Life Insurance Corporation starts revamp, sets up two groups to look into issues

 

 

 

State-run Life Insurance Corporation has set up two groups to look into a host of issues, including investment strategy, marketing and review of its international operations and subsidiaries, two persons with knowledge of the development said.

 

The move is part of revamp of the 57-year-old insurer, the country’s largest, facilitated by the government to increase insurance penetration in the country.

 

According to the persons quoted earlier, finance minister P Chidamabram, who met LIC’s board members last month, had expressed dissatisfaction with the insurer’s performance- in 2012-13, policies grew 2.89% and first-year premium grew 0.77%. “Finance minister had said that LIC is not a market leader but a market maker. The whole idea (behind revamp) is that the company should not only increase its customer base but also innovate to strengthen the sector in the country,” an LIC board member, who did not wish to be named, said.

 

India is one of most under-insured countries in the world with insurance penetration at less than 4% of the GDP. With 23 million customers, LIC is the largest insurance company in the world by customer base. The company held 70% of the domestic life insurance market in 2011-12.

 

“The finance minister had indicated that LIC should compete with itself and every effort should be made to increase its base and improve the operations,” the board member said. The finance ministry may also ask LIC to go for an independent actuarial valuation and set up an investment fluctuation reserve, he added.

 

A senior finance ministry official, however, said that the suggestions given during the board meeting will be implemented by LIC itself. “We are not going to meddle in their day-to-day operations. They have set up two groups and they will be working out a long-term strategy for the company.”

 

LIC is now expected to prepare an action plan and present it to the board along with annual goals. The insurer may also go for an independent mechanism to verify the actuarial valuation of the company, one of the persons quoted earlier said.

 

Some LIC officials, however, feel that some of the board members have hijacked the company’s agenda and are placing unjust demands. “There is already a peer review that is done by an outside actuary after the appointed actuary gives his report. The government should focus on the IRDA (insurance regulator) and allow easy filing of products, rather than blaming the company for dismal performance,” an LIC official said, requesting anonymity.

 

An LIC board member, however, said that it is the board’s duty to apprise the company of its shortcomings. “LIC has still not been able to segregate the funds for policies issued after December 2011. They can’t expect the board not to raise such issues,” he said. The LIC Act was amended in December 2011, providing for 90% of the profits to be distributed among policyholders, compared with 95% earlier.

 

The insurer is also expected to finalise a plan for opening its branches in the 1,800 towns that have a population of at least 1,000. It will also work out a strategy to increase coverage under government schemes such as Aam Aadmi Bima Yojan and Janashree Bima Yojna.

 

The government recently appointed SK Roy as the new chairman of LIC. He is expected to take charge from July 1. He will have a full five-year term, the finance ministry official said.

 

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/lic-starts-revamp-sets-up-two-groups-to-look-into-issues/articleshow/20655892.cms

 

 

 

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