LIC to change tack, focus on recurrent cash-flow products

Mumbai: State-owned Life Insurance Corporation of India (LIC), which continued to gain market share from private rivals in the single-premium product space, said that it would now concentrate on building a portfolio around recurrent cash-flows, such as ULIPs and other policies that require premium payments more than once.

“At the beginning of the year, we took a conscious decision to step up the sale of non-single premium policies and the number of policies,” said MR Kumar, chairman, LIC. The IPO-bound insurer said on Friday that it had further increased its domination in the life insurance market, both in the number of policies and first-year premium over its private sector competitors.

The insurance behemoth’s market share in terms of number of policies and first year premiums stood at 77.61% and 70.02%, respectively, up from 73.54% and 66.26% the same period last year. LIC’s total income rose 18% to Rs 2,97,017 crore as of September 2019 from Rs 2,52,149 crore a year ago, while the total assets grew by 7.92% to Rs 32,25,905 crore.

Kumar said that earlier LIC had not concentrated on expanding non-single premium policies due to the “overhanging fear of losing market share” of single premium policies, where margins are generally higher. However, the strategy to push investment and savings linked protection was made to improve coverage of insurance in the country, he said.

“We believe that coverage should be more important than penetration or density of premium, which is more a European or American philosophy. In India, we still need to sell policies to people not been covered yet, and their number is more than 30%,” said Kumar. LIC is currently awaiting Insurance Regulatory and Development Authority’s (IRDAI) nod before launching two non-single premium products in the market in March.

Several analysts and insurance sector stakeholders have raised concerns over the budget announcement that removes 70 types of tax deductions, including on ULIPs, arguing that the move will hit life insurers’ business. However, Kumar said that the impact for LIC would be largely contained as most policyholders are either in low income category where these deductions don’t apply or high-income categories where the benefits outweigh the expenses.

“Section 80C has been there for many years. While for upper segments there is no considerable impact, the amendments don’t apply to low income groups who account for most of our policyholders,” said Kumar. “I don’t foresee any impact on either sales or valuations.”

Source: The Economic Times