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| LIC goes whole hog to sell new policy |
| Shilpy Sinha / Mumbai Dec 28, 2008, 00:39 IST |
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The Life Insurance Corporation of India (LIC), the country’s largest insurer, is pulling out all stops to mop up Rs 25,000 crore through Jeevan Aastha, a single-premium product which offers at least 9 per cent guaranteed returns, in an attempt to reverse the trend of falling sales.
The state-owned company has received proposals worth over Rs 3,500 crore during the first 15 days of the scheme’s launch, while actual premium received is more than Rs 750 crore, LIC sources said. The close-ended scheme, the first from the insurer in many years, was launched on December 8 and is due to end on January 22.
The sales force has been asked to ensure that proposals are received by December 31 so that medical checks on the customers who decide to invest over Rs 15 lakh are completed by the time the scheme closes.
In addition, source said, some zonal managers are discussing the prospects of relaxing some of the conditions to ensure that more people can invest.
LIC, which is paying 2 per cent commission to its agents, is also offering other incentives and freebies disguised as contests to ensure that the sales force puts up a good show. A company source said that incentives could add up to 2 per cent of the commission and increase the total pay out to 4 per cent.
“The policy is getting positive response and has garnered about Rs 750 crore till December 24,” said LIC Managing Director Thomas Matthew T.
During April-October, LIC’s premium income from the sale of new policies fell 18 per cent to Rs 21,874.21 crore, which pulled down growth of the life insurance industry to 2.7 per cent.
LIC’s rivals and financial service advisors said that Jeevan Aastha is not just helping it mop up resources but also affecting the industry. “A lot of people are withdrawing money from their fixed deposits and investing in Jeevan Aastha,” said an executive at RR Financial, a financial product distribution company.
Tata AIG and IDBI Fortis have similar products in the market. IDBI Fortis’s Bondassurance, which is open for subscription up to March 31, has seen limited response so far.
Insurance companies bet heavily on sales in the fourth quarter which accounts for nearly 40 per cent of their annual sales, as individuals invest to avail of tax benefits.
For those investing in Jeevan Aastha for five years, the company is offering an annual tax-free return of 9 per cent, which will go up to 10 per cent in case they park their funds for 10 years. Many LIC agents are hawking the product as one which will offer up to 13 per cent returns after factoring in loyalty additions. Those investing in the scheme have the option to exit after a year.
While the returns may be assured the insurance cover is something that has come up for criticism from investment advisors. For instance, if one purchases a policy of Rs 1 lakh, the payment in case of death of the insured will be Rs 6 lakh at the end of the first year. However, second year onwards, it will fall to Rs 2 lakh.
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