Life insurers can provide a viable pension option

Interview/ T.C. Suseel Kumar, managing director, Life Insurance Corporation of India

suseel-kumar-lic T.C. Suseel Kumar | Amey Mansabdar

In an exclusive interview, T.C. Suseel Kumar, managing director of Life Insurance Corporation of India, talks about how the country’s largest life insurer navigated Covid-19, and how the pandemic brought a fundamental shift in people’s perception about insurance. Excerpts:

Q/Covid-19 led to a lot of disruption across businesses. Did LIC have to tweak plans because of the pandemic? What is your outlook for the next 12-18 months?

A/ The lockdown and the related restrictions, which had impacted the economic activities as a whole, had also cast a negative impact on the life insurance industry. With India unlocking gradually, we can see that demand resurgence is palpable in many sectors. Economic indicators allude to a steady recovery in almost all sectors, with some sectors shooting above their previous-year levels as well.

We have not scaled down our budgeted growth plan. Rather, we are optimistic about reaching them well in advance of the close of the financial year.

The pandemic has thrown light on the importance of life insurance and health insurance. With people across age groups being affected by the pandemic, they have begun to understand the importance of life insurance, and this may become an essential part of the new reality of our economy in the long term. Backed by rising income level, digitisation and the growing width of distribution channels, we expect the life insurance industry to grow at 10 to 12 per cent compounded annual growth rate in the next 12 to 18 months.

Q/ Data show that new life insurance premiums rose 32 per cent year-on-year in October. Among the various life insurance segments, where do you see strong growth?

A/With a population of more than 130 crore and a penetration rate of 2.74 per cent, the potential for growth of life insurance is unlimited in India. The economic activities gradually started looking up once the unlock process started in June. The upturn in the economy was reflected in the performance of life insurers. Our resilient and quick response in meeting the expectation of the market in the backdrop of the economic recovery and awareness created by the pandemic have yielded results, and for the month of October our growth in first year premium was more than 36 per cent, while the overall industry grew by 32 per cent.

With a huge majority of our population in the unorganised sector, there is already a huge demand for annuity products, which, we foresee, will increase further. At the same time, the huge protection gap provides a unique opportunity for term products, and we have two very competitively priced, feature-rich products in our portfolio, and we will definitely focus on this sector.

Keeping in mind the long-term economic perspective of India, ULIP (unit linked insurance plan) also has a huge potential for growth and it gives the opportunity to reap higher returns for our market savvy customers.

Q/Mutual fund SIPs (systematic investment plans) have been very popular. But, ULIPs have not been.

A/SIPs do not offer life insurance coverage whereas ULIPs offer bundled products of insurance as well as investment opportunity. In ULIPs, mortality charges are also to be accounted for. Further, with a view to smoothening the cap on charges, the capping has been rationalised by the IRDAI to ensure reduction in overall charges.

In order to market a product under ULIP, an intermediary has to have adequate capital market knowledge, and we are now imparting training to all our agents in this aspect. We foresee a quantum jump in ULIPs in the days to come.

Q/LIC is one of the largest investors in stocks. Markets have seen a sharp rebound since the lows they hit in March. How much have you invested so far this year and what is your assessment from here on?

A/In FY21, as of today, LIC has booked a profit of Rs27,000 crore through sale of equities against Rs18,400 crore in 2019-20. The total equity investments for FY21 will depend on the investible surplus available with the corporation. As on today, LIC has invested Rs60,000 crore in the equity market, against Rs32,800 crore during the corresponding period last year.

Q/India has a large workforce
employed in the private sector, where there are no pensions. What is the role insurance companies can play here?

A/ With the population of India expected to reach 140.3 crore by 2025, and majority of the working population engaged in private and unorganised sectors, life insurers can provide a viable pension option through their annuity products. Buying a pension/annuity plan will be a prudent investment decision, and we foresee a huge opportunity for growth in this sector. Our pension and group schemes wing provides annuity to organised groups, and our regular channel sells annuity to individuals. As on March 31, 2020, both combined, we have more than a crore customers who receive annuity from LIC.

Q/India has a growing young population. How is LIC tapping these potential customers?

A/We are taking all possible steps to tap the business potential in this segment. In the last fiscal, we sold 1.1 crore policies to millennials and that constitute as much as 50.29 per cent of our total policies sold.

Life insurance should come as the first and foremost among financial assets of any individual. Our communication strategy in recent times is more tuned to attract the attention of youth and speaks their language to appeal to them. We have made conscious efforts to induct young professionals among our agency force. Out of a total of 1.33 lakh agents recruited during the current year, nearly 50 per cent are millennials. This is the right group to sync with the millennial customers.

Q/How has your acquisition of IDBI Bank helped in growing the bancassurance channel?

A/Banking channels will continue to play a vital role in the sale of life insurance, especially keeping in mind the spurt in banking activities due to the various financial schemes launched by the government of India which are implemented through banks. IDBI Bank is a major contributor in our bancassurance channel and is the top performer in both policies and premium among our banking channels, and it is worth mentioning that our BAC channel has grown by nearly 36 per cent in first year premiums as of November 2020 as compared to the same period in the last financial year.