Financial year 2011-12 was very challenging for most of the sectors including insurance. DK Mehrotra, Chairman of country's largest life insurer, Life Insurance Corporation of India or LIC, speaks to NDTV Profit's Vijay Iyer about how the market volatility and regulatory issues affected the company in the last fiscal and what kind of steps the company had to take to help its products meet the consumer requirements.
Mehrotra is, however, hoping to meet the set targets this fiscal. He said that the company is planning to clock 15-18 per cent growth on policy and 20-25 per cent on premium in FY13.
Below is the complete interview. Watch the accompanying video here.
As you rightly said, the year has been challenging if we look back. And definitely, the performance of the various companies including LIC witnessed a slowdown. Because the market has been quite volatile, especially the capital market so that's impacted the sale of the unit-linked insurance products (ULIPs) along with the regulatory provisions which were introduced. Secondly, the entire scenario, in an economy was like people were holding back and seeing what's going to happen before they put their money into a product, especially a long term commitment. So the insurance industry has witnessed a slow down including LIC as well.
Nevertheless, we have been trying to see that we meet the master challenges in the market, meet the requirements of the people through our products. But the challenges were many, not one. Because as I said the market was volatile, we had regulatory requirements especially the recruitment also suffered because of the online examinations. Especially in the deep rural areas, it affected the recruitment of agents. So all these factors combined together have definitely been the reason for the slowdown in the industry and I am sure LIC also has been impacted by these reasons.
See, I don't know why ONGC has been singled out for so much of discussion. You know that, we have been investing since 1956 and we know all our investments are backed by proper research, proper data, proper diligence of the company, on the values that the companies are holding. So this also was totally a commissioned decision. And secondly, since it was through a process of auction.
This issue had also been discussed with our regulator. Recently, we also had a very healthy discussion with the regulator but we have a target of almost Rs 45,000 to 50,000 crore in equity, so we have to have good scrips available in the market. We should have a good float in the market, so we have represented to the regulator to allow us for some concession.
Nevertheless, I would like to say that these regulators have been very helpful to us and we have definitely been in touch with them and we are definitely trying to comply with whatever regulatory norms they are going to put to us. At the same time, we want to see that we are getting good scrips in the market. So ultimately it has to be a win-win situation for me and the regulator as well so that we don't breach the norms and at the same time give good returns to my customers.
See, as I have been telling earlier the future insurance market will move around the pension and health products. But recently we look into the little hand side; we go back and see that the regulatory norms were put into regarding pension products. That has impacted the sale of pension products. Secondly, because of the new norms many of the pension products had been pulled out of the market.
Today, I think LIC has the Jeevan Lakshya 6 which is available. We don't have any other deferred annuity products in the market. See, basically what happens, the customer has to understand the distance between annuity and pension. So once we are able to give that education to a person that why pension is required and there has to be some more focus on the sale of pension products. May be from the regulatory side as well; from other insurer as well because unless the focus is there, the product will not pick up.
We came out with some good products. Jeevan Aarogya was one of the very innovative good products which got lot of awards as well. And then we came with Jeevan Ankur which was for the children segment and then we came up with Jeevan Vridhhi. The question is ultimately the main thing will depend on the market because the market needs new, innovative products.
So I need some regulatory help that the products are processed at a faster pace so that I am able to launch the product when the market needs it. Because if I launch a product when the need is not in the market, the products may not succeed in the market.
The finance ministry has said that if the premium is more than 10 per cent then we should not relate it to the premium but to the term. Because we should encourage people to invest for a longer period. And they should get some benefit out of that. Because that helps us in two ways, it gives us a steady flow of income plus it gives me enough sufficient funds to invest into long term projects, for example, in infrastructure projects for the society.
See, basically when they switch over to online, now we know that today we have a large presence in rural India, deep rural as well, but there the people are not that computer or tech savvy that I want them to come and pass the test.
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