State-owned life insurer Life Insurance Corporation (LIC) has seen its market share and its investment returns improve in the last few months. TS Vijayan, chairman LIC, in an interview with FE?s Sitanshu Swain & Kumud Das, talks about the corporation?s strategies to fight competition in the life insurance market. Excerpts:
Are the days of losing market share over and how can the gain be sustained in the future?
Market dynamics are very complex. Any market share has the tendency to go up or down and this is a continuous process. Our new premium income up to September is up by 45% and we are now targeting a total premium collection of Rs 1,73,000 crore by the end of the current fiscal. This amount includes Rs 53,000 crore from new businesses.
Would you say that your performance has been more on the basis of group performance?
Yes. But we would like to improve our individual performance in the days to come.
How successful is LIC in selling unit-linked insurance plans (Ulips)? Where do your plans for 50:50 ratio between Ulips and traditional products stand?
Ulips are picking up and is one of the strongest products of LIC. A ratio of 50:50 is an artificial assumption. It all depends on the awareness level and on the risk perception. A majority of the sales of insurance products happen during the second half of a fiscal.
Is it difficult to predict at the moment what the mix of the two kinds of products by the fiscal end will be?
The way I look at it, we should be telling our customers what the features of Ulips and non-Ulip products are. It is up to the customers to make a choice. So, we are concentrating on offering both the products equally.
But you had earlier said that your focus will be on traditional products?
The argument should not be whether to sell Ulips or non-Ulip products but should be based on the quality of demands. The strength of traditional policy is that it gives policy holders a guarantee not only on life risks, but also on the investors? portion. In Ulip policy, the risk of investment is borne by the customer. Personally, I believe there is a large market in India where guarantees are required.
Now that the stock market has improved, can a customer still find value in guaranteed products?
I will personally prefer a balance of non-linked and linked products.
Will you now focus on Ulip products more aggressively?
We are selling Ulips even now. Last year we might have ended at 60: 40 as far as the ratio between Ulips and non- Ulip products is concerned. An insurance product is a complete financial solution and there is definitely some place for guaranteed funds. It is like any other investment where one does not put his entire money in stock. He puts some money in fixed deposit too. One customer has more than one product. We have got 25 crore life policies subscribed by 14 crore customers. This means the customer has opted for multiple products.
Do you have any data on the number of policy holders and the size of policies?
Yes. We conducted a survey and reached a conclusion that we have about 14 crore customers. This figure may not be 100% accurate. Also, a person may have one policy in Mumbai and another in Delhi and this helps LIC to sell more policies to the same customer.
Is there any age-wise segmentation of the policy holders?
Yes. We have a programme on customer contact, where we contact our customers below 40 years of age and whose policies are maturing. We request them to buy new policies by making use of the funds they have received after their earlier policies have matured. The response has been very good so far. In another programme we tap those customers who have been loyal for the last 7 years and are still paying a particular amount of premium. We have classified them as ?Gold Club?. We are also trying to find out through this programme, whether our customers are now choosing our competitors over us. The exercise will continue for another 3-4 months.
What is the action plan to retain your customers?
We are creating a bigger product base. There is a great demand for health and pension products. Based on the demands, we devise our new products.
Which age-group purchases your products the most?
We have observed that a majority are from the age group of 30-40 years. This may be because people at this age think of some kind of security and need of insurance.
Are you concentrating more on your products and distribution?
We have introduced one or two niche areas in distribution. We are appointing senior business associates and direct sales executives.
What are your investment plans?
As a prudent investor, we are very careful and go by the fundamentals. The infrastructure sector looks promising. We invest on regularly and follow the HTM system. So, we don?t have the problem of MTM losses like banks.
What is the outcome of your discussion with Irda on being allowed to retain and buy more than 10% of any company?
In case of a problem in specific firms, we can approach the Irda for exemption. Recently the regulator allowed us to buy more in the NHPC IPO.
