Life Insurance Corporation of India (LIC), the country’s largest insurer, which is likely to be listed on stock exchanges in the next financial year FY22, is working towards getting a complete valuation carried out. In an interview with Moneycontrol, MR Kumar, Chairman of LIC, explained how the insurer is gearing itself up for the largest listing in the country. Kumar also underlined the recovery the insurer is seeing after the Covid-19 pandemic. Excerpts:
LIC is slated to be listed in FY22. What are the preparations from your end?
For LIC, the valuation process has to be done. This means that the Indian embedded value (EV) needs to be arrived at. Once we have the software and actuarial firm in place, we will get the EV. We are working on that right now.
Once the EV is out, activities like drafting the prospectus and roadshows will be done. On the other hand, the amendments to the LIC Act, 1956, will be done in Parliament and we will make whatever changes are required.
Finance Ministry officials have publicly stated Q3 (FY22) as the IPO timeline. We are working towards that.
For life insurers, Budget 2021 proposed removal of the tax exemption on the maturity proceeds of certain Ulips. Will that impact the industry?
The Budget 2021 proposal to limit the tax benefit on Ulips’ maturity proceeds to policies with annual premium of Rs 2.5 lakh will not impact the business. This is because very few people buy policies with annual premiums above Rs 2.5 lakh.
Would it be right to say that the worst is over as far the business is concerned?
We have been focussing on the number of policies sold. A clear trend is that de-growth (contraction) is slowing down and recovery is happening. So, we may see 3-5 percent growth in the number of policies sold in FY21.
On the new premiums, we are confident of the premium collection growth. We are hopeful that LIC will see 15 percent growth in FY21. Among the products, our standard term plan has also been filed with the insurance regulator.
But your group polices have seen a contraction. What is the reason?
When it comes to group products, selling policies amidst the Coronavirus (Covid-19) outbreak was a challenge. Corporates were working from home and offices were closed.
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But we have launched the ANANDA application for end-to-end sales and this has been helpful. There is video-based medical examination, eKYC is enabled and we sold more than 20,000 policies using this application.
Among product segments, are unit-linked insurance plans (Ulips) making a big comeback at LIC?
The Ulip segment has seen growth due to our products SIIP and Nivesh Plus. As of January 31, the Ulip business stood at Rs 481.78 crore as against Rs 83.49 crore in all of FY20. This is huge growth, especially after the SIIP launch in March 2020.
So, we may see Ulips constitute about 15 percent of our business in the next few years from below 10 percent currently.
India is still reeling under the impact of Covid-19. How many death claims has LIC settled so far under this?
India should be talking (more) about insurance policy coverage than premium density. Among the Coronavirus deaths, very few were insured. So far, there are 2,280 insured people of the total Covid deaths as of February 8. Here, LIC customers were 2,199. We have settled Rs 148 crore in claims related to the coronavirus so far.
On the distribution front, LIC has traditionally been known for its agent-led sales. But now bancassurance also seems to be catching up…
We added 100,000 new agents this year already and have touched 1.3 million agents. It is an all-time high for LIC and is primarily because of the job losses in the market due to Covid-19. Here, LIC has been able to recruit people who lost their jobs.
On the other hand, the bancassurance (bank-led insurance sales) channel has seen good traction. We plan to ramp up the bancassurance business in FY22. Over the next 3-5 years, bancassurance could contribute 10 percent of the business compared to less than 5 percent currently.