‘LIC will do what is required to bring it down, to about 5 per cent’
It’s seven months since SK Roy took over as Chairman of the Life Insurance Corporation, an organisation that he joined in 1981. Asked about his vision for LIC, Roy said his focus will be on improving employee and agent productivity and using technology more effectively to improve customer service.
He faced a challenging situation soon after taking over — of having to rejig the entire product portfolio. He compared that experience (of withdrawing some of the iconic products that commanded high brand recall) to the retirement of Indian cricket’s famed middle-order. Replacing these products will be his biggest challenge, and he admits that for some more time both the distribution channels and customers will face some difficulty. But LIC has about eight products in the market, which Roy feels meet most of his customers’ requirements, and other products will be introduced gradually.
What are your growth targets for this fiscal?
We budgeted for 12 per cent growth in first-year premium, but we are now growing at 30 per cent. So, in the current year, we are two-and-a-half times our targeted growth. Since the start of the fourth quarter (Q4) has been dull, we may see some impact on growth. But what we have budgeted for the year, those targets we will definitely achieve.
What are your views on the Finance Ministry mandating public sector banks to become insurance brokers?
If you read the Finance Minister’s Budget speech, he has given two justifications on why he wants banks to work as brokers. Despite the sector being opened up for 12-13 years, penetration has not significantly increased. And, he has found, based on data, that the number of bank branches actually selling insurance products is very small. So, the solution in the view of the Finance Minister is that banks could work as brokers, engage larger number of bank branches for which they may need more than one company’s insurance products, and once that happens, obviously penetration will increase. So, seen in that context, nobody can find fault with either the diagnosis or the solution.
As for them being compelled, I have no view as that is between the Government and the banking sector. As an insurance provider, my role is I have to extend certain services to the bank who is my partner in distribution. It doesn’t matter if the partner bank is distributing my products exclusively or distributing other products too. Also, it opens up other avenues for us.
Bancassurance still does not contribute much to your overall premium collection. What are the reasons for this?
Bulk of the business, about 83 per cent, comes from the tied channel, which is 57 years old. My bancassurance vertical is ranked No. 3 in the country.
I want it to be No. 1, but the reality is that my bancassurance is not promoted by a bank, and there are seven bank-promoted insurance companies in the company today. We have not done badly in this.
The share is not significant compared to my total business, but 2 per cent of LIC’s business gives it the status of being the fourth largest life insurance company in the country.
There has been a considerable exodus of life insurance agents in the industry over the last year, including at LIC. How are you addressing this issue? Do you feel under the new regulatory regime with limited commissions based on the premium-paying term, agents’ earnings will be under pressure?
For the industry, agent attrition has been around 11 per cent, and for LIC, 8 per cent. This means that 23 companies are suffering higher agent attrition than we are. Even 8 per cent is not good for us because it is a strain on the system. And when you have spent time and money, it’s not good for the agent or us. So, we do a lot of things to ensure that the agent continues to be engaged with us for a long time.
Even if there is an impact on persistency of agents in the new product regime, it will not be of very long duration. Everyone will have to work out a solution to this. LIC will do what is required to bring it down — perhaps to about 5 per cent — which we are okay with.
This year, we are adding agents in large numbers as the regulator has given a 15 per cent rebate in pass percentage.
Our total agency force is approximately 12 lakh. In the nine months we would have added about 25,000 agents and for the coming year we would be targeting a 20 per cent increase over the closing figure of March 31.
What are your investment
estimates for the year?In the current year, we expect to touch ₹2.2-lakh crore of investments. We are confident of achieving this figure. Equity will cross ₹40,000 crore, and the rest will be debt, which will include Government securities.