LIC is focusing on New products and channels
The introduction of new products and effective agent training are driving factors in LIC's strategy to sell more non-par. Young millennials, agents who are already selling these products, and club members—experienced agents who can eventually sell all the products—are the target audiences for selling non-par. The emphasis on non-par is broad and covers ULIPS, protection savings, and annuities. For LIC, cross-selling and up-selling in both individual and group businesses represent significant opportunities.
The ANANDA app for atmanirbhar agents is being accepted by more and more agents. This app enables policy issuance, canvassing, KYC, and digital agent onboarding. Between FY22 and H1FY23, this app sold about 400k more insurance policies than it did in FY22. Agents using ANANDA now exceed 100,000.
As it gains popularity in agent groups like study circles, the advantages of this app will spread further among agents. Additionally, the rural 5G rollout will help with this. With the help of this app, the policy can be issued in less than 11 minutes.
In 3-5 years, LIC can aim to achieve a VNB margin of 25-30%. The goal of the company's strategy is not to maximize margin or promote any one product in particular. Segments by par or group will continue to be the company's strength. Margin expansion is, however, definitely feasible through mix modification and efficiency. Absolute VNB can significantly rise more than the margin.
The claim settlement process is intentionally designed to be more effective and independent of any middlemen. Survival benefits make up roughly 80–85% of claim settlements. Up to a certain amount, LIC does not require any paperwork and this can be paid without any contact. The business is strategically aiming for greater efficiency by centralizing the claim settlement process, increasing customer registrations (LIC already has 160–170 million mobile numbers and 30 million email addresses), and gradually doing away with the use of chequebooks (this can save a tonne of time and money). The difficulty, though, is that NEFT information is frequently unavailable.
The bancassurance market is incredibly lucrative. The company is focusing on bancassurance by establishing new partnerships and enhancing the effectiveness of its current partnerships. In order to increase LIC's share in each counter, top management is in contact with banks. They are also utilising other connections that LIC has with all banks.
Increased insurance partners for banks may also assist LIC in forging new alliances.
LIC has made a number of wise provisionings. These include Rs. 74 billion Covid provisions and a Rs. 115 billion upfront provision for wage revisions. The majority of the IDBI asset value is held in par funds. As a result, 10% of the proceeds from stake sales and surplus creation may be allocated to the embedded value.
The proposed Bima Sugam's key components have been clarified by LIC. Bima Sugam is a novel concept that can benefit the sector. However, there are some crucial elements of Bima Sugam that require further clarification, such as:
(1) How can agents still be relevant after BIMA Sugam? The platform shouldn't discourage businesses from supporting agents with investments, including training. Fundamentally, agents provide the much-needed push that eventually includes healthy individuals in the insurance pool, ensuring sustained risk coverage for everyone.
(2) How to prevent salespeople in Bima Sugam from pushing products on customers in exchange for commission arbitrage (direct commission plus other forms of payment)
(3) Bima Sugam should be planned so that no specific company will be negatively impacted. For instance, LIC may receive fewer incremental benefits from Bima Sugam compared to private peers because it already employs a larger agency force than all others.
In addition, given its market share, LIC will wind up shelling out the most money if Bima Sugam is an industry organisation.
DisclaimerInvestment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.
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