LIC plans to focus on traditional products

Life Insurance Corporation of India (LIC), the country’s largest insurer, is banking on traditional policies to recover lost ground.

The public sector insurance company had decided to reduce its dependence on unit-linked plans – which has traditionally been the mainstay of a life insurance company’s product portfolio in the last three-four years – due to a growing risk-aversion to equity-related products among investors, LIC Managing Director D K Mehrotra told Business Standard.

“We will launch more traditional products in 2009-10, irrespective of whether the equity market rebounds to some extent or not. At present, the volatility in the market is discouraging agents from selling Ulips,” Mehrotra said.

During the current financial year, LIC’s strategy would focus on launching four to five new traditional covers. The shift in focus from Ulips to traditional policies was already in evidence with LIC having launched two return-guaranteed products – Jeevan Aastha and Jeevan Varsha – during the second half of 2008-09.

In the absence of private peers in the traditional products’ market, LIC mopped up around Rs 12,000 crore through the two policies and managed to recoup some of the losses it had seen.

Although, between April 2008 and February 2009, the latest period for which data is available, the public sector company had seen its premium income from the sale of new policies drop by 4.03 per cent to Rs 43,883 crore.

Mehrotra said that LIC is expected to close the financial year with a fall in premium income. During the last financial year up to February 2009, premium from the sale of new life insurance policies had remained flat as insurers found it tough to sell Ulips, which accounted for nearly 80 per cent of their sales during the three-four years up to 2007-08.

With stock prices falling, individuals found the net asset value of Ulips also slipping well below their face value and developed an aversion towards fresh purchases.