S K Roy became the chairman of Life Insurance Corporation of India (LIC) within a month of taking over as managing director. In an interview with M Saraswathy and Manojit Saha, he says his immediate priority will be growth, while adjusting with the new regulatory environment. Edited excerpts:
You have become LIC chairman at a time when growth has slowed due to the evolving regulatory environment. What would be your immediate priorities now?
Growth is my first priority. The industry has entered into a new regulatory regime in terms of products. If we, as leaders, don't adjust to the new regime well, how will other insurance companies would? It is imperative that LIC adjusts well. LIC has 240 million policy-holders, which is a huge resource. If I could sell a new policy to 10 per cent of these customers, I would achieve 50 per cent of the year's target.
LIC has seen a drop in new business premium collection in the last financial year and in the first two months of 2013-14. How are you planning to address the issue?
We had a minor shortfall in premium, and it can be specifically attributed to the absence of our popular group product last year. That is not a major a concern as we will have new plans in place. On life insurance side, we have a Rs 33,000-crore new premium collection target for this fiscal.
LIC has lost about 100,000 agents in FY13. What are the corrective steps you are taking on this front?
This is a universal phenomena and not unique to the LIC. But we have good systems and processes in place. This year, we are looking to at leveraging Information techmology to arrest attrition. IT has huge potential in doing this work easier, since our team size is 1.2 million. We will put solutions in place in about a quarter.
LIC Housing Finance (LIC HFL), has applied for a banking licence. How will you leverage this opportunity?
LIC HFL is a separate entity and has applied for a banking entity. Their board has decided that it makes good sense to enter into the banking field. I have no reason to doubt the wisdom of the LIC HFL board. If they get banking licence, there will be implications to them and I am sure that they have considered these. There are no implications to us. The top few private life insurers are bank-promoted. The fact is that theoretically, the potential is massive, but we unfortunately don't have evidence in front of us that the model is game-changing and fantastic results will happen.
If LIC HFL does get a bank licence, wouldn't you have to reduce your stake in Corporation Bank?
That has been an investment. We have never sought management control and neither does the law permit us to do so. It was a strategic step and was an investment decision. That is a regulatory issue and we have been always been regulatory-compliant. If the regulations need us to do something, that is not an issue for us. If it is to comply with regulation, it is a fait accompli for everyone.
But do you think having exposure in so many banks, most of them being public sector, exposes to systemic risk?
When I say we are heavily invested in banking sector, it also includes private banks where we have huge stakes. If we feel an entity or sector is a potential flag-off item, we will reassess those entities or sector.
Has the issue of raising equity exposure cap of LIC in a single company been resolved? Can LIC pick up 30 per cent stake in a single listed entity, at present?
We are still engaging with the regulator and we are hopeful that we will get a solution to this sooner than later. We don't want to be seen to be non-compliant and that is why we are engaging. We have made a representation and it is being actively considered. I believe the regulator will take a balance view on this.
It is often said LIC, which is on the board of many blue-chip companies, does not play an active role. How do you respond to that?
We are one of the oldest institutional investors in India. In 1956 itself, the LIC Act has made provision for nominee director. It is not as if I have suddenly walked into companies' boards and am finding myself out of place.
I was myself a nominee director and have discharged my duties diligently. Those duties did not involve that I will wrestle with board members and create chaos in company boards. I was representing an institutional investor. My responsibility was to ensure that investors' interests are protected and the company remains complaint. We have to ensure that LIC's interest in the company is protected. For this, I am supposed to see the activities of companies, if it is run on professional lines, business strategy is in line with macro-economic environment and if it is giving us value. You may feel that LIC is passive. The converse of passive is active. Active could be functional and dysfunctional. So, we should be judged on the benchmark of playing an effective role on board of company. It does not matter if I am active or passive.
How has your single premium segment performed?
Our single premium products have been popular among customers. Today we have attractive single premium plans and will have such products from September 30 onwards, too. We target 45 per cent of our premiums to come from single premium products. There is a market for single premium products.
The government has lined up disinvestment of many PSUs. Have you set aside a separate corpus to participate in the programme?
If we get value in participating in the offer-for-sale (OFS) of a company, I am not concerned who owns it. If it is a good investment opportunity, then we will consider it. I have equity caps and sectoral caps and I have to work under those caps. We don't have a necessity to allocate any funds. In the future, too, if the investment opportunity makes sense to LIC, it will participate.
What is your investment target for this financial year?
We are planning to invest about Rs 2.25 lakh crore, out of which Rs 40,000 crore will be in equity.
What is your view on open architecture so far as bancassurance model is concerned?
What the regulator decides is good for the industry. I am sure the regulator will take a decision that is in the best interest of everyone. For us, about 5 per cent premium comes from this channel from our nine public sector bank partners.
