Lic To Stop 2 More Assured Return Plans

The Life Insurance Corporation of India (LIC) will close down two more assured return schemes -- Jeevan Sanchay and Children Anticipated Guarantee scheme --before the end of the fiscal.

The state insurer will reintroduce the Jeevan Shree plan from March 1, 2002, with a revised rate of assured returns of Rs 70 per Rs 1000 sum assured, from Rs 75 per Rs 1,000 sum assured at present. Jeevan Shree, an endowment plan meant for the higher middle income bracket, was closed on January 31 as LIC found it difficult to meet the high assured rate of returns.

"We will rationalise the rate of returns on the two plans as we did in the case of the pension products earlier this month," said LIC managing director N C Sharma. Many LIC policyholders present at the A D Shroff Memorial Trust lecture in Mumbai on Monday agitated against the revised rate of interest on LIC's policy meant for women only -- Jeevan Sneha -- after LIC reduced the rate from 11 to 8 per cent, despite the terms and conditions of the plan.

LIC officials stated that, in the light of the drastic drop in interest rates, LIC was forced to revise its assured returns on its products.

Meanwhile, Jeevan Shree helped the corporation mop up an additional Rs 2,000 crore in the month of January 31, 2002 when it was publicised that the scheme would close down. During the current fiscal (2001-02), LIC has mopped up more than Rs 12,000 crore till January 31. This reflected a growth rate of well over 270 per cent.

Speaking on the sidelines of the lecture, LIC managing director A Ramamurthy said that for want of good investment opportunities, LIC has invested more than 65 per cent of its investible funds in the government securities market. Another Rs 3,400 odd crore has been invested in the equity market and the balance in corporate paper and housing schemes.

"We are investing more in government securities because the opportunities are less elsewhere, despite 50 per cent being mandated by the regulator," said Ramamurthy. LIC has been active in trading of government securities and its equity portfolio. Said Ramamurthy: "We are making good the fall in returns through capital appreciation".

LIC chairman G N Bajpai said in his address that there is a grave "need for new instruments like derivatives, insurance-based capital market bonds, solvency bonds, catastrophe bonds, C-swaps and live securitisation to keep a company a step ahead of others". Unfortunately these he stated are yet not in existence in the Indian market.