Lic Not To Lower First Premium Income Target

The Life Insurance Corporation of India today said that despite lower sales in the first half of the current financial year, it would be able to meet the target of 40 per cent growth in first premium income in 2002-03.

"We are not planning to reduce the target. Some recovery in sales has been noticed in the last month and our traditional product (individual assurance) has shown a growth of 13 per cent. We are already meeting our targets of 25 per cent higher sum assured and 15 per cent more policies," LIC chairman S B Mathur said at an insurance seminar organised by the Federation of Indian Chambers of Commerce and Industry.

 

He said the recovery was partly on account of the government's decision to withdraw service tax on life insurance policies. "In the early part, some business was lost due to the confusion created by the service tax announcement, and a lot of people deferred their decision to a later date," Mathur added.

The LIC chairman also said that the last financial year was an aberration as there was a spurt in single premium policy sales. Despite the slowdown this year, there has been a significant growth in sales of single premium products compared to 2000-01. He also said that, due to the state-owned life insurer's decision to reduce returns on single premium policies like Bima Nivesh, there was a rush to purchase the product which further resulted in a spurt in sales.

He also said that last year a large part of LIC's overall sales -- which accrue in the last quarter of the year -- was actually accounted for in the earlier part of the financial year which resulted in sales showing a decrease.

Mathur said so far the trends in renewal income was healthy with a growth of over 25 per cent in the first half of the current financial year. He also said that LIC would be able to maintain a growth rate of 20 per cent in the years to come. The company has a compounded annual growth rate of 20 per cent in the last 10 years.

However, between April and August 15 this year, LIC's first premium income has dipped 68 per cent to Rs 1687.69 crore as against Rs 5151.92 crore in the corresponding period last year. The most significant drop is witnessed in the first premium income from single premium policies which dipped 77.49 per cent to Rs 721.88 crore.

In number terms, the drop is even more significant with the sales of such policies numbering 72,769 as against over 3.69 lakh single premium covers sold between April-August 15 last year.

Team set up to track yields

Life Insurance Corporation today said it has set up an internal team to keep track of yields on its investment and suggest changes in the returns on the state-owned company's products. "The market environment is no longer static and we need to change our strategy accordingly.

Restating returns is going to be an ongoing strategy from now on and we will link the returns on our policies to the market rates or returns," LIC chairman S B Mathur said.

In recent months, India's largest life insurance company has reset returns on many of its products with returns on its popular Bima Nivesh policy cut four times since July last year. (Our Economy Bureau)