IPO-bound LIC plans to cross-sell policies via housing finance arm

Life Insurance Corporation (LIC) may explore cross-selling products through its housing finance arm LIC Housing Finance. This will help strengthen yet another channel of LIC for selling its policies.

As the insurer looks to attract investors for its mega initial public offering (IPO), the Centre is learnt to have informed investors during road shows that LIC would look at cross selling its policies, a senior government official said.

This would be by selling insurance products to home buyers who avail loans from LIC Housing Finance. LIC owns 45.24 per cent in LIC Housing Finance. 

Although the option is already available with LIC, the route has not been utilised by the insurer like its competitors, an official said.

“Harnessing this route would give another channel to sell policies to LIC and grow further,” the official added.

Currently, lenders — while providing home loans — tell borrowers to avail their own life insurance policies.

This isn’t done by LIC as actively as its peers, the official said.

Citing the example of State Bank of India (SBI), the official added that SBI tells borrowers to avail life insurance from SBI Life instead of LIC.

Utilising this channel to sell its policies to home buyers of LIC Housing Finance will give LIC yet another channel to sell its products, the official said. 

LIC has the largest network of 1.34 million individual agents as on March 31, 2021. This accounts for 55 per cent of the total agent network in the country. This is 7.2 times more than the number of agents of the second largest life insurer. 

The move would entice investors who are looking to loosen their purse strings for India’s largest-ever IPO proposed to be launched this month. Investors had raised queries to the government and LIC on whether this route would be used by the insurer like its peers.

The Centre had said that the option would be leveraged by LIC in future, the official quoted above said.

In its draft red-herring prospectus (DRHP), filed with the Securities and Exchange Board of India (Sebi), LIC stated that it has an omni-channel distribution platform for individual products. This includes 1.34 million individual agents and 72 bancassurance partners. It also comprises eight public sector banks, five private banks, one foreign bank, 13 regional rural banks and 45 cooperative banks, among others.

In the DRHP, LIC also stated that the Reserve Bank of India (RBI) stipulated that either IDBI Bank or LIC Housing Finance — associate companies of LIC — will have to cease conducting housing finance activity by November 2023. And, the housing finance activity will be conducted by only one entity. 

The Centre’s view is that this would be a problem for the insurer as both LIC and the government are looking to sell substantial stake in IDBI Bank through the strategic disinvestment route.

The Centre is exploring two timelines for listing of the IPO and the ministerial panel will explore a mid-April or end-April date to launch the IPO.