'LIC Ready To Meet Competition Head-On': CEO R Doraiswamy On 100% FDI Boost For Insurance Sector

With the Union Cabinet's approval of the Insurance Amendment Bill which has increased the cap of foreign direct investment into the sector to 100%, several large insurers of India have welcomed the move, despite the expected competition in the industry. India's Life Insurance Corporation of India (LIC) also eyes new players in the sector, but still remains confident of maintaining its leadership as the largest state-run insurer in the country.

In an exclusive interaction with NDTV Profit on Wednesday, Dec. 17, R. Doraiswamy, CEO and MD of LIC said that the organisation is ready to meet the increased competition head-on after the 100% FDI approval in the insurance sector. The top official also believes that many players abroad were waiting for this opportunity to enter the Indian market.

According to R. Doraiswamy, the new Insurance Amendment Bill is a fantastic move by the government which was expected from quite some time. "The bill will amend provisions of the Insurance Act, LIC Act and the IRDAI Act. It is expected to contribute to India moving towards 'insurance-for-all by 2047 when we will celebrate 100 years of independence."

According to the LIC CEO, the bill will lead to better tech adoption and improved transparency among insurance companies in India. The bill strengthens IRDAI's oversight over insurers and intermediaries. It also opens insurance to more foreign capital to life, general and health. It seeks to focus on capital infusion and sector stability. The bill also brings in higher penalties fir violations by insurers and related intermediaries.

The higher competition and more penetration is expected to help the insurance sector, according to R. Doraiswamy. "The insurance sector will open up with the bill and is expected to improve technology and product quality," he said. The FDI cap removal is seen as a major growth catalyst and IRDAI will oversee commission caps along with profit clawback.

Commenting on commissions, LIC CEO highlighted that previously, India has had experience of regulations on insurance commissions. "It was part of regulations till a few years back. IRDAI then removed the cap on insurance commissions and brought under the management's radar."

According to R. Doraiswamy, now a lot of frontloading of commissions has happened in insurance companies at diff levels. LIC has always stuck to the basic levels of commission even before regulations came to India. We've always been compliant and closely monitoring the expenses incurred from premiums received both in the first year and in renewals," he said.

LIC expects the regulator to also come back with some kind of cap on commissions. Doraiswamy also stated that as a customer-centric product in India, insurance has always been thought of as a diversification of portfolio and investment. "There was a time when people thought of insurance as primary savings. The they moved on to other forms of savings keeping insurance as part of their diversified portfolio," he explained.

LIC's focus will be to increase term but it will also look at the potential of ULIPs. "So, we are combining term insurance with ULIPs so that customers get the best of both worlds. Very high term insurance protection is a need for the current generation, along with their savings getting good returns."

With this change, LIC expects that term insurance as part of its portfolio will increase in the near-to-medium term, according to R. Doraiswamy.

R. Doraiswamy stated that some organistaions abroad were waiting to get the 100% FDI so that they operate in the country exclusively without the support of an Indian partner. Those organisations may use the opportunity to enter India and set up their offices to try and capture some part of the market," he said.

"To that extent, LIC is expecting some competition to intensify," admits the CEO. However, he also believes that the 100% FDI boost will also lead to the ease of doing business, better customer service and better customer perception. "The claim settlement ratio is also expected to improve with 100% FDI as a trigger," he told NDTV Profit.

According to Doraiswamy, LIC has always faced competition. "Competition is not new to us. We are in 70th year of our existence and till now, we have been able to maintain above 60% market share. We're confident that we will maintain our leadership even after the 100% FDI boost that will raise competition," he said.

"We'll bring in some changes and work hard on our path to transformation to meet the competition head-on," he concluded. Shares of LIC last traded 0.78% lower to Rs 847.20 apiece on the NSE. LIC commands a market cap of Rs 5,35,980.31 crore.