The productivity of LIC Agents and that of LIC is one of the highest in the industry. You also have the best bancassurance tieup, but you have not managed to capitalise on that.
True, this is something we have been working on. In fact, last year we did a lot of work on the bancassurance model after our stake purchase in IDBI Bank. This bank has been very supportive in doing the insurance business. Last year they showed the highest growth in the bancassurance business. We must have grown the bancassurance business at around 20-25%, just like the other channels. But the greatest contribution came from IDBI Bank. We continue to work with Axis Bank and other banks, with whom we have tieups. And yes a moment back, when you talked about things happening digitally, this is one channel where the digital thing will happen faster than on the agency side of it. So I believe this year our business through the bancassurance channel will grow faster than any other channel.
So far IDBI Bank has managed to bounce back. Will it need additional support, and are you happy with the sizable investment that LIC made in the bank?
You must have seen in last two quarters they have shown growth after 13 quarters. In fact, they have the best PCR (provisional coverage ratio) in the entire banking industry at more than 93-94 per cent. So, we have done a lot of work on repairing the balance sheet, and then working on other core areas like retail banking, something that they were not very strong in earlier. I think the turnaround has started to happen in the bank and going forward I am very confident that this bank is going to do very well.
The benefit of 80C tax exemption, some would argue, was also a motivating factor for a lot of Indians to buy insurance. Post last Union Budget, you do not get the tax benefit in a universal manner. Could that have an impact on LIC sales?
I do not think so. That is something that we have lived with for many years now, and maybe the time has come. As I said sometime back, the awareness for insurance and the need for insurance has grown tremendously in last three-four months. So people may want to take insurance as a basic necessity for what it provides, rather than for the tax breaks that it give.
The growth in individual policies and number of policies which LIC is selling is one of the best in the industry, but in terms of size, it is not there. Is this a conscious strategy because you need to stick to your ethos of insuring India and remain committed to your goal, while other insurance companies are looking at more profitable goals?
There are two aspects here. One is when people are buying insurance only for protection from risk, they are going to buy term cover kind of plans. I think our ticket size and our size is quite big and nobody can match us anywhere. But when people are buying it for savings, or typically like you said for some tax break, they are only looking at the amount of premium or the amount of tax they want to save, and therefore, the coverage ticket size comes down drastically. But like I said, once people start looking at term covers and probably looking at how much cover they require over time, the protection business would increase slowly and the ticket sizes will also increase exponentially.
Now a big challenge for not just LIC, but also the entire insurance industry is that bulk of their AUM essentially is in government securities and debt, and interest rates are falling. Do you think that would be a huge challenge for LIC in its ability to generate superior returns?
It will be a challenge in the long term, and therefore, this year we have introduced two Ulips products — Nivesh Plus and SIIP — on March 2 and they have started picking up. I think with the markets down throughout, they are coming back on track. We made use of this opportunity in April, May and June to pitch our Ulip products. They have started picking up. Slowly we would like to increase the percentage of sales of Ulips vis-à-vis the traditional products to take care of what exactly you are talking about.
LIC has always been a contrarian buyer in the market; you buy bad news, you sell good news. So I am assuming you were a big buyer in the equity market when stocks fell in March and April.
You are right. I cannot give away the figures but I can only tell you post lockdowns for at least two months, we were only buying. We hardly sold anything. And subsequently, we did some selling as well. But I can share only this much with you today that from April 1 till day before yesterday, we made a profit of Rs 10,000 crore.
In all probability you will go public in next 12 to 18 months. If that happens, what will change for LIC both in terms of organisation and disclosures?
From the point of view business, a few things will change. There will be a lot more disclosures obviously, right from the DHRP stage. But then we have been a very compliant organisation from the regulation point of view, or any other point of view. So that will not change. But we are going to get a whole new set of shareholders, and this is something we are preparing for. We are working on our systems, IT systems and many other things that are happening to ensure that when we welcome most of our policyholders, I suppose, will also be shareholders. So this new group of people is something that we will have to contend with and, therefore, the expectations of shareholders and others will increase and we have to prepare for that.
How exactly is LIC now planning to morph into a complete digital and solution-based platform?
From the early 1960s that we adopted technology, it was all done in house. So we have tried to escalate and out new technology in place. Maybe the time has come for us to reach out to other fintechs and insurance techs kind of companies to find out what better things we can do. Although we are doing well, but then in terms of scale, I think we need to do something better. And that is something we are working on right now.