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Business Standard

LIC admits pressure from pvt players

Freny Patel  |  Mumbai 

The (LIC) will not be in a position to retain its market share, said chairman R N Bhardwaj, who retires tomorrow after a 37-year stint at the state-owned life insurer.
This is the first time that the management has admitted to difficulties in retaining market share after the privatisation of the sector.
In an effort to give best returns to policyholders, has decided to stop cross-subsidising returns of one product against another. Against its total invested portfolio of about Rs 4,62,000 crore, has segregated Rs 38,000 crore of pension and group superannuation (P&GS) business and Rs 4,000 crore of investments (UILIPs).
"If these investments are maintained separately we can do a better job," said Bhardwaj.
With competition among players to give the best value in terms of returns, and ULIPs offering transparency in terms of net asset value, is ensuring special emphasis on this lines of business.
"We need to address where and how to invest funds to give the best returns," Bhardwaj said. The state insurer has created (SBUs) for specific businesses, which it hopes will ensure profitability.
Meanwhile, Bhardwaj further pointed out that if were to maintain its current market share (of about 80 per cent in terms of new business), it would need to ensure growth rates of 125 per cent plus.
"To retain our market share we need to grow at the same rate as that of private players," Bhardwaj said.
"We cannot grow at the same rate. Growth needs to be sustainable and profitable. Else diseconomies of scale will start flowing and average cost of unit will increase," chief told Business Standard in an exclusive interview.
has targeted new premium income of Rs 18,000 crore in the current financial year, as it aims for 90 per cent of new business income and 95 per cent of new policies.
It is pushing for a growth of 40-50 per cent in new business largely on the back of ULIP sales. For every new additional policy sold, staff has to take care of two more transactions, which considering the existing number of policies, will add pressure on the existing infrastructure, Bhardwaj added.

First Published: Tue, May 31 2005. 00:00 IST