LIC weighing plans to invest in health insurance, fintech: R Doraiswamy, CEO, LIC

The Centre raised Rs 31,552 crore in an offer for sale (OFS) at Life Insurance Corp of India, which CEO and MD R Doraiswamy attributes to growing investor trust in the insurance behemoth. Doraiswamy tells Shilpy Sinha that LIC will now focus on meeting market expectations, expanding distribution, improving margins and evaluating opportunities in health insurance and fintech, while maintaining its leadership position in India’s life insurance market.

What does OFS mean for LIC?

It shows the confidence the market has in LIC. Now, it is our responsibility to live up to the expectations. Following the OFS, the 10% public shareholding target is achieved. By when will the public float rise to 25%? The government has to increase public shareholding to 25% by 2032. The government has been talking about keeping a longer gap of 18-24 months before the next stake sale. A longer gap from the government will reduce the supply overhang, which could lead to better price discovery.

LIC’s stock has mostly remained below the IPO price. What explains this?

Share price is a response of the market. One reason certainly would be the very low public float. To take care of this, we issued 1:1 bonus shares and increased the dividend yield. We have consistently focused on increasing the share of non-par business and improving margins.

LIC’s VNB (value of new business) margins have improved sharply, but APE (annualised premium equivalent) growth has lagged the industry. What explains the divergence?

We are looking to grow in all the segments. There is a lot of volatility in the market situation. The comfort level in buying a ULIP takes a beating during such periods. We are making efforts to come back in the ULIP segment. Growth on this scale requires a lot of effort because we operate on a very high base.

Why has the annuity business remained weak for LIC?

Annuity has not done well in the first quarter because remittances have been affected and liquidity has been hit. ULIPs should improve as market conditions stabilise.

Is LIC also looking at fintech investments?

We have embarked on a big technology transformation. We are engaging technology players as vendors. We are open to investing in fintech or insurtech companies that need growth capital and provide good value as an investment opportunity.

Is LIC still evaluating opportunities in health insurance?

We are not shelving the plan. We are looking at everything as an investment opportunity. But there is no urgency. We have to be sure that the claims settlement ratio does not dent the brand that LIC carries. We are considering a few opportunities, but we have not reached the stage where we can say this is the best opportunity and take the plunge.

Bancassurance has grown to over 8% of new business. Where do you see this channel going?

The agency channel will continue to be our strength. Business through banks and alternative channels has increased from less than 3% in 2022 to over 8%, including digital, and this can increase to over 10%. It is not at the cost of agency channels.

Does the proposed sale of IDBI Bank affect LIC’s bancassurance strategy?

IDBI has been a very premier partner in terms of bancassurance. Those strengths will continue irrespective of whether we hold a 49% stake in the bank. I would like to see IDBI continue as our premier partner. At the same time, we have been building relationships with other banks, brokers, corporate agents and web aggregators.

The regulator is said to be considering trail-based commissions and reforms to distribution costs. How will this impact LIC?

LIC has strictly followed the practice of keeping distribution costs within accepted levels. We have, in fact, decreased or realigned the commission structure by spreading commissions over multiple years. We won’t see much impact. If modifications are required, we will adapt quickly while balancing the interests of policyholders and agents. Insurance is not a pull product. The agent plays the role of a firstline underwriter. There is an additional effort involved in the sale of life insurance because the agents need to understand the risk and ensure that it is properly disclosed to customers.

LIC’s agency force has come down. Is that a conscious decision?

We do not want agents with us who are not very serious. We are looking at strengthening agents who will continue with LIC for a longer period through consistent performance.

Domestic institutional investors have been buyers while foreign investors have been selling. How is LIC, which has assets under management of around Rs 60 lakh crore, approaching investments amid volatile markets?

Our approach is contrarian. We buy in dips and realise the profits when the market goes up. The market also gave us a good opportunity to lock in high rates of interest, so we have a good amount invested in fixed-income securities. The balancing is done continuously depending on market opportunities.

What is your outlook for the markets?

The market has been range-bound. It is too difficult to predict the direction given geopolitical uncertainties. The current situation keeps the yields high, which is good for locking in investments. At present, you have opportunities both in equity and debt.

What are the key priorities for LIC over the next few years?

We do not give any guidance. The objective is taking insurance for every insurable person. We need reach, and we already have that through our offices, our agents and our service network. We would like to continue to maintain market leadership.

Why is the industry moving toward larger protection policies when the regulator has highlighted protection gaps in the Rs 25 lakh segment?

Protection is not supposed to be costly. Insurance companies look at high-ticket sizes because the product must also be viable and incomes have increased. But the regulator has rightly identified a sweet spot around Rs 25 lakh and below. We will be looking at this segment.