MC Govardhana Rangan. Separately, with its ‘DIVE’ digital programme, LIC is seeking to close the gap with private peers and extend its reach in rural India, Mohanty said.India’s equity markets are surging, but LIC has yielded circumspect returns. How do you intend to get the growth back and secure higher investor returns?
We are in line with our strategy we adopted at the time of listing, except for the group business. Our EV (embedded value) has gone up 21% in the first-half. Our non-par (policies where profits don’t accrue to shareholders) share has gone up from 7.12% to 10.7%. We have shown a 50% jump in non-par from March 2021. My objective is to take it further to 15%. We want to say that we are consistent in whatever commitments we made and strategies we adopted. We are in line with that. Market has responded positively after our result. Only in the group business, there was some setback. We are growing our individual business.
What is the outlook on market share with the private sector pushing the bank channel aggressively?
Our market share is down in group business because we could not get some of that. Our individual business is growing, and I am confident of growing market share in the coming quarters. LIC is going to launch a very innovative product as per the needs of the market. In this product, after premium paying term and policy term, one will get 10% of the sum assured every year for the rest of his or her life. This is a guaranteed non-par product. We will launch the product next month.
Some private companies are doubling commissions on some group products. How do you fight that?
In the group business, our commission structure is very reasonable. But looking at the need of the hour, we will also align ourselves so that we do not lose in the group segment.
The regulator has changed the expense of management guidelines. What does it mean for the industry – and LIC in particular?
The new guidelines give some leeway to all the insurers to manage their expenses in a manner that they can expand business. The industry has started moving in the direction and we will see visible changes in the next couple of quarters as commissions get realigned to the new realities.
Private insurers’ major growth has been coming from their tie-up with banks whereas LIC has traditionally been driven by agents.
Both in the number of policies and premium, our share of Banca has gone up. Our focus is Banca. We have a lot of tie-ups too and are selling a substantial amount of policies through banks. IDBI Bank and Axis Bank are contributing to our sale substantially and we have stakes in both banks as well. This way of business also calls for experts from insurance to be based in bank branches to educate potential policy buyers.
Mutual funds have expanded their assets substantially, probably at the cost of insurance. How does the insurance industry compete?
There is no substitute for insurance. Along with insurance, there is a requirement of investment. The regulator is coming up with programmes like Bima Vahak and Bima Vistaar. The objective is to expand insurance coverage. Mutual fund and insurance businesses are very different. We cater to the long-term needs of the people. Our investment has to be in line with the long-term view. Mutual fund is basically an investment. Insurance is both insurance and savings. Insurers have to deliver what they commit whereas MF returns depend on the market. So, people invest in each segment depending upon their risk appetite. There is a need for both.
You are the biggest investor in the industry. How do you look at the market in terms of opportunities?
Our equity market is bound to grow. There is a lot of confidence in the Indian equity market despite the Fed action and interests going up. We have earned good profit this year. We will surpass last year’s investment profit soon. Our fund size is also going up. I don’t see the market being overvalued.
Interest rates have run up in this tightening cycle. How far do you believe the rates could go?
The government has given us the 50-year bonds as well now. We need it given our long-term liability profile. As far as rates go, the current levels (7.24%) offer a decent return. We have our strategy as to how we can earn beyond G-Sec in NCDs depending on the quality of paper. We are 22% of the G-Sec market.
Almost every company is talking about digital. You have your Ananda App. What else is likely?
This year, we’ve initiated Project DIVE—Digital Innovation and Value Enhancement. All processes, including customer acquisition, will be digital. Partnering with BCG, we want to globally enhance value through digital servicing. We are in the process of adopting a board policy on data protection. The regulations will impact entities with substantial data holdings, requiring significant legal attention.