LIC clocks 80% jump in premium mop-up

Number of policies sold, however, dropped in first quarter

Life Insurance Corporation of India (LIC) has seen an 80 per cent growth in the premium collection during the first quarter of 2005-06 following huge demand for unit-linked insurance plans (ULIPs).

The state-owned corporation mopped up Rs 1,464.28 crore first premium income through sale of individual policies in the first three months of the year up to June 15.

This reflects a 78 per cent growth over the corresponding period last fiscal when LIC mopped up Rs 821.27 crore in new business income.

Growth in new business comes largely on the back of ULIP sales, said A K Shukla, current-in-charge, LIC. This has also been reflected in the fact that the average premium per policy has almost doubled from Rs 3,200 last fiscal to Rs 6,100 this quarter. Sale of ULIPs contributed Rs 686 crore towards premium collections this year.

Meanwhile, on the group side, Shukla said most superannuation plans come up for renewal in July. Considering that the corporation offers a one-month grace period, the real impact of fringe benefit tax on superannuation funds will only be known in August, he added.

The growth in business is even as just about 47 per cent of LIC 10-lakh odd agency force is selling policies this quarter. Usually, most agents start aggressively selling only in the last quarter of a financial year. Last year, about 39 per cent of the agency force was active during the first quarter.

Even as there has been sizeable growth in new business income, there has been a fall in the number of overall policies sold.

Against 24 lakh policies sold last fiscal during the first quarter, the current quarter saw the number drop to 23.65 lakh. As many as 2.39 lakh policies sold are on account of LIC's two popular ULIP plans "" Bima Plus and Future Plus.

Bima Kiran to face the axe

Interest rates may have hardened of late, but the fall in rates since 2002 continues to have an impact on the insurance industry. The Life Insurance Corporation of India (LIC) will withdraw its return of premium term insurance plan "" New Bima Kiran, from August 1.

"The rate presumed for factoring the premium was higher in 2002 than what we are getting today in the market," said A K Shukla, current-in-charge, LIC.

New Bima Kiran is today the cheapest plan in the market among term insurance covers. A 30-year old opting for a Rs 1-lakh term cover with return of premium would pay about Rs 2,700-3,000 per annum under this plan. The premium charge would come down further should he not opt for return of premium at the end of the term period.

Margins in term insurance plans are wafer-thin as this is a commodity product wherein people buy the cheapest plan. LIC officials said it would come out with a replacement at a future date.

Bima Kiran was first introduced back in 1994 and was offered to individuals up to the age limit of 35 years. In 2002, the plan was replaced with New Bima Kiran when LIC decided to raise the age limit to 45.

Currently, two of LIC's new plans are pending approval from the Insurance Regulatory and Development Authority. These include Jeevan Plus, a unit-linked wholelife cover and a single premium traditional plan.