Life Insurance Corporation (LIC) plans to invest Rs. 45,000 crore of its total investment kitty of Rs. 2.15 lakh crore in the stock markets this year. LIC has already invested Rs. 5000 crore since April.
DK Mehrotra, acting chairman of India's biggest insurance company says, "Existing regulations stipulate that 50% of the funds have to be deployed in government securities. That apart, we will invest around Rs. 45,000 crore in equities, slightly more than the Rs. 43,000 crore that we had put in last year." Mehrotra says LIC booked a profit of close to Rs. 17,000 crore during 2010-11 by selling stocks. The corporation, which invested around Rs. 1,83,000 crore in 2010-11 in other securities earned income to the tune of Rs. 90,000 crore. "We believe the market, after experiencing some volatility, could be stabilising and despite high inflation and rising interest rates, we could add to our portfolio if there is an opportunity," he observes.
Mehrotra says premium incomes have been picking up in the last two months. LIC currently has just under a 70% share of the life insurance premium market with private sector players together accounting for the rest. LIC will focus on traditional products that provide assured returns to the policy holders and also commission to the agents.
"As of now we are happy to have a product mix of 65:45 in favour of ULIPs," he points out. ULIPs had become popular, accounting for nearly 90% of the industry's new business, before the product was hit by the more stringent norms put in place by Insurance Regulatory and Development Authority (IRDA) in September last year. This mix may change to 60:40. LIC's strength lies in their conventional products and LIC will leverage their existing products.
During 2011-12, LIC plans to adopt a changed marketing strategy and is targeting 4.26 crore policies to garner Rs. 54,000 crore worth of fresh premium. Last year the corporation had sold 3.70 crore policies and had mobilized Rs. 44,000 crore worth of premium and Rs. 42, 000 crore through renewal premiums. "We have already settled 1.83 crore of claims so far and paid a sum of Rs. 55,000 crore to our policyholders. We are revamping all our customer touch points to provide a full range of customer services including financial transactions," he said.
According to a BCG report, the insurance industry is expected to reach $350-400 billion by 2020, with India being among the top three life insurance markets in the world and among the top 15 non-life insurance markets.
The number of life policies in force has increased nearly 12-fold over the past decade and health insurance, nearly 25-fold, with the progress aided by the dramatic shift in the availability of products.
The report estimates the total insurance premium at approximately Rs. 17 lakh crores to Rs. 22 lakh crore in 2020 with life insurance premium being between Rs. 15 lakh crore and Rs. 20 lakh crore.