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`We're quite strong, but we'll have to watch out' — Mr A. Ramamurthy, current-in-charge and Managing Director, LIC

M. Ramesh

M. Ramesh

WITH a 140 per cent increase in its first premium income last year, the Life Insurance Corporation of India proved that it is not a pushover. The performance flew in the face of those who doubted that with its monopoly gone, LIC would whittle down. But then, that was only in the Year One of competition. Would the public sector monolith be able to sustain its performance? What are its plans for the current year?

The LIC's current-in-charge and Managing Director, Mr A. Ramamurthy, answered these questions in an exclusive interview to Business Line.

Excerpts from the interview:

What are your comments on the operating environment today?

As on today, we're still quite strong. But they (the new players) are also becoming much stronger. They'd like to be very aggressive and we'd also not like to give up any opportunity.

In response to the current situation, we have four strategies: New products, riders, aggressive publicity and training of our agents and employees.

Do you propose to augment your agents' force?

Yes. Today, we've reached a figure of 8,00,000 (agents) now. There should be a net increase of 1,00,000 before the end of this financial year.

How was the performance of LIC in the first quarter of the current year?

The first quarter performance has been very good. Our individual business is picking up, though there is a slight set back in Bima Nivesh - which we did extremely well last year. But we've recently introduced a `Triple cover Bima Nivesh', which provides three times the sum assured as the risk cover, instead of small sum assured as risk cover. So we hope in a month or two it would pick up.

So, if you exclude Bima Nivesh and Annuity Plans, where we had unusual flow of business last year, then the performance is very good. In terms of number of individual policies, we are far ahead of where we were in the first quarter of last year. But the setback has come in the case of single premium policies, which are investment-related products, which we are making attractive by putting extra risk cover.

We are introducing two products shortly. On July 22, we will introduce Jeevan Rekha, an anticipated whole life policy, which will give the policyholder benefits even when he is alive. It can be called Money Back Whole Life policy; we are calling it Jeevan Rekha. This will enable the policyholder to enjoy the benefits of the investments, plus the family will have the benefit of the whole life policy.

The other policy we are introducing on July 30, is a pure term policy, where the benefit is payable only in the case of death. For a person aged 25, a Rs 10 lakh policy will be only about Rs 200 per month, lesser if the policyholder is paying income tax. Now, there are about 30 million households in the country who spend (say) Rs 250 towards cable TV, Rs 500 for land phone line, etc. It should not be difficult for middle class people to take protection policies and pay about Rs 200-300 per month.

Therefore, we are getting into all lines of business. Earlier, we used to do mainly savings-related policies - endowment, money back, etc. But now, pure term assurance is pure risk protection; anticipated whole life is also protection.

The pure term policy then, is not a single premium policy?

We are giving it a lot of flexibility. It can be a single premium also.

Can you give us any figures about your first quarter performance, in terms of first premium income or sum assured?

No. The first quarter results are not yet ready - the trial balance will be ready by July end. But there has been a very good growth. You have to remember that usually, the first quarter business is rather low. Besides, this year in April and May, there were some apprehensions about the service tax, (which impacted upon the sales).

What is the status of your proposed overseas ventures?

For the Sri Lankan venture, we signed MoU a couple of months back. We'll be signing the agreement on July 24 or 25. The partner is the Partlet group.

There again, the venture requires about 2.5 crore of Ceylonese rupees, which is already lying there, from our old operations in Sri Lanka. So, there is no export of operation at all. The erstwhile Sri Lankan operations would be converted into a joint venture now.

As regards the US, only the last stage of approval is required. But for one year, we are going to operate as a corporate agent, as per the requirement of the local law. In the US, each State has got its own insurance laws, unlike India. We've to get a licence from every State. We're initially going to restrict ourselves to two States, initially, New Jersey (including New York) and California. In fact, selection of personnel is also in an advanced stage, for both Sri Lanka and California.

After one year, we've to form a joint venture. The US Government will see the credibility of the company for one year; only then will they allow partnerships. As a corporate agent, we gain some experience. We propose to focus on the NRI population, and request our partner Nationwide Life Insurance, to devise products to suit NRIs. We'll be the corporate agent of Nationwide. Ultimately, the partnership will be between LIC and Nationwide.

As regards the UK venture (where the partner is Teachers' Provident Fund), there is a slight hitch - some minor administrative things, regarding the pricing of services, need to be thrashed out. The business will be economical only if the volume reaches a certain level. I must get some reliable figures as to when this volume will be reached. If the volume is small, it may not be economical for LIC.

How much capital would these two ventures need?

In the US, initially, we're going only as a corporate agent. For that we'll need about $300,000. After forming the joint venture, we've to work out how much capital will be needed. We'll also be earning some money from operating as corporate agents.

For the UK venture we will take some time to decide as it may take a substantial amount. Unless the volumes go up steeply, it will not be good.

Whether we can increase the volumes to such an extent, is to be seen.

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