As investors flock to equities in a raging bull market, the humble insurance policy is facing the brunt.
Life Insurance Corporation, ironically one of the leading stock market players, is finding it increasingly difficult to sell its bread-and butter insurance policies crowded out by mutual funds and banks in garnering household financial savings.
Also, a stricter regulatory regime that came into effect in January has stripped off all its old insurance schemes even as its new schemes are unattractive.
"This year will be bad for the life insurance sector, be it public sector or private sector as growth is not being seen. Because Irda- (Insurance Regulatory and Development Authority) compliant schemes are still not getting market acceptance. Our field personnel, who have been trying to push new products aggressively, still find a lot of difficulties. The products are not marketable," LIC managing director S B Mainak said.
A changed regulatory regime that re-looked at interest of policyholders in 2013 following complaints of mis-selling of investment products as insurance offerings has taken a toll on the behemoth's
performance, which is now left with just 12 products, down from 54 until December 31, 2013.
In January-March, the first quarter post the new regulatory regime, LIC's new premium collection at Rs 24,350 crore dropped 7.1% over Rs 26,210 crore of the previous year.
It was only the collections from old policies till December that helped LIC clock a handsome 17.82% increase in collection for fiscal 2014to Rs 90,123 crore.
But it's not just restricted regulatory regime but also poor marketing strategy that was also responsible for its current predicament.
"There are few places in the country, at least those above population of 10,000 where LIC is not present with offices. But despite such robust infrastructure, we are finding it difficult to do business. I
think, we need to take a relook at the way we do business and sell our policies and bring back the strategies we had in the 80s. Our challenge now is to connect again with customers," Mainak told the
gathering in an event organised by Bengal Chamber of Commerce.
The result is that LIC has been crowded out by its more savvy competitors, the commercial banks and mutual funds, or even the PSUs.
"The banking sector is sitting on Rs 73 lakh crore of current, savings and fixed deposits, growing at 13-14% annually. Public sector undertakings had came out with tax-free bonds last year, most of which
were oversubscribed except those who came late at the end of the tax planning period. Even mutual funds had a good last year, with asset under management base touching Rs 11 lakh crore."
But Mainak is hopeful that by year-end LIC would be able to retain its fiscal 2014 market share of 82%, which rose from 76% in fiscal 2013 on the strength of several schemes that are awaiting clearance from Irda.