‘When competition has done well, LIC has done better’

The country’s largest life insurer, Life Insurance Corporation of India is gearing up for new product launches, given that it now has just about a dozen products (compared to 48 products last fiscal) in its portfolio. The new products are expected to help it meet the ambitious target of ₹1 lakh crore in new business premium collection for this fiscal. SK Roy, Chairman of LIC, discusses the corporation’s plans for FY15 in an interview. Edited excerpts:

How has the transition to the new products regime been for LIC?

The first quarter of the current fiscal has been very good for us. We had given ourselves a challenging target of 12 per cent growth for the quarter and we have done nearly 12.5 per cent. Historically, the first quarter yields 8-9 per cent. As of now we have 12 products in the individual category and have done far better than Q1 last year, when we had 48 products. There is inherent strength in the LIC team; whenever it has been challenged, it outperforms.

LIC has been seeing good growth in group gratuity. Is this a focus area?

For the last couple of years, our group and pension department has been a major contributor for the Corporation. We are very proud of the fact that all the large corporates in the country repose their trust in us to manage their liabilities or their funds. Group gratuity gives us 30 per cent of the group schemes portfolio, so it’s large and growing.

LIC has seen healthy premium growth last fiscal, higher than the industry average. Do you expect this to continue?

Last year, we did approximately ₹90,000 crore of first year premium which was a good performance, considering the circumstances (new product regime and state of the general economy). For FY15, we have set a 10 per cent plus target of budgeted growth, which will take us to ₹1 lakh crore of new business premium collection.

As far as training of the agency force is concerned, mostly it is a continuous process. We can’t say everyone has been trained optimally. The number will increase as time passes and with the greater frequency of product launches. LIC’s marketing team consists of nearly 12 lakh agents; we have 25,000 development officers and other distribution channels through which we sell these products.

As and when approvals come from the regulator, and we feel the time is right, we will launch products. I am not saying we will go back to having 48 products, as only 10-12 sold in large numbers, while others were niche products. We would definitely like to have a bouquet of products that meet the needs of the entire insuring public.

Are you looking at any changes in distribution? Will LIC hire more agents?

We are looking at increasing our agency force by 20 per cent this year. We would like to reach a figure of 1.2 to 1.5 million agents this year.

On bancassurance, we are growing but not at the pace we would like to. We must understand that most of our partners are public sector banks and right now they have other priorities. We don’t expect high growth immediately but it is a market for the future.

The life insurance industry has seen a large churn in insurance agents in the last few years. Do you expect it to continue?

My belief is that this is still an informal sector. Unfortunately, over the last 58 years, a vast majority of agents have come from the informal sector, which is prone to churn. There is a group of 10-15 per cent of agents who are professional, who have been in the industry for long. The challenge is how to bring the mass of them from the informal to the formal sector. Till that happens, I believe there will be churn.

Will LIC be looking at more products on the online platform?

We have two products on the online platform and we feel the potential for online sales is very large.

We have received approximately 20,000 enquiries on the online platform for a niche product in the last two-and-a-half months, which indicates that there is a very large demand for products being sold online.

But we have infrastructure issues, such as KYC compliance, that need to be tied up for online sales. So, human intervention has not gone away. We will need to fix some of these back-end systems before we get into it.

How will LIC gear up to handle competition if FDI in insurance is raised to 49 per cent?

Historically, whenever competition has done well, LIC has done better.

We welcome this move because we are a very large organisation and we need triggers for growth. In the past, when many companies came in, initially we lost market share, then we regained it. So I am sure there will be a similar pattern in the future.