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How LIC's business slipped ahead of its mega IPO

LIC’s market share in terms of premium income has fallen sharply despite no new insurance player entering the life insurance industry since June 2020 (Photo: Mint)Premium
LIC’s market share in terms of premium income has fallen sharply despite no new insurance player entering the life insurance industry since June 2020 (Photo: Mint)

LIC lost nearly 10 percentage points in market share to nimbler rivals since Oct 2020 and about 8% between Dec 2020 and December 2021, according to Irdai data. Between Dec 2020 and now, LIC’s market share in terms of premium income dropped from 68.05% to 61.4%

MUMBAI : Life Insurance Corp. of India (LIC), which is likely to go public soon, has steadily ceded market share to private insurers, especially those owned by banks, after the pandemic hit India.

The insurance behemoth lost nearly 10 percentage points in market share to nimbler rivals since October 2020 and about 8% between December 2020 and December 2021, according to Insurance Regulatory Authority of India (Irdai) data. Between December 2020 and now, LIC’s market share in terms of premium income dropped from 68.05% to 61.4%. Moreover, market share fell 13 percentage points since June 2020, when it controlled nearly three-fourths of the market.

The latest data indicates the state-run insurer has failed to attract enough new retail customers, especially after announcing LIC’s IPO in February 2021. However, a major part of the decline may have been triggered by the pandemic and how LIC generates new business.

Insurers had to quickly redraw their strategy after the pandemic struck India in early 2020, including digitizing their processes, retraining their agents and increasing their reliance on the banking channel to overcome problems related to approaching customers physically because of fear of contracting infections. Unlike private insurers, which swiftly adapted to the new circumstances, LIC, which overwhelmingly depends on its million-strong agents to bring in new customers and renew premiums, found it challenging to cope with the change, experts said.

A spokesperson for LIC did not immediately respond to an email seeking comment.

According to Irdai’s data, private life insurers, especially those that are controlled by banks and sell policies mainly through the bancassurance channel, grabbed market share at the expense of the state-run giant. Between June 2020 and December 2021, bank-owned private life insurer SBI Life Insurance saw its market share jump from 6.2% to 9.16%, HDFC Standard Life’s share jumped from 5.35% to 8.38%, ICICI Prudential Life’s market share rose from 3.04% to 5%, Kotak Mahindra Life’s market share increased from 1.15% to 1.8% and PNB Met Life’s market share grew from 0.48% to 0.75%.

LIC also saw a steep fall in premium collections through its primary route—the agency channel. This is because LIC depends on its 1.2 million-odd agents for policy sales and premium collection.

With the bank channel increasingly becoming important for savings product distribution and digital channels becoming important for retail protection, experts said LIC might face turbulent times in terms of growth due to its heavy dependence on the agency-led distribution channel, lack of bancassurance and failure to transform itself adequately to adapt to the rapid digitalization of consumer-centric processes.

The 24 life insurers in the country collected new business premium of 2.05 trillion during the April-December period. But LIC’s market share in terms of premium income has fallen sharply despite no new insurance player entering the life insurance industry since June 2020.

Unlike LIC, private insurers, which have been able to lower their dependence on physical agents, strengthen their bancassurance channel, adequately digitalize their processes and change the ways to serve customers as per their needs or the evolving market, have displayed a clear growth in performance over the past year and also since June 2020, according to the Irdai data.

A closer look at the Irdai data shows that LIC’s loss in premium-income market share has been mainly caused due to the state-run insurer’s failure to acquire and retain customers under individual single premium policies, group-single policies and group non-single premium policies.

Over the past year, LIC’s new business under individual single premium policies (targeted at retail customers) tumbled by a whopping 27.5% to 16,671.3 crore and under group non-single premium policies, it fell by a massive 62% to 1,909 crore. On the other hand, in these two key segments, private insurers grew their new business by 32.4% and 30%, respectively, over the past year. In the group single premium segment, LIC’s new business grew by 3.9% to 87,331 crore, while private insurers grew it by 30% to 27,072 crore over the past year.

The government is counting heavily on the non-tax revenue it can generate from the sale of its stake through LIC’s mega IPO, which is expected to value the insurer at more than 15 trillion, according to some news reports.

ABOUT THE AUTHOR

Anirudh Laskar

Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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