The Hindu Business Line : LIC to push sale of traditional policies

Mumbai, May 16 Life Insurance Corporation of India plans to push the sale of traditional life insurance products rather than the already popular unit linked insurance plans.

This would be a conscious shift in the business strategy. In 2007-08, around 85 per cent of LIC’s new business premium came from unit linked insurance plans.

The corporation now hopes to bring down the share of such investment products.

“We will be more aggressive in selling conventional policies because that is our life line; we are a long-term player. This cannot be done overnight but for this year we plan to reduce the contribution from unit linked insurance plans to 70 per cent, with the rest coming from traditional plans,” said Mr D.K. Mehrotra, Managing Director, LIC.

For LIC, the average size of a traditional policy is Rs 3,500 and Rs 20,000 in the case of ULIPs. The sale of ULIPs has, however, increased LIC’s average ticket size to Rs 11,600 per policy in 2007-08, from Rs 10,300 in the previous year.

The need to drive the sale of traditional products also stems from LIC’s role as an investor in infrastructure. Under traditional products, up to 15 per cent of the investment is made in infrastructure. “The reason for driving traditional products is also in line with our commitment to invest in infrastructure,” Mr Mehrotra said.

LIC’s investment in government bonds and infrastructure was around Rs 91,000 crore in the last fiscal, against Rs 80,000 crore in the previous year.

Last year, LIC’s total investible surplus stood at Rs 1,20,000 crore. Mr Mehrotra said that this year the investible surplus would be 10-15 per cent higher at around Rs 1,32,000 crore-Rs 1,38,000 crore.

LIC is also looking at ramping up the sale of health insurance policies this fiscal. The corporation, which had introduced its first unit linked health insurance product in February, has set a target of around 50 lakh policies this year. Last year, the corporation sold 1 lakh policies and received premium of around Rs 100 crore from health policies.

“This year, we may introduce more health insurance products based on the feedback we get from customers. Based on the success of the health insurance business, we may think of even a standalone health insurance company,” Mr Mehrotra said.

The corporation also plans to increase its global footprint by setting up representative offices in Asia.

“In the next three to six months, we plan to set up a representative office in Singapore. We are also looking at setting up offices in Australia, New Zealand, Hong Kong, Thailand, Malaysia and Indonesia,” Mr Mehrotra said.

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