T S Vijayan has completed a year as chairman of insurance behemoth Life Insurance Corporation of India. In an interview with Business Standard, he speaks about the targets set by LIC, its plans to beat competition and overseas and future plans.
LIC has more than doubled its new business premium for FY07. How has the growth in the total premium income been compared with that in FY06?
The total premium income for 2006-07 was Rs 1,27,220 crore (Rs 1,272.20 billion) as against Rs 90,760 crore (Rs 907.6 billion) in 2005-06, with a growth rate of 40.15 per cent year-on-year.
The total new business premium income in 2006-07 was Rs 39,542 crore (Rs 395.42 billion) compared with Rs 18,085 crore (Rs 180.85 billiion) in 2005-06, achieving a growth rate of 118.65 per cent. March 2007 had been an extremely rewarding month for LIC of India with regard to mobilisation of new business. In fact, LIC grew better than the industry in 2006-07.
What are the targets for 2007-08 in terms of new business and total premium?
In the current financial year, LIC plans to unleash its full potential in mobilising the financial resources from the market. The organisation has set itself a target of 428 lakh new policies, bringing in a new premium income of Rs 52,500 crore (Rs 525 billion). As regards the total premium income, we have set a target of Rs 155,000 crore (Rs 1,550 billion) for 2007-08. These are ambitious targets by any standards and we intend to achieve them.
With several new players entering the life insurance industry, how do you plan to retain the market share?
We in LIC have a different perception on the market share. As it is, when monopoly is lost due to regulation changes, the market share has to gradually come down from 100 per cent. We would like to ensure a healthy growth commensurate with our ability to muster solvency margins and other operational issues. We want to remain the most significant and respected life insurer, which we have been able to demonstrate even after seven years of liberalisation.
Do you see a consolidation in the life insurance industry?
In the short term, we do not see much consolidation happening in the life insurance industry. But over the long term, there could be scope for mergers and amalgamations. It is possible that acquisitions may also happen over the longer term.
It is to be kept in mind that the private players are backed by strong technology and capital. We at LIC do not underestimate the performing capacity of the private players in the market.
LIC has been talking about foraying into New Zealand and Australia for quite some time. Is it likely to happen this year? What are the regulatory hurdles that you face?
LIC has been trying to expand its operations overseas as well so that its footprints are well spread out around the globe wherever there are non-resident Indians as well as people of Indian origin. Both New Zealand and Australia have substantial population of the Indian origin and we would definitely like to operate in these two countries. As and when we take a decision to enter these markets, we will let you know about it.
You have set up separate subsidiaries to launch credit cards business and get into micro-insurance. When do you plan to launch these businesses?
We started micro-insurance business in 2006-07. It will be one of the main contributors to the overall growth of the organisation. During the previous financial year, we procured 80,637 policies for a premium income of Rs 1.38 crore (Rs 13.8 million).
The start has been very good and the results are encouraging. During the current financial year, we plan to go in a big way and achieve tremendous growth in micro-insurance.
This year, we are creating a strong marketing network and technology platform to take full advantage of insuring the lives of people with marginal incomes both in rural and urban areas. Our plan for micro-insurance, Jeevan Madhur, has been well received in the market and has been praised for its innovative features. With regard to the credit cards venture, LIC will be coming out with its plans in the second quarter of the current financial year.
Will you be tying up with the four public sector general insurance companies for micro-insurance?
As of now, we do not have any plans to tie up with the general insurance companies in this arena.
How different will be the health insurance product, which you are set to launch soon, from mediclaim and other health insurance products of private insurers?
We will be coming out with an innovative health insurance product during the later part of the current year.
We have created a separate health insurance department in our corporate set-up and efforts are on to bring innovative products.
Have you applied to the RBI for a banking foray?
No.
There are media reports saying that the government may not allow you to buy SUUTI's stake in UTI Bank. How do you then propose to realise the long-cherished dream of owning a bank?
As of now, we do not have any intention of owning a bank. As it is, banking is a highly specialised area of business and intensely competitive. We have a strategic partnership with Corporation Bank, where our stake is 27 per cent. We have a substantial shareholding in a number of other banks as well in the nature of investments.
Have you been able to achieve the 150 per cent solvency margin? How are you making the reserves meet the solvency requirements?
LIC is a strong organisation with strong financial fundamentals. We have created sufficient reserves to meet the solvency requirements of the organisation.
Rest assured, LIC has got good amount of surplus and revenues to take care of all its obligations to the policyholders.
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