The insurance industry is bracing up for the crucial and last quarter, where most people make their tax-planning decisions. While many private insurance companies have been looking at growth albeit profitably and going slow, the largest life insurer in the country Life Insurance Corporation of India has been chalking out a plan carefully.
Last year, the insurer swept the country with its ‘Jeevan Aastha’ plan that collected Rs 8,000 crore in the last quarter. The insurance behemoth made a good decision of offering a capital guarantee product, when people were hearing just bad news from stock markets. This tax-season, the firm would launch a product keeping in view the interest rate situation, says D K Mehrotra, managing director of LIC. He tells Khyati Dharamsi on the way ahead for the insurance industry, where regulation-change is just round the corner.
What helped LIC regain its lost market share?
We knew that we were going to get back the share. People came back to us because of the trust. When people invest, they look at the core strength of the firm. They may be temporarily influenced. But they have the trust with us for 53 years now. We have never defaulted on any payment. Our outstanding is very low. Competition brings in challenges and we knew we had to be the best. So we changed a lot of things — the services, IT interventions. We have come out with products according to what people wanted.
What is the strategy that LIC would adopt for the final quarter?
We have already launched Jeevan Nischay, considering the needs of people. We will be coming out with another product, looking at the needs of the market. In January, the monetary policy may be announced and the interest rates may be changed. So we are looking at something that could benefit customers keeping this in mind. It may be both a unit-linked insurance product (Ulip) and a traditional product.
Looking at the capital market conditions last year, LIC had shifted focus from Ulips. Will that still continue?
Looking at the market volatility, we are gradually reducing the Ulip contribution to our business and shifting to our core strength of traditional products. Two years ago, 85-88% of the business can from Ulips. It is now around 68:32 ratio of Ulip versus traditional products. Inspite of the shift to traditional product, we are showing growth. But we will offer Ulips as we do not want to leave a vacuum in that product category.
Can insurance work without commissions?
World-over, insurance has been a push product and not a pull product. Unless it is mandated, like in motor insurance, people don’t buy. So, you need to have intermediaries. Mis-selling is not confined to this industry alone. Defectives can be sold in any industry.
The industry employs 3 million people. Where will they be put?
How will agent commissions come down after January 1, 2010, when only re-filed
insurance products with lower charge structure can be sold?
We will see to it that agent remuneration is not touched. They lose the trust if that is done. We will cut down on internal expenses.
Other industry players are aiming to get listed and go public. Is LIC mulling a public issue?
We haven’t even thought about an IPO.
What is the target on the microinsurance products?
We have two products Jeevan Madhu and Jeevan Mangal. We distribute them through non-governmental organisations. Last year we sold 16 lakh policies. This year, we are expecting to sell around 40 lakh policies to earning members only through the micro-insurance products.
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