Life Insurance Corporation of India (LIC) has said that offering products wherein returns were not higher than prevailing market rates is the biggest challenge the insurance sector faces.
"There is tremendous competition and the interest rate environment is very volatile. We are revising our products to see that they are aligned to the market," Sunil Behari Mathur, chairman, said adding that revising or restating returns on assured return products and single premium policies will have to be carried out more frequently.
"We have to see whether we want short term gains or long term wealth creation for our investors," he said.
Mathur said LIC will be focusing on its real estate portfolio this year. "We have a large number of commercial tenants paying less than market dictated rent to us. We expect increased income from this source with a few exceptions," he said adding that the yields from the real estate portfolio was set to increase this fiscal.
Mathur also said the insurer was open to increasing its exposure in "certain key investment products" sourced from the secondary markets. "The Irda norms specify that 50 per cent of our investment remains in government securities. We would be looking for safety and will be prepared to sacrifice perceived better yields for security," he said.
Mathur said he expected LIC to overcome the temporary set back it had received in the first half of the fiscal in respect of new business.
"We did exceedingly well last year registering an overall growth of 137 per cent. However, that was an aberration as certain policies did rather too well owing to the uncertainty in the market and assured returns from the LIC. This year we are expecting a growth of 20 per cent which should be stepped up to around 25 per cent in the coming years," he said.
Meanwhile, LIC has signed an agreement for a joint venture (JV) in Sri Lanka with the Bartleet group and expects to commence operations soon.
"We have signed the JV two days ago and are now in the final stages of negotiations. We should start operations in Lanka soon," Mathur said.
LIC has already started operating in Nepal through its joint venture with the Vishal group and is now also planning to do business in the US. "We are doing well in Nepal where our public issue floated through the Vishal Group was oversubscribed 16 times despite a recession in the country. In the US we are waiting for permission which is expected by year-end," he said. Mathur said LIC also intended signing a pact with a JV partner for Oman soon.
