FM-LIC Board meet: LIC asked to open 1,800 new offices

Increase in insurance penetration is top agenda

Finance Minister P Chidambaram has asked the country's largest insurer Life Finance minister P Chidambaram has asked the country’s largest insurer, Life Insurance Corp of India (LIC), to open 1,800 new offices this financial year. These offices would have to cover all towns with a population of more than 10,000 people, said financial services secretary Rajiv Takru, on the sidelines of a meeting between the LIC board and the finance minister.

LIC has to achieve a total target of 3,867 offices this year, he said, adding the life insurer already had about 2,067 offices. “This has to be established and we are going to chase this up on a regular basis to ensure that LIC’s own man other than an agent is present in each of these towns,” Takru said. The insurer will start small offices at the beginning and later on, will scale up operations.

“LIC is the 83 per cent market holder in life sector, which means that there is no competitor in the market, so it has to show the way to everybody else,” said Takru. Keeping that in view, three thrust areas have been identified. Those areas, which have low penetration of insurance, will be addressed on priority, he added.  

“Insurance, as a method of saving and as a method of security, should be encouraged in those areas where insurance is not there,” he said. It was pointed in the meeting that while Delhi, Mumbai, Kolkata and Chennai are already insured, remote areas of central India and the northeast will have to have insurance coverage. Takru said a strategy has to be worked out for the same.

To ensure that there is no mis-selling, the finance minister called for niche marketing for target groups. This would be for groups that actually need that kind of insurance.

Takru said therefore, there would be no mis-selling and there would be targeted and proper selling to those groups. It was further decided that there should be targeted promotional drives for niche markets, designed to hit the audience and the area which LIC was aiming.

The investment strategies of LIC were also discussed in the meeting and it was opined that there should be proper assessment-based investment as LIC is sitting on a pile of resources, which are growing exponentially.

“Crores have to be invested by LIC. It is the big boy. They must optimise their returns because only then they can pay the policyholders, as per expectations,” Takru added.

With respect to the increase in equity cap of 30 per cent for LIC, Takru said no final decision has been taken. “Discussions are on on this and was addressed in the recent Insurance Regulatory and Development Authority (Irda) board meeting,” he said. Among other issues, the linking of insurance with the banking sector was also discussed in the meeting.

CHIDAMBARAM SETS TARGETS FOR LIC

• New offices to cover towns with a population of more than 10,000
• LIC’s own man other than an agent will have to be present in each of these towns
• Insurer will have to achieve the target of having a total 3,867 offices this year