Mumbai: Faced with stiff competition from private insurers, India’s largest public sector insurance company, the Life Insurance Corp. of India (LIC), is planning to make the most of its reach in rural India.
It has lined up ambitious plans to aggressively tap the rural sector in the current fiscal through microinsurance plans, while its private sector rivals primarily target high net worth individuals in urban India.
In the current financial year alone, LIC plans to sell five million new microinsurance policies to the rural and unorganized sector, although it has manged to sell only 80,000 policies so far. The state-owned insurance firm is looking at villages with a population of less than 5,000, 75% of whom are engaged in agricultural activities. LIC has 2,048 branches and 1.1 million agents across the country.
Out of the total of 38.2 million new policies sold in 2006-07, 23%, or 8.85 million policies, were sold to rural clients. This is, however, independent of the microinsurance category. This year, LIC plans to sell 10 million policies to its rural clients, which would approximately work out to 25% of their premium income.
LIC managing director Thomas Mathew T. is enthusiastic about the microinsurance targets. “Private insurers have a limited reach,” he says. “There is a huge demand for insurance in the rural and unorganized sector. We are ideally placed to provide theseservices to this segment with our network of branches and agents.”
India opened up the insurance sector early this century and since then more than a dozen private players have entered into the sector, picking up a substantial chunk of the incremental business even though LIC continues to have the largest share of the market.
LIC is launching about 10 new products, targeting agricultural labourers, landless labourers and small land owners. These policies offer up to Rs30,000 life cover and Rs75,000 accident cover.
The premium structures have been tailor-made for people without a regular income. For example, a landless labourer signing up for the recently-launched Aam Admi Bima Yojna can pay as little as Rs25 a week to avail a cover of Rs5,000.
In 2006-07, LIC reported premium income of Rs39,541 crore, registering a growth of 118% over 2005-06, compared with an industry average of 110% growth.
LIC is also looking at innovative channels for collection of the premia from such schemes. It has tied up with a number of non-governmental organizations and other grass-roots groups, such as microfinance institutions and self-help groups. The rural customer paid an average annual premium of Rs3,000-4,000.
LIC is also giving final touches to its health insurance and credit card businesses.