF INSURANCE AND HUMAN RESOURCE MANAGEMENT Introduction of Insurance: Insurance has come up as a very important finanacial services is most of the part of the world. The insurance is considered as one of the important segment in an economy for its growth and development. This industry provides long term funds that are essential for the development of basic infrastructure. The Indian Insurance industry is more than 150 years old. The industry has witnessed many phases of the working form the days when there were many private sector companies initially and they moved to nationalization and again to the private sector. 14
  10. 10. Being one of the segments of financial sector, it has in the recent past gone through transformation and change including the passing of IRDA (Insurance Regulatory & Development Authority) Act, 1999. There have been many reforms in the past in the Banking & Capital Market segments, which for the first time are being witnessed after the passage of IRDA Act in the Insurance segment. Insurance is basically defined as, “a financial agreement that redistribute cost of Cost of Unexpected losses”. Today stands both as a service and the industry in its own right. Introduction of Human Resource Management: Human resource the invisible, intangible assets, are the most valuable assets in any industry, more so in case of a service industry like Insurance. It is now well recognized that Human Resource Management are an integral part of business strategy determines the direction which the organization is likely to take in relation to its environment in over to achieve sustainable competitive advantage. HRM should ensure that every strategy that the organization visualize is supported by matching response from its 15
  11. 11. employees who in turn to be supported by consistent human resources policies. The important and value of human assets were recognized in the early 1990. When there was a major increase in employment in the form of service, technology and other knowledge base sector. In this firm the intangible assets, specially the human resources, contributed significant by to the building of shareholders value. The critical success factor for any knowledge base company is it highly skilled and intellectual work force. The fundamental truth is that no organization can achieve anything with out its people. Whether is a matter of capital equipment, distribution channels or resource allocation or for that matter marketing? It always comes down to “people” therefore people are the building block of any organization. This may sound some what simplistic but the fact is the may organization failed to seek that link between people and business results. Perhaps, this is based on the presumption that “business strategy” is more important than “people”. As a result we do see that in there annual reports ,companies vociferously declare “our people are our greatest assets” 16
  12. 12. but at the same time hold back when it comes to making the investment in terms of money and energy in there people. While business strategy are base on quantitative factors link growth, competition, position, marketing, profitability etc. HRM strategies involve most of qualitative factor like commitment, motivation, and good employee relations. It remains for the HRM process to help to design system that will help the organization to have staffed with the requisite skills need to success full implement its business strategy. Unprecedented development of science and technology, knowledge its very discipline is fast multiplying. It is said that in every sphere of management the techniques are just double in comparision of the last half decade. New theories and practices are being adopted very rapidly which are the result of mechanization and renovated systemization f human factor. It a great thrust of computerization. The increasing use of sophisticated information processing technology has changed the patter of planning, decision making and controlling almost beyond recognition. 17
  13. 13. DISTINCTIVE FEATURES OF HUMAN RESOURCE: The human element as a source has certain distinct features which mark it out from other material resources physical inputs into the system. It largely influences the methods and techniques of managing the human elements. These are – 1. The investment in man has a lagged return. The lag varying with the person the function and the level at which he works. 2. The divisibility factor is constrained by the unit which is the manager himself, with his essential supporting facilities – including other men who assist. 3. The investment in men is along term benefit. The logic of hiring and firing of employees is fast getting obsolete and difficult to apply. Even if the principle is to work, frequent changes of employees (especially managers) erode the health of the organization. 4. The characteristic noted above compels that a manager taken today is only partly for the task at present that the management 18
  14. 14. foresees for him in the future over a span of fifteen or twenty years. 5. The cost effectiveness of a material input usually cannot be less than zero. The measure of a managers contribution to enterprise goal can conceivably, assumes, negative values. In mathematical terms the marginal utility of a manger (or an employee) can take any positive or negative value, in a given position. 6. The sum of the several effectiveness of managers functioning in a team is not necessarily equal to the effectiveness of the team. The later can be more or less than the sum of the constituents. This is the consequences of group dynamics in which the group emerges as anew unit of effectiveness not by the arithmetical additive process of the constituents but by a synthetic, organic totality. This is group characteristic of managerial effectiveness imposes of HR, recruitment, selection, training and development. 7. Measurement (& verification) of managerial effectiveness is oe complex & uncertain. This puts an extra burden & new dimensions to the evaluation, appraisal and control system of the use and effectiveness of the human resources. 19
  15. 15. 8. Finally, since the potential of the man (manager) is almost admitted the task of manager’s development both as individual functionary and as a member of the team assumes unusual significance. CHAPTER – 4 HISTORY OF HUMAN RESOURCE MANAGEMNET AND LIFE INSURANCE COMPANY 1. HISTORY OF HRM: HR comes of age - history of human resource management Workfoce management has become increasingly complex. The heritage and growth of the human resource management profession 20
  16. 16. is closely linked to people's attitudes about work, the evolution of employment-related laws and sociological trends. The HR field today recognizes the dynamic relationship between strategy, people, technology and the processes that drive organizations. Although this dynamic relationship appears obvious now, the evolution of the profession has often been slow. One could argue that the HR field dates back to the first working arrangements between master craftspeople and their apprentices. Before the industrial Revolution, working arrangements involved close relationships between mentors and apprentices dedicated to learning a particular trade. Apprentices were often required to live in the shop or home of the master craftsperson. If an apprentice was injured or sick, the master's family was responsible for restoring the young worker's health and welfare. Master and apprentice shared in good times and bad, in profit and in loss. The usefulness of this age-old relationship came to an abrupt end with the advent of the Industrial Age. In one powerful stroke, the notion of work moved from guilds and home shops to steam-driven 21
  17. 17. factories. The introduction of the assembly line brought a need for low- skilled employees capable of performing repetitive tasks. Management philosophy at the turn of the century was epitomized by Henry Ford, who often wondered why workers brought their heads to work when all he really needed was their hands and feet. The personnel administration movement: By the late 1800s, people problems were a very real concern in the workplace. For the average blue-collar worker, most jobs were low-paying, monotonous and unsafe. Some industries experienced difficulty recruiting and retaining employees because of the poor working conditions workers were exposed to. As the means of production continued to shift from farmlands and guilds to city factories, concerns grew about wages, safety, child labor and 12-hour workdays. Workers began to band together in unions to protect their interests and improve living standards. Government stepped in to provide basic rights and protections for workers. Forward-thinking employers recognized that productivity was connected to worker satisfaction and involvement and realized they 22
  18. 18. could not meet production schedules with bands of disgruntled employees. In the late 1800s and early 1900s, the personnel profession that grew out of concerns about employee absenteeism and high turnover attempted to solve worker problems with such basic HR management functions as employee selection, training and compensation. Although industrial giants were beginning to understand that they had to do more than just hire and fire if they were going to meet consumer demands for products, most of the objectives of early personnel professionals were one-sided. Business leaders still viewed the work itself as infinitely more important than the people doing it, and production rates remained the top concern. Because employers believed employees would accept more rigid standards if they received extra pay and benefits, most employer-sponsored business solutions were aimed at making employees more efficient. From this mind-set grew scientific management approaches based on the work of Frederick W. Taylor and other experts whose goal was to get people to perform as efficiently as machines. 23
  19. 19. Of course, such approaches did little to improve worker morale or improve working environments. To counter the growing strength of the labor movement, some employers hired strikebreakers or kept blacklists of union members. Others made workers sign "yellow- dog" contracts -- agreements that they would not join unions. Still others attempted to protect their interests by creating company unions to preempt the influence of outside union activities. 2. HISTORY OF LIFE INSURANCE COMPANY: 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 and 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 – past few centuries – yet its beginnings date back almost 6000 years. Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by 24
  20. 20. Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of 25
  21. 21. the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage. The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in- force as Rs.22.44 crore, it rose to 176 companies with total business-in- force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past 26
  22. 22. but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. 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. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district 27
  23. 23. headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organisation servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organization happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies. 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 28
  24. 24. 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. 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. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many 29
  25. 25. homes as possible and to help the people in providing security to their families. Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 30
  26. 26. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. CHAPTER – 5 ACTIVITES OF HUMAN RESOURCE MANAGEMENT IN LIFE INSURANCE COMPANIES HUMAN RESOURCE MANAGEMENT (HRM) in Life Insurance Companies is a management function that helps manager’s recruit, select, train, and develops members for an organization. Obviously, HRM is concerned with the people’s dimension in organization. 31 HUMAN RESOURCE MANAGEMENT is also a management function concerned with hiring, motivating, and maintaining people in an organization. It focuses on people in organizations.
  27. 27. Development of human capital is important for any organization especially for organization whose activities resolve around special human interactions. Alongwith products and services the new insurers need people with the right set of knowledge, skills and aptitude for insurance. The persons who are involved in selling the product and those who are doing the back office work need to equip themselves with never skills and insights into every aspect of companies functioning. They have a daunting task of exploiting potential in the industry and at the same time bring good risks to the company for providing insurance coverage. They have to retain the existing customers for which they need to have better understanding of products and services by creating healthy internal environment with group harmony. Existing companies will have to frame their human resources policies to retain the competent and motivated staff since new entrants will be eying them by offering lucrative salaries. The scope of human resource management is very vast. It is connected with all major activities in the working life of a 32
  28. 28. worker. HRM is connected with every other department as human resources are the requirements of all departments in the life insurance organizations. HRM in Life Insurance Companies covers the following: • Human resource planning • Job analysis and design • Recruitment and selection • Orientation and placement • Training and development • Performance appraisal • Compensation management • Career planning, promotions and transfers • Motivation and communication • Employees Welfare 33
  29. 29. • HRIS – Human Resource Information System • Employee safety and health • Industrial relation etc……….. HRM involves a large numbers of functions or activites. This number varies according ti the size and needs of the organiation. The activites or funnctions of HRM affect the organisation internally. However, the extenal environment affects HRM functions. The major activites of HRM in Life Insurance Companies areas depicted below: 1. HUMAN RESOURCE PLANNING: HRP is the processs of assessing the organisation’s human resources needs in the light of organisational goals and chaning cinditions and making plans to ensure that a competent, motivated workforce is employed. HRP is very important in these mordern times where everything is fluid and chages are occuring at great speed. Importance of HRP: 34
  30. 30. • Future personnel needs • Parts of strategic planning • Creating highly talented personnels • Intrenational strategies • Foundations for personnel functions • Incresing investment in human resources • Resistence to change and move 2. ORGANISATIONAL AND JOB DESIGN: An important activity of HRM is developing an organisation which caters for all the activites required, groups them together in way which encourages integration, cooperation, and provides for effective communication and decision making. Job design is concerned with deciding on the content and accountabilities of jobs in order to motivate employees and maximise job satisfaction. 35
  31. 31. 3. JOB ANALYSIS: Job analysis is the process of cleecting job related information. Such information helps in the preparation of job description and job specification. It is defined as ………. ‘Job analysis is the procss of studyong and collecting information relating to the operations and responsibilities of a specific job. The immediate products of this analysis are job descriptions and job specifications.’ Specifically, job analysis involves the following steps: • Collecting and recording job information • Checking the job information for accuracy • Writing job descriptions based on the information • Using the information ti determine the skills, abilities and knowledge that are required on yhr job. • Updating the information from time to time 4. STAFFING: 36
  32. 32. Staffing or aqusition of human resources is another activity of human resource management. Staffing activites detemine the composition of an organisation human resources. Staffing activites include: attracting qualifiued people to the organisation, selecting from among candidates, reassigning employees through transfer, promotion, or demotion and ultimately managing the employee esparation through resignation, discharge or retirement. 5. TRAINING AND DEVELOPMENT: This activity of HRM focuses on improving the performance of individuals and groups within the organisation. Theses activittes aim to help employees learn new skills or refine exixting skills. HR managers must decide which skills or knowledge areas need development and which methods are most effective for helping employees acquire skills and knowledge. 37
  33. 33. A formal definition of training and development is …… ‘it is any attempt to improve current or future employee performance by increasing an employees ability to perform through learning usually by changing the employees attitude or increasing his or her skills and knowledge. The need for training and development is determined by the employees performance deficiency, computed as follows: Training and development need = Standard performance – Actual performance 5. PERFORMANCE APPRAISAL: Performance appraisal and review is ongoing evaluation of individual and group contributors to the organisation and the communication of those evaluations to the npersons involved. This HRM function is carried out for a number of purposes: to provide feedback about performance, to detemine the need for training, to make decisions about promotions, pay increases and so on. It has comprehensive definition which is as follows: 38
  34. 34. “Performance appraisal is a formal, structure system of measuring and evaluating an emploees job related behavior and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectivly in the future so that the employee, organisation and society all benefit.” Objectives of Performance Appraisal Data relating to performance assessment of employees are recordede, stored and used for several purposes. The main purposes of employee assessment are: • To effect promotions based on competence and performance • To confirm the services of probationary employees upon their completing the probationary period satisfactorily • To asses the training and development needs of employees • To decide upon a pay rais where regular pay scales have not been fixed etc……….. 6. COMPENSATION AND REWARD: 39
  35. 35. Organisations compensate employees through wages and salaries, bonueses and benefits, such as health insurance, vacation time, and pension programs. The presence or absence of rewards and recognition is important to employee morale and performance. Compensation decisions include determining: ensuring fair and equitable pay differences among employees, designing a pay pakagese relative to that of its competitiors, forms of compensation and so on. 1. MAINTAINING EFFECTIVE EMPLOYER-EMPLOYEE RELATIONSHIP: An important function of HRM is to promote harmonious relationships between the management and employees. The aim of HRM is to increase cooperation, trust and to provide to involve employees actively in the companys affairs. This function of HRM includes addressing employees grievances and taking suitable steps towards solving them. 2. HEALTH AND SAFETY MANAGEMENT: 40
  36. 36. This function of HRM includes activites and events that serve to protect organisation members from illness and physical dangers in the workplace and to assist them with their physical and emotional health. For many organisations, protecting the health and safety of humana resouyrces is aprime social responsibility. This HRM functions serves to preserve the human resources of the organisation. 3. EMPLOYEE PARTICIPATION: This is a relatively new function of HRM. Employee participation focus on giving employees a voice, sharing information with them and consulting them on matters of mutual interest. Employee participation is an impoartent step in establishing industrial democracy. 4. ORGANISATION IMPROVEMENT: Organisations must constantly improve themselves due to the emergence of new ideas regarding productivity, rapidly changing technology and competitionfrom the organisations. 41
  37. 37. 5. HR AUDIT: An HR audit is a tool for evaluating the personnel activites of an organsation. The audit may include one division or an entire company. It gives feedback about the HR functions to operating managers amd HR specialists. It also provides feed back about how wll managers are meeting their HR duties. In short, the audit is an overall quality control check on HR activites in a division or company and an evaluation of how these activittes support the organisations strategy.specifically, an HR audirt covers the following areas: • Audit of human resource function, • Audit of maangerial compliance, • Audit of thuman resource climate, • Audit of corporate strategy. The fuction of human resources manager is to ensure the flow of events through which people ijn the organisation improve the 42
  38. 38. organisations effectiveness. He has to constantly lookout for ways to improve the organisation through employee training, implementing work redesign programs and so on. CHAPTER – 6 HUMAN RESOURCE IN LIC “To be identified as an epitome of customer care and concern into the entire service industry – globally, we would need individual excellence wovem intoa fabric of team spirit, where the enterprise of leadership would transcend organisational 43
  39. 39. hierarchy and geographical boundaries leaving a trajectory of history with untold success stories”. ----- LIC has had many problems relating to the efficient use of its HR since the time it was set-up. Many of these problems related to the fact that it was a public sector organisation. The corporation managers were too bureaucratic. The work culture in the organisation was sloppy. Strong trade unions made it difficult for managers to get the work done. The corporations development officers focused on their own earnings and incentives, rather than on customer satisfaction. Govt. interference also had an adverse effect on the functioning of the organisation. In 1994, the Malhotra Committee was set-up by the Govt. of India for submiting its recommendations on allowing private companies into Indian Insuarnce market Govt. of India had to face 44
  40. 40. severe opposition from all the insurance mployee unions against the opening-up of sector. After the liberalisation of the insurance industry, LIC had an evaluation of its organiusational structure by consulting firm Booz Allen & Hamilton. The report by the consultants suggested that there was a need for organisational structuring, as some of LIC’s department did not add value to the organisation. In 2002, initiatives for organisational change have been inititaed – “We will set-up high level cross functional teams to speed up decision- making”. Said Mr.Bajpai, Chairman LIC in reponse to the report. Although Lic had an excessively large workforce (1,25,000 employees), it decided not to after them a voluntary retirement scheme (VRS). LIC planned to adopt a growth path to use its employes strength fully rather than offering VRS. A productivity linked lump-sum incentive of upto 6% based on the corporations performance was started in 2001, N.M. Sundarm, General Secretary, All India Insurance. Employees Association said, “The management hasn’t spent out in detail its intentions on the staff re-deployment. 45
  41. 41. Taking into account the emerging market and the customer expectations, we have suggested new value-added jobs to the management and also simplfications of claim procedures”. LIC intended to re-deploy its personnel into revenue generating activites to reduce cost by 2003. In 2002, the corporation said it has the full support of its unions in meeting the competition. The Unions accptance of the new direction for LIC was stated by B.S. Rawat, Joint Secretary and All- India LIC Employees Federation (AILICEF), “This is a part of a joint effort of the mnaagement of the unions to improve the functioning and the profitability of ythe corporation. The unions have decided to lend whatever support they could to professionals LIC”. A year earlier, in 2001, Lic faced the problems of a major brain-drain of top executives from LIC to positions in new private insurance omapnies. P.C. Gupta, former LIC Executive Director, Acturial, left the organisation. For HDFC Standard Life just a few months after he was denied to the top post at LIC. Others who left includede P.S. Pritam joined as an advisor to Allianz; 46
  42. 42. V.Rajagopalam, Chief in-charge of investment; who signed up with ICICI Prudential; and Vrinda Kini, Senior Branch for pension business. The drain occurred not only at the top level management, but also at the middle management level of LIC. LIC has established extensive training facilities at all levels. At the apex, it had Management Development Institute, seven zonal training centres and 35 sales training centres. At the industry level, along with the Govt. and the GIC, it established the National Institute Academy. In 2002, LIC signed a MOU with IIT (Indian Institute of Technology), Chennai, for training. LIC in the areas of IT, systems management & IT enables services management. LIC announced that it would develop its Zonal training centre in Chennai into an apex IT- training centre with the help IIT Chennai. CHAPTER - 7 47
  43. 43. RECENT DEVELOPMENT IN INSURANCE INDUSTRY IN INDIA INTRODUCTION: The Government of India in 1993 and set-up a high powered committee by R.N. Malhotra, former Governor, RBI, ti examine the structure of the insurnace industry and recommend changes to make it more efficient and competitive. Keeping in view structural changes in other parts of the finacial system of the economy. Major Recommendations of Malhotra Committee: The committee submitted its report in January 1994 recommending that Private insureres by allowed to co-exist along with Government company’s like LIC & GIC companies. This recommendations had been prompted by several factors such as need for greater and deeper insurance coverage in the economy and much greater scale of insurance sector is at least partly driven by fiscal 48
  44. 44. necessity of tapping the big reserve of savings in the economy. Committees recommendations were as follows: 1. Raising the capital base of LIC and GIC upto Rs. 200 crores, half retained by the Govt. and rest sold to the public at large with suitable reservations for employees. 2. Private sector be granted permission to enter insurance industry with a minimum paid capitaln of Rs.100 crores. 3. Foreign insurance companies be allowed to enter by floating an Indian company preferably joint venture with Indian partners. 4. Steps to be initiated to set-up a strong and effective insurance regulatory in the form of statutory autonomous board on the lines of SEBI. 5. Limited number of private companies to be allowed in th esector, but no firm be allowed to operate in both lines of insurance (life or non-life). 49
  45. 45. 6. Traiff Advisory Committees (TAC) is delinked from GIC to function as separate statutory body under necessary supervision by the insurance regulatory authority. 7. all insurance comapanies be treated on equal footing and governed by the provisions of the insurance act. No special dispensation is given to Govt. companies. 8. Setting up of a strong and effective regulatory boby with independent source for financing before allowing private companies into sector. 50
  46. 46. CHAPTER – 8 CASE STUDIES IN INSURANCE I. “THE IMPORTANCE OF HR PLANNING AN INSURANCE ORGANISATION”. ____________________________________________________________________ ____ The case focuses on the development and utilization of the human resources of insurance organisation through proper planning a management. It emphasizes the need for the organisation to shift frm their current manpower situation to their desired manpower position through HR planning. It also examines the problems faced by companies that failed to recognise their aniticipated future needs in terms of employee skills and training. The case throws light on the need for motivationg sales personnel so that they perform to the best of their abilities. 51
  47. 47. ____________________________________________________________________ ____ Ram Narayan (Narayan) began his career as amangement trainee in a private organisation. His special interest in studying human behavior and his bacground in psychology often made him analyse the emotional reactions and behavioral patterns of people around im. It was his ambition to become a human resource consultant in a reputed company. Therefore, after his graduation, he took a diploma course in human resource management. However, when he came across an opportunity to enter the insurance industry, he joined an insurance company as a junior manager. Later on, he worked in different caapcities in the HR department of four other insurance comapanies before working as the human resource manager of LMH Insurance Company. Within a short time, he gained cosiderable reputation at LMH. Some crucial decisions he had taken related to the employee compensation and reward systems in the company paid off rich dividends in due course of time. He was hence considered a key number in the organisation. 52
  48. 48. As part of the human resource policy. Narayan wanted to develop a lean structure for the organisation. LMH was in an expansionmode during those days. Narayan felt that having a lean organisational structure during the expansion period would help th ecomapny become more flexible in adapting to change. He believed that a fast growing organisation should have a limited number of personnel. But Narayan was against employee retrenchment and layoffs. His policies worked well, and he became an instant success with both the employer and employees in the organisation. Over the year, however, the business environment changed and the organisatiop expandede in size because of diversification. Narayan, therefore, advise the top managemnt at LMH to change its HR policy and develop a strategic human reosrce plan that would take care of the future needs of the organisation. However, the top management ignorned his advice and continued with existing HR policy since this involved lesser costs. The consequences did not favor the company in the last three years. The company had to struggle to manintain its existence in the business during 53
  49. 49. the last three years. One of the basc reasons was that the organisational structure was too lean. The company’s HR policy actually led to a shortage of manpower. The company’s cagerness to increse its profits rapidly made th emanagemnt decide to make a temporary arrangemnet of recruiting people on an emergency basis and provide them with fast-track trianing. Owing to space constraints, the comapny was forced to move to a bigger office, and its monthly expenses and cash requirements incresed. The top management decided that things could improve only if the company sold more polocies and expandeed its clent base. It pushed its employees to work for extra hours, often with no overtime allowancw. Due to such presure on the employees, their productivity declined. There were other problems too. When the company came up with an innovative product, there was always the threat of big players following its corse by releasing a similar product. In addition, such competition added to the burden on the already overstressed personnel and other resrces. The situation deteriorated fast as people started to quit in droves. Those who stayed felt insecurs. Total confusion prevailed in the entire 54
  50. 50. organisation and the employees started losing confidence in the management. A meeting was convened to resolve the problem. Narayan too, attended the meeting. He brooded over the problems. While talking about the changes requird to solve these problems, he advised the top managemnt to formulate a strtegic HR plan. For the time being, he suggested tactical human resource palnning. He convinced the management that once the present problems are solved, the company would have to implement the strategic HR plan. Questions for discussions: 1. Describe the HR problems that LMH Insurance Company faced. What were the reasons for hese problems? Could the company have avoidede these problems? If so, then how? Solution: A. HR problems that LMH Insurance Company faced: • The company was struggling to maintain its existence. • The organisational sturcture was too lean. 55
  51. 51. • HR policy led to shortage of manpower. • Because of the over-loaded work, employees productivity declined. • Competition in the market added more burden to the employees. • Employees started losing the confidence in the management because of the confusion prevailed in the entire organisationand that confusion was about the work, competition, overtime etc. B. Reasons for the problems: • The stucture of organisation was made too lean. • The work was more given to the employees and no overtime allowance was given in return. • The confusion was there. 56
  52. 52. • The organisational personnel were overstresed because of the burden. C. Company did not avoided the problems: The problems faced by the LMH Insurance Company decided to solve the problems, for that purpose meeting was held by the management where all the problems were brooded by Mr. Ram Narayan, HR Manager of LMH Insurance company. He adviced the top management to formulate – • Strategic HR Plan • Tactical HR planning II. “HR CHALLENGES IN THE INSURANCE INDUSTRY” 57
  53. 53. The cases focus on the challenges facing the HR department in the growing insurance industry in India. Prob;lems caused by the lack of skilled personnel and the increasing demend for skilled emplyees are also discussed in the case. In addition, challenges regarding the recuitment and retention of employees are examined. The case throws light on various measures taken by HR depatments in insurance organisations to improve the work environment and the productivity of employees. “The real challenge for human resource professionals. Espaecially in the insurance sector, will begin in the new millennium,” said Karrupu Vasu (Vasu), Senior Manager (Human Resource) at Bombay Life Insuarnce. What kind of challenge will we face? As of now, the sailing is smooth for HR professionals as compared to the marketing professionals. As competition is severe in the insurance sector. It requires a lot of skill to sell a policy. Even finance professionals face difficulties as the interest rates have been on a downward spiral. They now face the challenges of identifying the best investment opportunities,” said Chenchull Reddy (Reddy), another manager at Bonny Life Insurance. 58
  54. 54. “The honeymoon is over. It is time to pll up our socks. After the liberalisation of the insurance sector, private and foreign players in India have become active. Though therer is lot of scope for growth in the sector, the availability of human rsource with skills suited for the insurance industry is meager. Therefore, it is difficult to find skilled people,” replied Vasu. Both Vasu and Reddy had several years of experience of working in managerial positions for different service organisations before they joined Bonny. Vasu was happy with previous job, when the offer from Bonny came to him. Though, he was initially reluctant to switch from the orgnaisation to bonny, the pay packet offered by the Bonny finally wooed him. Soon after joining Bonny, Vasu was assigned the responsibility of recuiting people to various positions in the organisations. “Recruiting the right people has become a key issue now. Identifying people with proper skill sets is very important,” said Vasu. “But statistics reveal a high unemploment rate is country,” pointed out Reddy. 59
  55. 55. “Yes, I agree that the unemployment rate is growing. But the typr of employees being sought now s different. The industry now requires employees who are more skilled or better educated than those in the past,” said Vasu. Coincidentally, on the very next day, Diwakar Nambiar (Nambiar), the Generl Manager of the company, called Vasu and Reddy fo r a startegic business discussion. While discussing about the strategies that the company needed to implenment, Vasu informed Nambiar about the difficulties they were facinf in recruiting people for the organisation. Nambiar replied, “This was expected, since growth for any company comes at a certain cost. In the current competitive scenario, the success or fialure of any organisation depends upon the kind of emplyees it recruits”. They then discussed about the kind of employees they needed and other strategic matters related to human resource management. 60
  56. 56. While talking about h ecurrent requirements of the company, Nambiar said, “We need underwriters, computer support specialists, database administrators and sales personnel”. “But before we go in for staffing, we need to conduct job analysis,” pointed out Vasu. Nambiar accepted Vasu’s suggestion, and stressed on the need for the HR department to decide its priorities. After giving is a serious thought, Vasu replied, “There is aneed to create an environment which would attract people and make them loyal to the organisation.” “But with the overall industry trend being the way it is, how can this be acheieved?” asked Nambiar. Vasu replied, “We need to pay high salaries to highly effeicient employees. Instead of havinf a rigid policy regharding the work hours, the HR department should provide employees with flexi- time options”. The meeting ended with the decision to adopt employee- friendly HR practices in the company. It was felt that with the 61
  57. 57. implementation of innovative HR practices, the company would soon become an employer of choice. The productivity of the employees and the output of the firm were also expected to significantly increse due o the flexi-time arrangements. However, before adopting the new practices, it was essential that the HR department sorted out matters pertaining to teamwork, synergy, building up employee morale and strengthening their interperssonel relationships. Taking into consideration the diversity of the workforce, this was a huge task for the HR managers. Questions for discussion: 1. Nambiar called both Vasu and Reddy to discuss the rewcruitning process that the company must follow. What are the startegic issues involved in the recruiting process of Bonny Life Insurance Company? Solution: The strategic issues involved in the recuiting process of Bonny Life Insurance Company are – 62
  58. 58. • Certain kind of employees they needed are underwriters, computer support specilists, daatbase administrators and sales personnel. • They have to create such an environment which would attract people and make them loyal to the organisation. • Pay high salaries to highly efficient employees. • Instead of having a rigid policy regarding the work hours the HR department should provide employees with flexi-time options. • Employee – friendly HR practices will be adopted. 2. Vasu suggested the need to conduct organisation and job analysis before staffing . discuss the need for Bonny Life Insurance company to conduct organisation. Solution: Yes, there is a need to conduct organisation because the productivity of the employees and the output of theform were expected to significantly increase due to the flexi – time arrangement. However, before adopting the new practices, it was essential that the HR 63
  59. 59. department sorted out matters pertaining to teamwork, synergy, building up employee orale and strengthening their interpersonnel relationships. CHAPTER – 9 DATA COLLECTION The data about the project was collected in the form of Primary and Secondary data. The information was collected through personal visting the Life Insurance companies and getting the quesstionnaire filled by the HR managers of the companies.The collected information is depicted below: 64
  60. 60. I. PRIMARY DATA: 1. What is your policy as HR manager of Life Insurance? Ans. Most of the HR Managers are dealing their work with more effective and efficient manner. This leads them to make the employees also active towards their tasks. These HR maangers use the various plans to keep the employees satisfy by giving some of the incentive, better salary, good commission, apparaisal of the performance and many more. In general the motto of the HR Managers are “to make the employee satisfied with his work by placing him on the right job. 2. What are the different types of work did you handle? Ans. Activities handled by the HR Manager are as follows: • HR Planning • Job analysis and design 65
  61. 61. • Recruitment and selection • Orientation and placement • Performnac appraisal • Job evaluation • Remuneration • Incentives payment • Employees benefit • Welfare of the employees • Promotions and tranfers • HR Audit & record • Training and development etc……... 3. what are your HR duties and responsibilities? 66
  62. 62. Ans. Duties and Reponsibilites: • To make the employee satisfied with their work • To make the true and fair view about the top level mangement • To decide the different types of activites provided to the employees, prior permission of the top level management • To seek the problems of the employees • To have proper attention to the work of the employee • To place the employees at the right where they are needed more • To trained and develop the employees to faces the challenges ahead • To take care of their (employees) needs in the organisation 4. How do you appraise the performance of the employees? 67
  63. 63. Ans. The employees performance is depend on- • Efficiency to work • Efficient to deal with work • Better understanding about his work • If lead the followers to achieve the goals • Feedback to the organisation by the employees • Interview of th eemployee • Weaknesses or deficiencies in knowledge, skills, and abilities of the employees 5. How would you keep your employees satisfied? Ans.Different strategies are followed to keep the employees satisfied- • Motivating them through the bonus or incentives • Different types of trainings 68
  64. 64. • Attractive commissions • Attractive pay – scale • Open discussions with the employees for their problems • By rewarding the efficiency of an employee CHPATER – 10 FINDINGS AND CONCLUSIONS 1. HR Managers try to satisfy the needs of the employee as well as the job satisfaction. 2. They handle more than two to three activites under their task and are able to complete their work as soon as possible. 69
  65. 65. 3. They are well aware of their duties and reponsibilities towards their work and take it as a challenge for them. 4. They are mostly concerns with the employees performance appraisal, as it defines the strength and the weakness in detail of employee. 5. They handle the different types of problems of the employees and sole by making the open discussion with them. 6. They decide the different types of commission and pay-scale which they make in such a manner that the employees are attracted towards it and more give their involvement to achieve their desored goals. Bonuses and incentives are the another factor of motivating the employees. 7. They reward them in such a greatful manner that they work with more efficiency. 8. They work after the welfare of the employees and give the attention to their basic needs also. 70
  66. 66. 9. They provide different types of training ti their employees which will help them to faces the challenges ahead. 10. Promotions and transfers are also the part of motivating the employees. These are given when the employees does their work in more efficient manner and give the efficient results to the organissation. Conclusions: The organisation and HR managers make all the possible efforts to keep the employee satisfied with his work and should give the good results in returns to the organisation. They keep their emloyees happy by giving them different types of incentives plans, transfers, promotions, commission, better pay scale and may be the participation to speak in the top level management and much more. CHAPTER – 11 SUGGESTIONS AND RECOMMENDATIONS 71
  67. 67. 1. As they are more concern about the satisfaction of the employees they can’t concentrate on the individual employees bacause there are many, so they should try to concentrate on the individual also. 2. HR managers should disclose the material facts of their job as human resource management is especially for the welfare and the satisfaction of the employee. 3. They should solve the problems of the employees as soon as possible. 4. HR managers should consult with the employees in the certain cases or should include them to make certain level of decisions of their own. @@@@ BIBLIOGRAPHY @@@@ 72
  68. 68. BOOK AUTHOR EDITION YEAR 1. HUMAN RESOURCE MANAGEMENT GARY DESSLER 10TH EDITION 2005 2. HUMAN RESOURCE AND PERSONNEL MANAGEMENT K. ASWATHAPPA, Dean faculty of commerce and manangemnt and Director, canara Bank School of Managemnt studies, Banglore University. 4th EDITION 2005 3. CASE STUDIES IN INSURANCE ICFAI - MARCH -2005 73
  69. 69. 4. INSURANCE HRD PRACTICE DR. MAMTA JAIN 1ST EDITION 2007 @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 74