LIC on overdrive, new business up 184%

MUMBAI: Life Insurance Corporation (LIC) has grown its new business by 184% in the first seven months, which boosted the industry growth to 163%. The corporation mobilised Rs 28,906 crore through sales of new policies between April and October 2006, which helped it clawback marketshare to 79% from a low of 71% as of March 2006.

What makes LIC’s growth exceptional is the fact that it is on a base of Rs 10,160 crore. Only two companies — SBI Life and Reliance Life — have managed a higher growth rate than LIC. However, the base for these two companies, at Rs 205 crore and Rs 73 crore, are a fraction of LIC’s last year’s premium.

Among private companies, ICICI Prudential is still at the number one position with a growth of 108%, which gives the company a marketshare of 5.73%. ICICI Pru plans to consolidate its position by recruiting more agents and increasing group sales. Its closest rival Bajaj Allianz Life Insurance has a couple of products in the pipeline with which it expects to increase its marketshare.

LIC’s growth has come from sales of investment linked products. Close to half of its premium income has come from sales of single premium policies, which brought in Rs 12,183 crore for the corporation by way of new business premium. Premium from regular income policies were also high at Rs 12,350 crore. The rise in premium reflects the higher level of investment by policyholders, with the average premium per policy shooting up to Rs 20,632, up from less than Rs 7,000 as of end-March. In terms of number of policies, the Corporation is slightly behind its own internal target, with policy sales growing only 7% to 1.18 crore policies in the first seven months.

According to Anand Jathan, a million dollar roundtable agent with LIC, premium income has gone up because of high value premium coming into Market Plus — LIC’s unit-linked insurance policy. “LIC’s Jeevan Tarang, which is a whole-life plan is also doing very well,” said Mr Jathan. Investors are also using insurance as an avenue for channelising savings into equities. Although mutual funds also have similar tax benefits, they have a much smaller reach compared to life insurers. Life companies have been recruiting agents at a frenetic pace and there are close to twenty lakh registered life insurance agents in the country.

Ironically, this highest-ever growth in recent times has come after a regulatory crackdown on short-term unit-linked plans which were structured on the lines of MF schemes. Although all short-term schemes came to a close in end-June 2006, sales of investment-linked policies have not slowed down.

With stock market indices touching an all-time high, net asset values of unit-linked schemes have also gone up significantly. Action is also expected to pick up in 2007 because of the presence of four new companies — Bharti Axa, IDBI Fortis, Aegon-Religare and PNB-Principal.