The new Chairman of Life Insurance Corporation of India (LIC), S. K. Roy, will have a five-year term to lead it at a challenging time when foreign insurers plan to increase their presence in the country. After taking over as the head of the life insurance behemoth of the country, on June 29, he is spearheading changes in its operations to equip itself to take up all future challenges.
Following are the excerpts from an interview with The Hindu.
With the government’s focus on raising foreign inflows, including from the Indian diaspora, does LIC have any specific plans to offer to this class of investors?
India is the largest among the countries which are getting inward remittances in the world with $71 billion. This is largely migrant worker-oriented. We have schemes by which we offer insurance to non-resident Indians (NRIs).
They have the flexibility to pay premia, either through foreign or Indian currency. If the premium is received in dollars, payments are also made in dollars. This s a big market for us, and we do very well in this segment.
As far as the products are concerned, the regulator has mandated that by December 31, 2013, all old products will be phased out, and a new products’ regime will start from January 1, 2014. So, we will be launching new products in the next calendar year. For NRI population, we have a high performing company, head-quartered in Bahrain, LIC (International) BSC(c). It operates in five of the six Gulf Co-operation Council (GCC) countries, and the ‘unique selling proposition’ for our product is that a person buys a product in Dubai or in Bahrain and when he comes back to India, the policy comes back with him. This is part of his asset. We are the market leader in the GCC countries. We have achieved this calendar year’s target, in four months. It is showing phenomenal growth. For NRIs, we also offer all the products which are available in this country.
You are the big daddy among investors in bonds and stocks. What’s your total exposure in equities and bonds?
It’s a fact that we are the largest, possibly the single largest, investor in the capital market. In any economy, the life insurance industry is the big daddy of investments. No other industry can generate the kind of money which can be generated by the life insurance business.
We are planning to invest a total of Rs.2,25,000 crore in the current financial year. Bonds are not target-driven but it depends on what is available in the market and we are a major player in the government bond market. That investment opportunity is subject to availability.
Equity market is more broad-based compared to the bond market. In the current fiscal so far, we have invested about Rs.31,000 crore in equities.
Our total plan for equity investment is around Rs.40,000 crore for the financial year. In equities, we have a steady growth rate of about 9 per cent.
What about your real estate investments?
A large number of real estate companies are not in an expansion mode. At this moment, we don’t have any large investment opportunity in the real estate segment but we are bullish on this segment and it will do well.
What sort of impact do you foresee on your investment because of the sharp slowdown in economic growth and shrinking corporate profitability?
We are a long-term investor. The average contract with my policy holder is 15 to 20 years. We have to do an asset-liability match. So, I need a backing of an asset of that duration. These temporary ups and downs in the capital market are not so significant for us. LIC has, historically, always been a contrarian investor. When the markets are down, we aggressively purchase. When the markets are up, wherever we see that we can book profit, we book those profits. We don’t have a good day or a bad day syndrome.
What is the outlook for the economy? One of the biggest causes for India’s economic problems is the poor state of infrastructure. What is the potential for LIC in this area?
Our long-term outlook is that we are very bullish on Indian economy. Even, in the medium-term, we see very positive indications. Maybe because of the different investment parameters we have, stressed borrowings are not a major issue for us. It may be an issue for others in the financial sector. Investment in infrastructure is very well synchronised with investment pattern of an insurance company.
I will not say we are not active. We keep on waiting for opportunities for such funding, and, in this current year, we have invested more than Rs.5,000 crore in the infrastructure sector. This is also not target-driven, and it depends on the opportunities before us. But this is something which we look at with great interest.
What is the growth rate of life insurance, specifically for LIC? What is the outlook?
The first quarter has recorded de-growth for the life insurance industry. But the second quarter was an interesting one, specially for LIC.
Our total collection for September itself was more than Rs.5,900 core, which is more than double that we did last year in September. If it was an outstanding quarter for LIC, it is going to be outstanding for the industry because number of sales we represent around 84 per cent of the industry.
There have been requests for raising the foreign cap on investment in insurance. Are foreign insurance companies a threat to your market share?
A large number of foreign companies are in this country since 2000. They have completed 13 years of existence in India. In the last 13 years, LIC has done outstandingly well in every aspect of its work. Our growth is huge in this period. In the current fiscal, we have a target of Rs.33,000 crore in premium. In 1999-2000, our budget was around Rs.7,000-8,000 crore.
They are not a cause of threat but a cause of encouragement. When foreign companies come to the country, they bring good practices and product innovations will happen.
Today, the Indian customer has a wide range of products to choose from.
Market share is available on two parameters; premium and sales. Sales is more important because it represent the size of the operation, our premium market share is about 75 per cent. Competition is good, as we will be able to do better than others.
Last year some 100,000 agents had quit LIC. Why is there such a high attrition rate? What plans, if any, are afoot to arrest this trend?
Attrition is a phenomenon which happens in every industry. It is not a phenomenon only for life insurance industry. We, in LIC, have put in performance benchmarks. Now we are making agents more professional. We have various training programmes, and we send them for training outside LIC also.
Besides that, we have a large training infrastructure. Top-performing agents were sent to reputed business schools of the country. We have other methods also to encourage them in their professional expertise.