The future of the insurance sector is pension and health products: D K Mehrotra
Life Insurance Corporation of India has planned to get into the banking sector through its subsidiary, LIC Housing Finance. D K Mehrotra, chairman of Life Insurance Corporation of India, the government-owned giant, talks of their plans with Business Standard.
The Reserve Bank of India recently released the final norms on applying for a new bank licence. Will LIC apply?
We will not like to do it under our own umbrella. Let it be through one of our arms. We (LIC) are in the business of giving risk cover and want to continue to do that. We have asked LIC Housing Finance, the home loan arm, to have a look at the guidelines. They are working on it and will come back to us. If they find it favourable, they may move forward as well.
Would new key personnel be inducted?
That has to happen. Once we go for that, it will be a separate unit altogether.
The government has readied divestment of stake in several public sector units. Have you set aside any reserve for this?
We never allocate any reserve for a specific purpose. We do it as we go on. We have not yet been approached till now for any other disinvestment. If it happens, we will judge every issue on its own strength.
The new premium business of both private insurers and LIC has seen a dip in the past few months. Will it pick up in the coming months?
The entire industry was going through a slow phase in the last two years and LIC was not an exception. Now, we are in a positive direction and moving ahead. We have also launched a new product and the market has given a good response to it.
You had talked about an ideal mix of 65-35 for traditional and unit linked (Ulip) products for LIC. Have you achieved this mix?
At present, we do not have the 65-35 mix as Ulip is not finding favour in the market. There has been a slowdown in Ulip sales after the September 2010 guidelines. The market has also been volatile and choppy. So it would be wrong to say that Ulip is the flavour now.
Long-term product with the right kind of risk should be taken.
Would there be new Ulip products?
Since Ulips are linked with market movement, people perceive it as an investment product. But, we are selling a risk cover. We will be there, if there is a space. That is why we recently came out with the Flexi Plus unit-linked plan. If there is more demand in the market for Ulips in the near future, we will definitely step it up.
Mid-cap stocks have crashed in the past couple of days. Has this changed your investment outlook?
We are a long-term investor. Such intermittent moments of the market will not influence our decisions. We will always keep a watch. We do not rush into the market. either to exit or to buy. Such one-off incidents do not influence us to either rush out or rush in.
The pension market has been partially revived. Would you be launching new pension products this year?
Today, the future of insurance is pension and health. This is due to factors like longevity and high costs of medical care. This would be a key factor in the future for the insurance sector.
This fiscal, we are not launching new products but in the next fiscal, we will try to come out with new products on this front.
How have you progressed in Vision 2020?
Going by the enthusiasm and response, we hope that giving a policy to every insurable person by 2020 will be fulfilled.
It includes any insurance product, depending on the person’s ability to buy it.
Each of these persons should have a cover of insurance with LIC. If he thinks about insurance, it should be LIC.
There is a perception that you have deliberately stayed out of deeper focus on bancassurance.
This is not true. When we started, we had a good number of banks. But some of them diversified into insurance, so we had to exit these agreements.
Today, we do have some banks with whom we have tie-ups for bancassurance. But, results from this channel are lower than expected.
There is a lot of potential and some bank partners have done good business. We are moving forward, albeit slowly, in this channel. We are waiting for the final guidelines on bancassurance.
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