At times of financial uncertainty nothing quite sells like assured return products and Life Insurance Corporation of India (LIC), till recently the 800 lb gorilla in the Indian insurance market, is preparing to launch them to wean back customers and market share.
LIC chairman Siddhartha Mohanty has told financial dailies such as The Economic Times and the Business Standard of their plans to launch fixed income instruments. Incidentally, despite losing some market share to sprightly private sector insurers, LIC remains the country’s biggest insurer and investor in the capital markets investor.
The product that the LIC chief has in mind might provide about 10% of the sum assured every year after the expiry of the policy term to those who buy the policy. This product will hit the market in December this year.
“LIC is going to launch a very innovative product as per the needs of the market. In this product, after premium paying term and policy term, one will get 10% of the sum assured every year for the rest of his or her life. This is a guaranteed non-par product,” said Mohanty in an interview.
Admitting a drop in the first-year premium in H1 of FY24, Mohanty said, “Due to a high base in group premium in Hl of 2022-23 (FY23), there was a dip in the overall premium this financial year. Our market share in individual premiums has never gone below 40%. The objective is to increase it further.”
The LIC chairman also commented on how they are working on product mix and distribution to regain market share.
He said that after listing product mix was one crucial area that was taken up for addressing. “The idea was to have a fair share of non-participatory (non-par) products in the mix. The share of non-parannual premium equivalent has gone up almost 50%. In March 2022, the share was 7.12 per cent. It was 8.89 percent in March 2023. Today, it is over 10.73 percent. Non-par products are beneficial for our customers as they provide guaranteed returns,” he stated.
Though the agent network fetches more than 96% of the company’s business, LIC is now focussing on bancassurance channel, which is already yielding results. Its share has gone up to 3.42% in new business premiums and 2.1% in number of policies. LIC now has 80 banks as partners, including co-operative banks which are crucial in the rural segments.
LIC is also aggressively pursuing its digital marketing drive. “This year, the number of policies completed through the Ananda mobile application (app) during the first six months has increased from 314,000 in FY23 to 533,000 in FY24, a 69% growth,” he revealed.
Though the LIC scrip has disappointed investors so far, Mohanty has stated that LIC is steadily following its strategy since the time of listing (except for the group business) and that the company’s embedded value has risen by 21% in the first half of FY24. “Our non-par (policies where profits don’t accrue to shareholders) share has gone up from 7.12% to 10.7%. We have shown a 50% jump in non-par from March 2021. My objective is to take it further to 15%,” said the LIC chairman.
However, he admitted that LIC has suffered setback in the group business.
Despite the common man directing a substantial portion of his savings to mutual funds, the Mohanty felt there is no substitute for insurance and MFs don’t pose any threat to insurance. “Along with insurance, there is a requirement of investment. The regulator is coming up with pro grammes like Bima Vahak and Bima Vistaar. The objective is to expand insurance coverage. Mutual fund and insurance businesses are very different. We cater to the long-term needs of the people,” remarked the LIC chairman.
He also remarked that insurance offers both insurance and savings while MFs are basically an investment. “Insurers have to deliver what they commit whereas MF returns depend on the market. So people invest in each segment depending up on their risk appetite. There is a need for both,” remarked the LIC boss.
Mohanty has also said that LIC is selling more and more policies through banks. He also said that LIC has been mainly growing through its network of agents while private agents have benefitted with their tie-ups with banks.
“Both in the number of policies and premium, our share of Banca has gone up. Our focus is Banca. We have a lot of tie-ups too and are selling substantial amount of policies through banks. IDBI Bank and Axis Bank are contributing to our sales substantially and we have stakes in both banks as well.”
Mohanty also expressed a lot of confidence in the Indian equity markets that he noted is going up despite the Fed action.
“We have earned good profit this year. We will surpass last year’s investment profit soon. Our fund size is also going up. I don’t see the market being overvalued,” remarked the LIC boss.
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