News Analysis

LIC runs for cover as pvt players grab market share

Rajalakshmi Nirmal BL Research Bureau | Updated on January 21, 2019

Lacklustre online presence, high premium and reliance on traditional plans hurt insurance giant

Did you know that LIC’s market share in life insurance has dropped from 75 per cent in 2013-14 to 69 per cent in 2017-18?

Yes, the public sector insurance behemoth is rapidly losing business to private sector insurance companies.

In the first nine months of the current year 2018-19, based on new business premium, LIC’s market share stood at 66.49 per cent. In this period, the first-year premium collected across single and group policies by private life insurers saw an increase of 23 per cent year on year, while LIC’s dropped 5 per cent.

Among the private sector players, HDFC Life, SBI Life and ICICI Prudential Life lead the pack in terms of market share.

Smaller private insurance companies including Aditya Birla Sun Life, Tata AIA Life, Bharti Axa Life, Edelweiss Tokio Life and India First Life have also seen a significant jump in premium collection in the first nine months of 2018-19, according to IRDAI data.



A litany of woes

LIC losing its Big Daddy position in the life insurance space can be attributed to a variety of factors.

While private insurance companies, over the last 10 years, have ramped up their online product portfolio and have come up with competitive rates, LIC has failed to keep up. Though it launched its ‘e-term’ life insurance policy in 2014, it was way too expensive compared to similar plans from its competitors, and hence, failed to attract investors.

IRDAI data show that 10.9 per cent of the business of private insurance companies came through the direct (online) route in 2017-18. For LIC, this was just 1.47 per cent.

Private insurance companies rely more on corporate and bank tie-ups to distribute their products, but LIC is still largely dependent on its network of agents. The insurance behemoth has about 11.48 lakh agents (March 2018) – the largest network for any life insurance company. It gets about 95.6 per cent of its individual business from agents. The private sector, on the other hand, has a total agent count of 9.3 lakh, with individual agents bringing 27.8 per cent of the business. Other insurers get a major chunk of their business from corporate agents: 57 per cent.

Absence in ULIP segment

Further, the loss in market share can be attributed to LIC’s absence in the ULIP segment, say market observers.

In 2017-18, unit-linked insurance products collected a premium of ₹64,850 crore, which is a jump of 22 per cent from the previous year. Traditional plans, on the other hand, saw a muted 7.75 per cent growth in premium.

LIC has a portfolio that is overweight on traditional plans. After withdrawing its ULIPs in 2013 following new regulations for unit-linked plans, LIC launched its new ULIP – New Endowment Plus – in 2015. But over the years, this plan too has failed to catch the fancy of investors.

Published on January 20, 2019

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