Lic To Launch Unit- Linked Insurance Scheme

Life Insurance Corporation of India is getting ready to launch the first ever unit-linked insurance plan to take on competition once the new players foray into the sector by the end of this calendar year. "The pilot project is on. The product will be formally launched in November," Y P Gupta, LIC managing director, told Business Standard. "We are planning three funds ""debt, equity and a balanced fund ""and the investors will be allowed to switch from one fund to another," Gupta said. Mutual fund major Unit Trust of India has a unit-linked fund in its kitty which offers limited insurance cover. The LIC planned unit-linked insurance scheme will be the first full-fledged scheme to be offered to investors combining returns of a mutual fund with a life risk cover. LIC is also planning to rope in banks to sell insurance products across the counter. "We have initiated talks with banks to sell Bancassurance products. None of the banks are planning to enter life insurance business. Moreover, our products will be different from that of banks," Gupta said. The public sector insurance juggernaut is also in the process of restructuring some of its schemes. "We run about 57 plans at present covering all segments. Some of the plans need to be recast. We have already restructured some of the annuity plans which promised higher than market related returns. We have brought down the returns to a realistic level," Gupta pointed out. According to the LIC chief, the organisation is focussing on investments in a big way. "The investment returns accounts for about 35 per cent of the total income. We have already established an equity research cell and the focus now is on return on investments," Gupta said. In the fiscal 2000, the premium income of LIC was pegged at Rs 27,900 crore while investment returns were to the tune of Rs 16,000 crore. LIC wants to raise the equity exposure from the current level of 8.5 per cent to 10 per cent over the next two years. It is also plans to start trading in equity and government papers in a big way. "Our gilts portfolio is as big as Rs 75,000 crore. We want to kick off gilts trading this year," Gupta said. The institution's equity portfolio was to the tune of Rs 11,000 crore on March 31 which has gone up to Rs 12,500 crore in July. "We are steadily increasing the lContinued on Page 10 exposure... It should go up to Rs 14,000 crore," Gupta said. LIC's total investible fund was pegged at Rs 1,40,000 crore in March this year. Even though the government has changed the investment pattern and allowed the insurance companies to invest up to 35 per cent of the total investible fund in corporate debt and equities (up from the earlier norm of 25 per cent), Gupta does not want to go all out to invest in stock markets. "The return on infrastructure and social sectors are market related and we are comforable with our investments in these sectors," he said. At present, 54 per cent of LICs investments are in goverment papers, 24 per cent in core sector and 22 per cent in private sector (13.5 per cent debt and 8.5 per cent equity).