IPO-bound LIC plans more focus on ULIPs, annuity and health products

LIC looks to improve share of non-participating products

Life Insurance Corporation (LIC), which is all set to hit the bourses in the latter part of the current quarter, is looking to improve the share of non-participating products. It now plans to focus more on unit-linked insurance plans (ULIPs) as well as protection, annuity and health products.

Traditionally, LIC focused more on participating products such as endowment and money-back plans. Now, it is looking to diversify its product mix further by increasing sales of its existing non-participating products as well as launching new products under this category.

In non-participating policies, the profits are not shared by the insurance company with the policyholders and there are no dividends.

A non-participating insurance plan provides only guaranteed benefits to the policyholder. That is, the sum assured payable on the policyholder’s demise, or the maturity benefits payable when the plan matures.

While unit-linked plans have been one of the mainstays in private insurers’ portfolios, LIC stayed away from ULIPs for a long time for strategic reasons. It was only in 2020 that the life insurance giant launched three new ULIP plans. Further, with heightened awareness around risk because of the pandemic, term plans for private life insurers have seen tremendous growth. So, it makes sense for LIC to focus more on pure protection products, given the demand in the market. 

“The median age in India is 28 years and so the need at present will be totally different from what it will be 20-30 years later. And, in the absence of any social security scheme, annuities and deferred annuities will be the flavour of the season. At our end, we are looking into these things and contemplating what kind of products can be launched. Also, we believe that we have reached a stage when differentiated products may have to be launched for different geographies,” LIC managing director (MD) Raj Kumar had said at Business Standard BFSI Insight Summit for Life Insurers.

Further, in meetings with financial investors, ahead of the proposed initial public offering (IPO), LIC has expressed its intention to focus on group protection plans as well.

Among other things, it is also looking at diversifying its distribution channels by increasing the share of business that comes in through bancassurance channels. This will be done by tying up with more partners and improving their productivity.

LIC has 72 bancassurance partners, comprising eight public sector banks, 42 co-operative banks, six private banks, 13 regional rural banks, and one foreign bank. It also has 175 alternative channel partners, of which there are 44 insurance marketing firms, 59 brokers, and 72 corporate agents.

LIC has 1.3 million individual agents, or over 55 per cent of the 2.39 million individual agents in India’s life insurance market.

LIC’s individual agents have sourced almost 97 per cent of its new business premium (NBP) in the first six months of FY22 from its products on a standalone basis.

The much-awaited IPO of LIC is expected to hit the market in the January-March quarter of FY22. LIC’s top management has indicated to financial investors that it intends to file its draft red herring prospectus (DRHP) with Securities and Exchange Board of India (Sebi) in the third week of this month.