'Market instability has thrown up new hurdles'

Q&A: T S vijayan

The country’s largest insurer, the Life Insurance Corporation of India (LIC), has seen its sales dip in recent months. However, the performance over the last two months has shown some improvement. The public-sector company’s Chairman T S Vijayan spoke to Anirudh Laskar about LIC’s strategy in the wake of the economic slowdown. Excerpts:

How has the life insurance industry been affected by the global financial turmoil? What is LIC’s strategy?
The life insurance industry in India is well insulated from the financial turmoil. But, the prerequisites and proclivity of the customers are changing due to the upheaval in the market. Our strategy is to focus on that change and bring out products that are conducive to the current demand. The area of concern, for us, could be the impact of volatility of market on the return on the investors’ money.

LIC has been losing its market share in terms of new business premium. Can you elaborate the factors affecting LIC and what is being done to regain market share?
With the advent of new players it is inevitable that the market share will get divided. In the last few months, there has been a decline in our new business, mainly because of the shift of the customers from Ulips (unit-linked plans) and the vacuum generated due to lack of any product catering to the current needs of the customer.

We have revisited our strategies in the last two months and new business has picked up. We have just launched Jeevan Aastha ,a limited edition single-premium plan, tailor-made for the customer looking for guaranteed returns at a time when guarantee is a rarity.

What has been the impact on LIC’s Ulip sales due to the equity market lull?
There has been a fall in Ulip sales due to the ups and downs in the equity market. It has impacted LIC too, in terms of fall in the new business premium. Though Ulips were essentially introduced to cash in on the customers’ interest in benefitting from the equity market, it has now gained an integral position in our portfolio. But, its demand is not something that an insurer can create, it is market-based. As of now, it is just down, but not out.

What is your new business premium target for the coming financial year?
Our new business target is Rs 57,000 crore in first premium income. We intend to achieve it by bringing more and varied segments of people under the insurance cover. Our key emphasis will be on proper placement of product and brand building.

The Insurance Regulatory and Development Authority (Irda) has directed insurers not to hold more than 10 per cent as equity holdings of any company. As LIC holds more than 10 per cent in many companies, how will you deal with this new directive?
Irda is our regulator and we approach them for guidance in lot of matters, investment being one of them. We will follow whatever guidance and guidelines, as and when are given to us.

How do you see your other businesses such as credit cards and health insurance faring next year?
We are planning to launch credit cards by January 2009. We intend to start in a small way, beginning with our staff, agents and policyholders as the prospective customers. Based on the feedback, we will decide on expansion. We forayed into health insurance last year. The policies are marketed and issued as an LIC plan. In just four months since the launch, we sold 100,000 policies. This year, our target is much higher and we hope to introduce more plans too.

A number of senior managers have left LIC, with many of them joining the private sector. Some development officers were also not happy with the incentives they were offered. What are you doing to check attrition?
Attrition is faced by any organisation, irrespective of the sector. For many years, LIC held a monopoly. Now, the sector has opened up. There are bound to be a few exits.

We are not complacent about it. We are trying to revisit our systems and policies and have come up with incentive packages for specialised personnel. We have also teamed up with an elite management institute, to hone the skills and knowledge of our employees. As far as the development officers are concerned, there were some issues in the last financial year, which affected our March 2008 closing figures. After several rounds of talks with them, the issues have more or less been sorted out and their response this year has been encouraging.