Insurance behemoth Life Insurance Corporation of India has made sure that the insurance sector grew in the first quarter despite private insurers posting a steep decline in new business.
During the quarter, LIC not only registered a 20 per cent rise in first premium income, but also reversed the trend of falling market share by pocketing 62.5 per cent of the pie.
In an interview with Shilpy Sinha and Sidhartha, discusses the public sector player's strategy. Excerpts:
LIC has posted a 20 per cent increase in new business premium collection in the first quarter. How did you manage this growth?
We have focused on the need of the people, who always look for safety and security of their money. And, LIC has got a brand image. People know that with LIC their money is safe. We have learnt a lesson from last year's performance. The product should match the customer's needs at that point of time.
We placed Market Plus 1 when the market was down. We found that for an insurer to tick on, it is always better to have a proper mix of conventional products and Ulips. Our people knew what product to sell to which customer.
We are now targeting a 20 per cent increase in policies and 35-40 per cent rise in premium. Last year, we sold 35.4 million policies and are now targeting 43.5 million policies and Rs 48,000 crore (Rs 480 billion) new premium income this year.
What are you doing to almost double the growth rate?
First, we are trying to empower our agents. We have started training our agents so as to give them an insight into what is happening in the market. They are also being taught which products place at what time and how to meet customer objections.
We've set a target of training seven-eight lakh agents by the end of September. We have 1.3 million agents as of now. We are working on some new products, both traditional and Ulip, and will be hitting the market soon.
Last year, we started a direct marketing channel after finding out that this was one space where we were not present very aggressively. We have realised that multiple channel distribution is going to help.
Now we have structured our distribution channels and leveraged our call centres and info serve. We have already started direct marketing in five centres and would like to scale it up.
We are now empowering some good development officers, who have been given the authority to collect premium from their offices. We are planning to have satellite offices around 800 main offices.
We have come to believe that in a competitive environment the mantra to survive is to re-innovate and re-invent.
Now that the stock market is improving, will the traditional products be less relevant?
We always have a proper mix of products. At one point, the Ulip-traditional mix reached 85:15. We then brought it down to 70:30. Many people do not consider Ulip as a long-term investment.
This is because they are not getting the kind of return they should get from Ulips. On the other hand, though traditional products are not very transparent, but there is safety and security. We are trying to sell a product as insurance and security of life. We want to have a 65:35 Ulip-traditional mix.
How will the cap on Ulip charges affect your products?
The matter is still with the Insurance Regulatory and Development Authority (Irda). People say that we should bring down the charges, but we have to see where we fit into the system. We have to insure both, an 18-year-old and a 60-year-old.
We also want to give insurance to people who can afford a premium of Rs 5,000 and also Rs 50,000. If these things are managed within the framework of the regulation, it is welcome.
We'll see once the regulation is finalised. If you include mortality charges within the cap, the differential will be difficult to meet. In many cases, small ticket size as well as higher age group become unviable. Also, fund management charges do not depend on the term of the policy.
The target was to have 80 per cent market share post-opening up. But it fell to around 50 per cent. What is a comfortable level?
If I am not very optimistic, we should be 65 per cent by 2010. In a competitive market, it will not be correct to have a monopoly. I should be able to grow at the rate the industry is growing. I have to give the best to the customers.
We have grown by 10 per cent since last year and this gives us the strength and confidence that the customers are reposing their trust in us. But looking at the financials of LIC, customers see that here is a risk firm where the money would be safe for 15-20 years.
We are planning to add 20 per cent agents this year. The average level of attrition is high, but we have come out with a new policy that an agent who joins today will get a transition period for three years during which his/her services will not be terminated.
There are certain minimum business requirements and the new policy allows the agent to cover the shortfall, if any, of the first year in the following year.
You wanted to be a POP for the new pension scheme but Irda has not allowed it. What do you have to say on that?
They are the regulator and they have some issues. But we are happy that we are at least fund managers for the new pension fund. We respect their decision.
Image: LIC managing director DK Mehrotra
