LIC expects steady growth in life insurance premiums by December quarter

State-owned Life Insurance Corporation (LIC) is expecting the sector it operates in to post steady growth in new business premium (NBP) by the end of the December quarter (Q3FY21), assuming the economy bounces back.

The first quarter of FY21 was a rough one for life insures because NBP contracted 18.64 per cent to Rs 49,335 crore against Rs 60,637 crore in Q1FY20 due the lockdown.

LIC’s NBP also contracted by 18.45 per cent to Rs 36,530 crore against Rs 44,794 crore while that of private insurers dropped 19.17 per cent to Rs 12,805 crore from Rs 15,842 crore.

“Economic activity, which came to a standstill during lockdown, gradually started looking up once the unlock process started in June. The economy started to move in a northern direction and the upturn was reflected in the performance of life insurers in June,” said T C Suseel Kumar, managing director, LIC.

In the fortnight ended July 15, LIC saw 46 per cent growth in NBP over last year. At the end of Q1, the insurer issued 2 million new policies and captured a market share of 74 per cent in terms of premium in the life insurance market.

Due to the pandemic and the subsequent lockdown, insurance companies have had to make adjustment, the most important being a leap from a manual paper-bound process to end-to-end paper-less or digital-based selling through all the channels of distribution. And, keeping in mind the initiatives taken by insurers, “we can foresee fairly steady growth in premium by the end of Q3”, Kumar said.

The pandemic is expected to boost demand for pure protection products, which, in turn, are bound to improve the margins of insurance companies. Also, the recent fluctuation in the equity market is an opportunity for insurers to market unit-linked insurance plans, said Kumar. Since interest rates are going down, there’s an upsurge in the sale of guaranteed-return plans as well, he added.

In the financial year so far, LIC, which is the biggest player in the equity markets, has invested Rs 20,000 crore. Taking advantage of the volatility in the markets, LIC has been buying blue-chips at attractive prices and booking profit selectively at higher levels.

“LIC, being long-term investor, usually is sector-agnostic and focuses on diversified investment. However, due to the current pandemic the focus was on large caps and the sectors that are badly affected were avoided,” Kumar said.

While experts have suggested stress may build up in the balance sheets of companies because of the pandemic, LIC, which is a major investor also in debt papers of Indian firms, does not expect major defaults.

The government in the Budget this year announced LIC would be listed. However, experts said this might be delayed. But Kumar said the process of listing was in progress and the government had floated a request for proposal (RFP) for selecting a transaction advisor.

While private insurers are focusing more on the direct and bancassurance channel, LIC added 32,586 agents in Q1. Private insurers have shed 5,360 of them.

It expects strong business from its bank partners like IDBI and Axis Bank. In FY20, IDBI Bank generated more than Rs 700 crore in new business for LIC.

To attract millennials, the corporation last year took steps including improving its customer service experience and upgrading its online services. Of the 21.8 million new policies it sold in FY20, nearly 50 per cent were to millennial customers.

This year the trend is similar as 48 per cent of the policies have been sold to millennials.