The Hindu Business Line : LIC to focus on alternative channels of distribution

“The number of policies sold through bancassurance and other channels should grow to 5 per cent of total business, up from 2.1 per cent in 2007-08.”

Manish Basu

Kolkata, July 1 Taking a cue from private players, Life Insurance Corporationis focusing on bancassurance and other alternative channels for business growth. Bancassurance is a mode of delivery or sale of insurance products through banks.

The insurance major generates a mere two per cent of its business (in terms of first premium income) through alternative channels. In comparison, private players generate 30 per cent of revenue through these channels.

In 2008-09, however, LIC targets to double its first premium income (FPI) from bancassurance to Rs 1,600 crore.

This is against an overall 20 per cent increase in projected business growth to Rs 52,500 crore during this fiscal, sources from LIC told Business Line.

“In 2008-09, we will increase our focus on alternative channels of distribution as a way of reaching out to masses. “The number of policies sold through bancassurance and other channels should grow to 5 per cent of total business, up from 2.1 per cent in 2007-08,” said Mr R.R. Dash, Zonal Head, LIC.

The corporation is also looking to tie up with five-six new regional rural banks and cooperative banks in the eastern zone this year, he added.

While LIC has been catching up on the model of alternative distribution network, for private players this has been a successful business model since a long time, said Mr V. Viswanand, Director and Head of Bancassurance and Direct Sales Distribution, Max New York Life.

“Currently, 50 per cent of our total business comes through banks and corporate agents. The segment has grown from being non-existent in 2001,” he said.

Though rural and co-operative banks have wider reach, foreign and other private banks yield larger volumes of business, he feels.

“LIC is now looking to tie up with more banks before a private player can grab the opportunity and leverage upon their network,” an LIC official said.

During last year, the Eastern zone recorded maximum business contribution through bancassurance, accounting for 22 per cent of national business in the segment.

The zone posted 3.64 per cent, nearly double the LIC’s national average, in terms of contribution of bancassurance in total business growth, said Mr Dash.

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