Government-owned Life Insurance Corporation has performed much better than the private sector life insurers. DK Mehrotra, managing director, LIC in an exclusive interview with FE?s Kumud Das explains the changing dynamics in the life insurance market. Excerpts:
How do you see your performance in 2010-11?
Life Insurance Corporation has witnessed a growth of 22% in composite premium in 2010-11, as against the average industry growth of 15%. LIC?s first premium income stands at R44,000 crore for 2009-10. Our market share has gone up to 68.7% now compared with 64.8% during 2009-10. In terms of policy, our market share has increased to 77% compared with 73% during 2009-10. Our ratio of Ulip to traditional products has also come down to 60:40 in 2010-11 as against 70:30 in 2009-10. It was a conscious decision to reduce our dependency on Ulips.
The decision was taken by us in the light of new Irda guidelines announced in September 2010. Gradually we started shifting focus to non-single and conventional products. Both the products have done well during the last financial year. Our average policy size is at R12,000 on the Ulip platform.
Now that LIC has regained its market share, we are going to encash the trust and confidence from our policyholders during this financial year too.
Our performance on traditional products could have been better but for volatility in interest rates.
Banks started offering higher rates on deposits and customers preferred to keep money in bank deposits rather than buying life insurance. LIC was the first among the life insurers to come out with pension product under the revised regulatory regime. The only problem being that neither seller, nor buyer could understand the product. Secondly, the interest rates started firming up. It affected the sale of our product on Ulip platform.
How do you expect your performance to be in 2011-12?
It will be a difficult year for us to achieve the target. Still, we have kept our hopes pinned at achieving a growth of 15% in terms of policy and 25% in terms of premium. Our total number of policies stand at 3.7 crore and we are targeting 4.66 crore policies by the end of this financial year. We will launch both Ulip and conventional products during this financial year. Group products are in the offing. Still, I believe conventional products will be the mainstay.
For insurance products, we don?t try to calculate the return on investment. Rather, we cover risks. Last year, we introduced four to five products.
This year too, we plan to launch same number of products. We have to be aware of the market sentiments. Buying pattern of customers is changing. Hence, my priority will be to understand the customers? mind. We are working on a project, which is titled ?Insight-driven Marketing?. We are trying to profile existing customers through data mining. We are in the process of forming a marketing intelligence team to undertake this exercise.
We will also ensure that there is no conflict among the different channels-direct marketing, bancassurance and even microinsurance at LIC.
We are also trying to sell our products online. If there is a space in the market, we want to be there through various channels.
What will be your product focus?
If there is a demand for Ulip products in the market, we will push these products. Otherwise, we will go for conventional products. Contribution from pension products is falling. We have already launched Pension Plus. But, there is not much demand.
Do you think new pension system will kill business of life insurers?
Fund managers at National Pension Scheme (NPS) are in the accumulation stage right now. But the real situation will come when payout begins.
Do you have plans to open new branches and expand you agency force?
We have opened two new divisions at Patna and Vardhman. Agency expansion is a continuous process.
