 "Siddhartha Mohanty")
The Life Insurance Corporation (LIC) of India, led by SIDDHARTHA MOHANTY, who assumed the role of chairman earlier this year, has initiated an ambitious project for a technology overhaul, which is expected to boost product sales and enhance customer experience. Mohanty also discusses strategic changes in terms of product mix and distribution in an exclusive interview with Manojit Saha in Mumbai. Edited excerpts:
What is your projection for the growth of new business premiums (NBPs) in the current financial year (2023-24, or FY24)?
In comparison to the industry, our objective is to match or slightly exceed the industry’s growth rate. There might be some quarterly fluctuations. In 2022-23 (FY23), we achieved a growth of 16.47 per cent in NBPs, which stands as one of the industry’s best performances. This year, I also anticipate a strong growth rate.
What are the key strategies driving this growth?
Following our listing, we have made directional shifts in our approach, particularly in our product mix. Our product portfolio is largely dominated by participating (par) products. We are concentrating on increasing premium contributions from non-par products.
In the first quarter, the proportion of non-par premiums in total annualised premium equivalent (APE) was 10.22 per cent, as compared to 7.75 per cent for the same period in the previous financial year. This marks the first time we have surpassed a double-digit non-par APE. This shift also benefits our margins.
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We are also emphasising the promotion of premiums through bancassurance channels. Our focus areas are product mix and channel distribution, both of which will contribute to higher business growth and improved margins.
What caused the decline in NBP growth during the first quarter?
There were two to three factors at play. One factor was the impact of taxation, specifically the tax on high-value insurance products, during the last quarter of the previous financial year.
Some individuals advanced their decisions, resulting in business that would have occurred in the first quarter being conducted in the final quarter of the previous financial year. This explains the dip in our individual businesses.
In the group insurance segment, certain big-ticket receivables were postponed as employers made decisions based on potential interest rate movements, among other factors. Consequently, some decisions were deferred, leading to delayed payments. These decisions will be made in the coming months, and we anticipate robust growth during this period. We are looking forward to strong growth during the festival season.
The value of new business (VNB) margins remained flat in the first quarter of FY24. What are your expectations for margins in the current financial year?
The industry experienced some margin strain during the first quarter. We had positive outcomes; the VNB margin increased from 13.6 per cent to 13.7 per cent on a year-on-year basis. For the full FY23, we achieved a VNB margin of 16.2 per cent.
The current year will certainly witness higher growth, which will translate into improved margins. We expect margins to improve in the current financial year compared to the previous year as a whole.
Could you outline your plans on the technology front?
We have also undertaken significant initiatives on the technology front. A comprehensive digital transformation project is underway, aiming to transition all processes to a digital mode.
Additionally, a customer onboarding project is scheduled to take effect from December to January. At present, we collect 52 per cent of premiums digitally.
Customer onboarding will occur through agents, bancassurance, and digital channels. Consequently, this approach will not only foster growth but also contribute to enhanced profitability.
LIC recently launched a new product, Jeevan Kiran. How has the response been?
Jeevan Kiran is an excellent product that provides coverage for life risks, and at the policy’s maturity, the total premium is refunded. Effectively, it offers a risk cover at no cost, as the total amount paid is reimbursed. The product has been well-received and is gaining traction.
Prime Minister Narendra Modi reposed faith in LIC during his speech on the no-confidence motion. How do you view this endorsement?
I extend my gratitude to the Prime Minister. His appreciation of LIC is a big shot in the arm. His trust in LIC reinforces our commitment to delivering sustainable, superior value to all stakeholders. This endorsement will boost the morale of LIC staff and our extensive network of 1.3 million agents. We will honour our commitments to all stakeholders.
What is the investment strategy for LIC in the current financial year?
There will be incremental investments in both equity and debt. Our objective is to create enhanced value for all stakeholders. In the first quarter, our equity portfolio yielded substantial profits. The total equity portfolio is Rs 10 trillion. Of the total investment of Rs 46 trillion (total assets under management by the end of the first quarter), the majority is allocated to debt, including central and state government securities.
