Financial Daily from THE HINDU group of publications
Saturday, Aug 17, 2002
Money & Banking - Life Insurance
`I want to maintain LIC's market share'
Mr S.B. Mathur
MUMBAI, Aug 16
UPPERMOST in the list of priorities of Mr Sunil Behari Mathur, the new Chairman of Life Insurance Corporation, is to maintain LIC's near-dominant position in the country's life insurance market.
"I want to ensure that LIC retains its market share (which, incidentally, is almost 99 per cent),'' Mr Mathur told Business Line, after assuming charge today. He has also set his sights on the non-resident Indians for new business.
"We will plan innovative schemes suitable for NRIs in different countries. After 9/11, several US-based NRIs feel the importance of having some savings back in India. We have recently started a business venture in Sri Lanka,'' he said.
LIC currently controls 98.5 per cent of the domestic life insurance market and has a total income of about Rs 72,000 crore. Last year it sold more than 2.3 crore life policies assuring a total sum of about Rs 1.92 lakh crore and collecting a first premium of more than Rs 14,800 crore. Compared to that, the next best player in the market did a business of about Rs 1,000 crore.
The first quarter sales numbers suggest that Mr Mathur may need all the good wishes he can collect. In the first three months, LIC has recorded a negative growth of 69 per cent compared to the previous year's 132 per cent during the same period.
Mr Mathur said, "The drop in sales was mainly due to the uncertainty over the service tax on insurance polices which has now been cleared, with the Finance Minister scrapping the proposal. The indications are that there is a pick-up in sales in the first fortnight of August.''
The new entrants in the life market do not bother Mr Mathur. "The insurance market is huge. In a vast country like India, there is room for every one. But we need to be vigilant,'' he said.
Last year, the first year of competition, was a watershed year for LIC, which saw its business almost triple in size. It also saw the insurer remoulding several of its best-selling policies such as Bima Nivesh and Jeevan Shree. Falling yields on investment forced it to repeatedly cut returns on popular policies last year."We have also restructured several schemes and withdrawn a few which were not viable in the emerging interest rate scenario. This also would have affected the fall in premium income,'' Mr Mathur said. LIC's strategy would be to ensure that investors in LIC policies get the "best return'', particularly in a falling interest rate environment, he said.
He proposes to give a new thrust to tap the overseas market. LIC's joint venture in Nepal with the Vishal Group (Nepal) went in for an IPO early this month, which was oversubscribed 15 times.
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