Life Insurance Corporation of India (LIC), which is slated to hit the primary market towards the end of next fiscal, has delivered strong performance over the past year, gaining significant market share. In January, the insurer posted strong growth of 44.8 per cent in individual first-year premium, while private players grew by a lower 11.5 per cent. The robust growth reported by LIC in January follows a strong traction witnessed by the insurer through this fiscal. For the first 10 months of FY20 (April-January), LIC’s first-year premium grew by 43 per cent year-on-year, while private players saw first-year premium grow by about 20 per cent during this period. LIC’s strong performance has led to substantial market share gains, with the insurer commanding 70 per cent market share, up from 66 per cent last year.
Sale of ULIPs
With volatility in equity markets, the sale of ULIPs (unit-linked plans) have taken a hit over the past year. This has impacted many private players. With the sharp fall in interest rates, there has been a higher demand for traditional plans, which has aided the performance of LIC — a chunk of its products are endowment and pension plans. LIC also withdrew several of its flagship products such as Jeevan Umang, Jeevan Labh and Jeevan Anand due to the change in product regulations. In the run-up to this, sales zoomed as people made a beeline for these products. This was one key reason for LIC’s strong growth in premium this year.
“Our endowment plans, New Endowment, Jeevan Anand, Jeevan Labh and Jeevan Laksya are our best selling products and are doing very well. If we include our pension and group schemes portfolio, which includes group schemes and superannuation business, it has collected over ₹1-lakh-crore premium in the current financial year. That’s another reason why our market share has gone up,” said MR Kumar, Chairman, LIC.
IRDAI’s change in product regulations also led to spurt in sales of LIC’s products. The key changes included maximum withdrawal at the time of maturity under pension plans increased to 60 per cent from one-third earlier, shorter period to acquire surrender value ( two years from three years earlier), and extended revival period (three years in the case of ULIPs and five years in the case of non-linked products).
“Post these regulations, we withdrew our products and re-introduced them, though there is no change in premiums. But prior to withdrawing these products, there was an overdrive in the sale of these products in November and December — the final closure of these products happened in January. The products have been re-launched in February,” said Kumar.
Interest rates have also fallen sharply. “This led to us withdrawing our annuity product Jeevan Shanti. In the run-up to the withdrawal of the product, policies were sold. This happened in August last year, and there was sharp rise in single premium then,” adds Kumar.
LIC’s New Endowment plan has raked in about ₹2,739 crore of premium so far this fiscal, which is about 6 per cent of total premium. Around 43.7 lakh New Endowment plans have been sold this year, which is 20 per cent of the policies sold. LIC sold about 37.5 lakh Jeevan Labh policies, amounting to ₹5,333-crore premium (around 13 per cent of total premium). Single premium on annuity/pension products (mostly Jeevan Shanti) brought in about ₹17,885 crore of premium, 47 per cent of the overall premium.
Agency network
The insurer’s strong agency network of about 12 lakh agents is another reason for the strong sales. “We also did a massive recruitment of 5,000 development officers (who, among other responsibilities, take care of the marketing of policies and recruitment and training of agents). The earlier quota for agents to become development officers was restored and, this year, about 25 per cent of the development officers were agents. So that has also spurred growth,” adds Kumar. Also, 60 per cent of LIC’s agents are millennials, which has also helped reach out to that target segment.