LIC neutral on composite licenses, prioritizing strength in life insurance: R Doraiswamy

R Doraiswamy, CEO & MD, LIC, indicates a neutral stance on composite licenses, reaffirming the company's commitment to its core strength in life insurance. The insurer plans to maintain its pan-India presence and focus on life insurance and pension services. They will cautiously evaluate statutory changes before considering diversification, aiming to consolidate their market leadership position.

LIC profit is up by 5%, VNB margin is up by 150 basis point to 15.4%. So, what really worked this quarter and are you targeting more than 20% VNB margin as compared to other listed companies?
R Doraiswamy: We have declared the quarterly results for the first quarter of this current financial year. We have been consistently maintaining our directional change towards an increased proportion of non-par business as well as policies that meet the needs of the customers. So, we have been managing a mix of both and the directional change that we brought by introducing newer plans which are meeting the demands of the market as well as increasing the ticket size. These are the two major areas that we have taken.

Thanks to that, our AP has grown both in non-par individual as well as in group premium, so that is the first step that we have been taking. When it comes to VNB margin, we have been clearly communicating that we are focusing towards a regular but gradual buildup of our VNB margins so that we are not behind anybody and we are looking at building up in a continuous and consistent manner. Last year, we reached around 17.8%. As the year progresses, there will be progress in our VNB margin this year also.

So, you are confident about more than 20% VNB margin this year?
R Doraiswamy: I do not want to exactly pinpoint on a number, but one thing we can assure is that VNB margin will keep improving. We will be coming up with products which take care of the customer's needs as well as having a good VNB margin so that there will be improvement over the last year.

The non-PAR share in APE is now 30%, with a jump of 32% in individual APE. What is LIC's target for non-PAR? Can we see that your focus will be on non-PAR only going ahead because the growth we are seeing is more than 30%?
R Doraiswamy: When we became public, when the IPO came, we were an organisation which was very heavy on PAR products. Slowly the market's focus has also been changing. The people's preference is also turning towards guaranteed products and there is a good flare for non-PAR products. We also took a directional change in 2022 itself that we will be slowly improving the non-PAR component so that we are able to balance both, we will have PAR as well as non-PAR.

Towards that, in the last three years, we have been bringing up a lot of new products which are on the non-PAR side. Today, we have a very big bouquet of 51 products, out of which a substantial number are from non-PAR and the non-PAR is also getting the attraction of the customers. So, as you have said, the non-PAR AP has grown at a rate higher than the par.

We have as of now reached 30% share of non-PAR APE; there may be some more increase to the non-PAR share in the near future but we will now also have par products added to the portfolio, by which we will have something around 40-60 or 45-55 kind of a proportion, that we will be able to reach, that is what we are looking at.

45% non-PAR, 55%-PAR?
R Doraiswamy: We are a very strong company in PAR and the customers have been reposing trust on us on the PAR products for a quite long time….

But before listing I guess you were in single digit in non-PAR?
R Doraiswamy: Yes, 7%. It has now…. We have been consistently improving on this…

So, it is a long way from 7% to 30% and now you are targeting 45 also.
R Doraiswamy: No, it can. See, the young population today are very comfortable with guaranteed products. There is a section of the population which is comfortable with LIC’s traditional PAR products as well. So, we have to have a balance of both. We have to meet the needs of the customers. So, whatever is the flare, whatever customers feel better, that is what we have to offer. We are here to take care of the interest of the customers as our prime focus. So, we will keep a balance. There can be some more increase in non-PAR share, that is what we are looking at.

So, one question that everybody wants to know from LIC, the policy holder, investor is about your plan of buying a stake in a standalone health insurance company. So, the previous timeline was 31st of March. Can we say that under your leadership, the timeline has increased?
R Doraiswamy: I do not say I have changed any plan as of now. See, the situation keeps changing. We originally were contemplating taking a strategic stake in a standalone health insurance. With the current regulatory practices in place, we started looking at various options available before us. We did some due diligence also. But as we went forward, we found that we had to do something more than what was done by then.

The board also felt that we need to increase our options and look at them on a more closer basis, one. Two, there has been change in the environment as well. Health insurance companies are starting to face some kind of a difficulty in the cost escalation and in those areas. So, we had to have a relook at it. We are still examining our options. We are expanding our options of looking at the companies where we can have a stake. In the meantime, there is talk of the statute changing and the regulatory changes that are expected from the regulator as well. So, we are also awaiting the changes that are going to happen. Based on the changes that are going to come up, we will be taking further steps in this direction. It is not completely ruled out.

By regulatory changes you mean insurance act amendment which will have a provision of composite license?
R Doraiswamy: Yes, the insurance act amendment has been talked about for some time now and some parts of it were discussed. There were public discussions on that as well. One of the features that was mentioned was a composite licence. There was also talk about 100% FDI and other areas where there are changes to be brought. Last year, after October, the master circular on policy holder regulations, the master circular brought in some changes. We had to respond to that. We had to modify all our plans, start new plans as well and we had to tweak the conditions of the policy with the surrender value having been introduced in the first year.

So, certain things that have become urgent, and that is why we are considering these options on a long-term basis and not on an immediate basis.

You just spoke about composite license. LIC has a reach in every village, every part of the country. You have around 15 lakh agents. When we talk about insurance, people understand LIC only. So, will you be interested in a composite license and if you go for it, will health be your preference or the other line of businesses also?
R Doraiswamy: No, we are currently neutral to this idea. Our core strength is in life insurance. We are primarily a life insurer pan-India, completely covering the geographical area of the country and that will continue to be our focus. Most likely we will be taking very calculated steps as and when the statute changes. We are not planning to jump into either becoming a composite insurer or starting what you call distributing any other lines of business to start with. We will be evaluating how the situation emerges and based on that, we will take a call on these areas.

We will remain focused as a life insurer. We are a major life insurer. We are a major pension provider. This segment will be our focus. That is why we would like to consolidate and improve our position. We are a market leader and we would like to remain that by a good margin.