Product mix, distribution strategies to help regain market share: LIC chief

Mohanty discusses a range of issues from product launches to the digital transformation journey that it has embarked upon

Life Insurance Corporation (LIC) of India has adopted a three-pronged strategy to boost premium income growth. SIDDHARTHA MOHANTY, chairman, LIC, discusses a range of issues from product launches to the digital transformation journey that it has embarked upon, in an interview with Manojit Saha and Aathira Varier. Excerpts:

There was a decline in first-year premium income in the first half (H1) of 2023-24 (FY24). What was the reason, and where do you see LIC’s market share by March 2024?
 

Due to a high base in group premium in H1 of 2022-23 (FY23), there was a dip in the overall premium this financial year. Our market share in individual premiums has never gone below 40 per cent. The objective is to increase it further.

We expect group premiums to recover by March. We anticipate our market share to increase as well. In FY23, our overall market share was 62.58 per cent. Our objective will be to increase by the end of FY24 marginally. We will regain market share.

What will be the strategy to increase market share?
 

One of the strategies adopted after the listing was on product mix. The idea was to have a fair share of non-participatory (non-par) products in the mix. The share of non-par annual premium equivalent has gone up almost 50 per cent.

In March 2022, the share was 7.12 per cent. It was 8.89 per cent in March 2023. Today, it is over 10.73 per cent. Non-par products are beneficial for our customers as they provide guaranteed returns.

The second is distribution. Our agent share constitutes over 96 per cent of our total business. We are focusing on the bancassurance channel, the share of which has gone up to 3.42 per cent in terms of new business premiums and 2.1 per cent in policies. There has been an 18 per cent increase in premiums. We have 80 banks as partners, including co-operative banks.

Third is digital intervention. This year, the number of policies completed through the Ananda mobile application (app) during the first six months has increased from 314,000 in FY23 to 533,000 in FY24, a 69 per cent growth.

This year, we have undertaken a massive digital transformation initiative called DIVE (Digital Innovation & Value Enhancement). Customer acquisition via agents, bancassurance, and direct will get a boost.

Is there any new product that you are planning to launch in the coming days?
 

We are going to introduce new products. Very soon we will be launching a regular premium, non-participatory (non-par) policy which will be very attractive as it has been designed in line with the needs of the market. It will be launched within the first week of December. This will have lifelong attractive guaranteed returns.

Suppose you pay the premium for five years, and the policy matures after 10 years — after that every year the customer will get 10 per cent of the total sum assured, for life. The minimum sum assured for this product will be Rs 5 lakh. Higher-age customers, say up to 60-65 years, can also take the policy.

The increase in reliance on non-par products can hurt when the interest cycle turns as yields soften. How will you guard against such times?
 

When we design our non-par products, which give guaranteed returns, we consider all relevant factors while deciding the premium, like the interest rate scenario, expenses, inflation, mortality, etc.

We also have our derivatives policy to hedge against interest fluctuations. Soon, our derivatives policy will be there. If there is a catastrophic change or certain things are beyond control — force majeure-type — we also have the option to give notice that after a certain date, the product will be withdrawn from the market.

The interest movement will not affect Life Insurance Corporation (LIC) of India’s non-par products or LIC’s commitment to give guaranteed returns to its customers.

LIC’s ticket size of policies increased in the first half (H1) of 2023-24 (FY24). What was the main driver for such an increase?

Gone are the days when people were taking Rs 50,000, Rs 1 lakh insurance for which the premium was Rs 4,000, Rs 5,000. Now people pay an annual premium of Rs 25,000, Rs 50,000 per policy. Awareness and economic development of individuals are the main reasons that they are going for a higher-sized policy.

The value of the new business margin of the company was flat year-on-year (Y-o-Y) in H1FY24. What is your expectation for the margin in the second half of FY24?
 

Group business not only gives us volume but also good margin and the drop in group business affected the margin due to which it was flat Y-o-Y. Last year, the margin was 16.2 per cent. This year we are looking to improve from last year from the sale of all these products.

The investment income of the life insurer was healthy in H1FY24? How do you see it for the remaining year?

In the current financial year, we will surpass whatever profit we booked from the equity market last year. Investment income from the debt section is also rising. LIC constitutes 4 per cent of the entire market capitalisation in equities.

The regulator is pushing insurance and has given growth targets for insurance companies. How is LIC faring in those targets?
 

LIC will play a significant role in our objective to fulfil insurance by 2047. It is taking a lot of initiative. The regulator is coming up with a composite product in Bima Vistaar, Bima Vahak — a women-centric distribution framework.

LIC has been entrusted with Assam, Andaman & Nicobar, and Lakshadweep, as the lead insurer. We are working with the government and discussing this. We are also expanding our footprint in the rural markets.

Will you be open to offering indemnity products once a composite licence is allowed?
 

Once it comes, we will take a call. We are in the life insurance space, although we have some health insurance experience. It is a fixed benefit product, not indemnified like Mediclaim. When it comes, we will examine and take a call. It is a welcome move, and it will be a good move from a consumer perspective too. There is also a certain link between life and health, but that market also needs development. But, it will be a good initiative.

What has been the impact of taxation imposed on life insurance policies with above Rs 5 lakh premium?
 

There is an impact of taxation imposed on policies with premiums above Rs 5 lakh, but it is more or less very minimal. We cater to other segments, so the impact is very minimal.

What has been the impact of employee cost and how has it affected profitability?
 

Employee cost is 5-6 per cent, and that has continued. The impact that was seen due to pension benefits in the second quarter of FY24 is due to the revision in pension benefits by the government. Earlier, the family pension was 15 per cent, which was increased to 30 per cent. We have to account for it. We have amortised, and it will not have an impact on our balance sheet or profitability. Over time, we will absorb it.