The Hindu Business Line : `Market to determine LIC's product mix'

Life Insurance Corporation of India will let the market determine its product composition rather than have a `prescriptive model', said Mr T.S. Vijayan, Chairman.

"In the last financial year, LIC had set a target business mix and taken a position on having a prescriptive model. But today, the market is indicating that our prescriptions are not right," Mr Vijayan said.

"As of today, the market demand is for ULIPs, but its too early to say because we have achieved just 10 per cent of our target", Mr Vijayan told Business Line.

In the last financial year, the corporation had made a conscious attempt to reduce the share of unit-linked policies in favour of traditional policies. The ratio between unit-linked and traditional plans moved to 42:58 in 2005-06 against the previous year's 65:35.

New premium target

Going forward, the company has set a target of 35 per cent growth in its new business premium. "While the target has been set at 35 per cent, we expect it to exceed 40 per cent," Mr Vijayan said.

The Chairman said the corporation's investments in equity would also be dictated by its product mix. "If we sell more of ULIPs and customers opt for equity funds, our investment will also increase."

"We are long-term investors and today infrastructure is offering us good opportunities. We invest about 8 to 10 per cent of our investible funds in equity and depending on the valuations and corporate performance, the same level may be maintained in the current year also," Mr Vijayan said.

Eyes perpetual bonds

The corporation is also looking at investing in perpetual bonds issued by banks. "Recently, the IRDA has included perpetual bonds under the list of `approved securities'. In terms of improving information technology, the corporation is planning to implement a "core insurance solution" for its unit-linked insurance plans. This will be rolled out in the next one or two months.

"We are trying to create a centralised data base for our unit-linked policies. Instead of maintaining the database in branches there will be now be a central data base," he said.

As per the ULIP guidelines, collection in any part of India has to be reported to the central office by 4.15 pm and allocation should take place.