Thursday, January 9, 2014

LIC's total investments touch Rs 14.8-lakh crore

Source: Business Standard

India's largest insurer to invest Rs 2.25-lakh crore in FY14
The total investments of Life Insurance Corporation of India (LIC) at the end of FY13 stood at Rs 14.86 lakh crore. According to LIC's annual report for 2012-13, the country's largest insurer had Rs 14.84 lakh crore worth of investments in India and Rs 2,408.61 crore worth of investments abroad.

In FY14, LIC plans to invest Rs 2.25 lakh crore in government securities, bonds, infrastructure, debenture and equity, of which 15-20 per cent would be in equity.

The insurer had booked Rs 21,000 crore profit from sale of equities and churning of the  portfolio. According to an earlier presentation by LIC to a Parliament standing committee on finance, total investments at the end of March 31, 2012 was Rs 13.49 lakh crore.

Usha Sangwan, managing director of LIC, had recently said the insurer has planned to invest Rs 40,000 crore in equity this financial year. "We have already invested Rs 33,000 crore. We have also booked profits of Rs 14,000 crore, since there has been a continuous churn in the portfolio," she had said.
With respect to the investment in infrastructure and the social sector, LIC invested Rs 10,995.33 crore in power, Rs 4,121.74 crore in housing, Rs 35.72 crore in water supply and sewerage, and Rs 5,012.13 crore in other infrastructure in FY13.

The insurer plans to have 12 per cent growth in new business premium this financial year. LIC Chairman S K Roy had earlier said that although it had budgeted for 12 per cent in first premium growth, the insurer is hopeful of achieving more growth.

LIC most consumer friendly: IRDA

Source: The Times of India
Life Insurance Corporation of India has outdone its peers in the private sector in most parameters used for measuring consumer friendliness. The corporation had fewer lapses, higher claim settlement and no penalties from the regulator.

The claim settlement ratio of LIC was better than that of private life insurers. Its settlement ratio increased to 97.73% in FY13 from 97.42% in the previous year. And the percentage of rejections was only 1.12% compared to 1.30% earlier.

Private insurers reported a dip in settlement ratio to 88.65% from 89.34% in FY12. "Private insurers had repudiated more number of claims when compared to LIC. The percentage of repudiations (by private insurers) was 7.85%, almost unchanged from pervious years 7.82% in FY12," the Insurance Regulatory and Development Authority said in its annual report for FY13 released on Wednesday.

In terms of persistency of business too, LIC scores better with a lapse ratio of only 5.6% as against private life companies which are all in double digits ranging from 17% to 42%. The only exception is HDFC Life Insurance, which has a lapse ratio of 5.6%. IRDA measures lapse ratio as the number of policies lapsed during the year divided by the average of the policies in force at the beginning and end of the year.

The 13-month persistency (policies which are renewed after a year) is the highest for PNB Metlife at 71.22% on a much smaller business. LIC, Max Life Insurance and IDBI Federal Life Insurance have a 13-month persistency of 70%. For other private companies, the ratio ranges from a low of 36% to 69%.

Private insurers scored slightly better was in terms of commission ratio. Private insurers paid out 5.7% of total premium as commission compared to 7.08% for LIC. However, LIC reach was much bigger and it sold more policies to the lower middle class with an average premium per policy of Rs 11,143. Compared to this, the private life insurers generated an average premium of Rs 24,457 per policy - more than double that of LIC.

While agents of private companies managed to sell only an average of three policies in FY13, the average agent of LIC sold 29 policies. In FY13, the insurance regulatory authority imposed penalties on 12 companies, including two public sector non-life insurers, for various reasons. The penalties ranged from Rs 5 lakh to Rs 1.4 crore. However, LIC did not face any penal action.

In the first quarter of FY14 life, insurers have written business of Rs 19,216 crore as against Rs 19,451 crore, recording a 1.2% shrinkage in business. While private insurers registered a 6.87% decline, the state-owned life insurer recorded a growth of 2.92%. LIC, with Rs 14,295 crore of premium from new policies, saw its new business market share rise from 74.29% to 74.39%.

Private insurance companies deny...

Tuesday, November 19, 2013

Market Share of LIC is increased

Market Share of LIC is increased

According to IRDA figures upto September 2013, LIC's market share
in No. of policies has increased to 86.23% from 81.39% at March 2013 and
in New Premium it is increased to 75.73% from 71.25%.

As at 30th Sep. 2013,
LIC has collected Rs.37,906.36 Crores new premium and
sold 1,72,20,815 individual policies.

All the 23 Pvt. Cos.
together collected Rs.12,150.2 Crores (24.27%) and
sold 27,49,470 policies (13.61%).

Sunday, September 1, 2013

LIC Agents do Right Selling!

From Insurance Worker September 2013
FFF(For our Field Force)
LIC Agents do Right Selling!
A Harvard Business School study, “Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market” tried to show that LIC's Agents (only) are doing mis-selling.
The main accusation is, LIC Agents are not recommending term assurance products. The low and medium income households (blindly) trust LIC and because of that trust, they are misled by LIC's agents to endowment plans. According to the study endowment plans are costly. If one is able to plan insurance and investment/savings separately, then it may be true. But, it is not possible for the “worst educated consumer” or “low and medium income households”, whom the study concern about.
According to a report from Espirito Santo Securities, term insurance policies have the highest lapsation rate in India. “People want returns from their insurance policies and see term insurance as a waste of premium,” said the report titled ‘Life insurance thematic: Let’s not give up on life yet’. So, if LIC Agents are not recommending term plans, they are selling what people want.
If it is such a big crime to recommend endowment plans, all the private insurers should not sell them. Are they prepared for it? In India, nobody can sell insurance without savings component. It is LIC's success to provide proper mixture of insurance and savings in plans for decades, which are still able to compete with investment instruments in returns.
The inability of the private players to break the market domination of LIC even after 14 years (life term in India!), makes them to lament like this, calling themselves it a “study”! Whatever it may, the phrase “commission driven sales behavior”, used to describe about LIC Agents must be strongly condemned!
The study actually accept that it is unable to find much difference with private agents. But, at the same time it tries to create an illusion that LIC's agents (only) are doing mis-selling. The news and other items in media and web are also purposefully trying to magnify the illusion.
According to Irda’s Annual Report 2011-12, the highest number of complaints in life insurance related to mis-selling. RBI noted (in the Financial Stability Report) that, they mainly pertained to the private sector, though LIC leads the business with a 70 per cent share. These statements clearly expose the motive of the “study”!
IRDA now allowed Banks to act as insurance brokers. Until now banks are working as corporate agent for one insurance company each in Life and General. The new guidelines allow them to sell the products of all companies. IRDA argues that banks' relationship with the customer is fiduciary (a legal relationship of trust and confidence between two parties) and hence it is not fair for banks to act as agent for a particular company and giving no choice to their customers.
Actually this move is not to support the customers. The late entrants of insurance field are having no bank left to get a tie up and they were asking repeatedly to allow banks to sell products of more than one company.
But, RBI's financial stability report cautioned about mis-selling of insurance products by banks. It observed banks did not have a clear segregation of duties of marketing personnel from other branch functions, and bank employees were directly receiving incentives from third parties such as insurance companies for selling their products. It said that the direct incentives to the bank staff have created distortions in the sales structure.
If one company's incentives can influence what to sell to the customer, what will happen hereafter? Banks will sell the policies of the company which offers highest incentive, even it can be off the record. It will lead to even bribery instead of curtailing mis-selling.
The Irda chairman raised concerns over the health of insurance companies. "Many companies are making losses even after 10 years (in operation)," he said. On higher foreign direct investment, Vijayan said increasing capital is not equivalent to increasing stability in a company.
The requirement of having a standard proposal form by life insurance companies, with detailed information of the financial needs of the customers, has now been postponed (from August 16, 2013) to April 1, 2014. IRDA said that it has deferred the implementation, taking into account the representations of the life insurance industry.
LIC policyholders need to pay separate service tax for premiums from October 2013. While private insurers add a service tax component to the premium paid by customers, LIC has not been levying the tax on the premium. Now, IRDA mandated that service tax shall not be included in the contractual premium, but collected from policyholder separately. When service tax is charged separately, LIC may be able to pay higher bonuses on the policies, as the surplus in the policyholders' account is declared as bonus.

57th formation day of LIC!