Opinion | Making sense of the business of life insurance
LIC listing will open the door to questions on what happens to a chunk of Indian savings
The Life Insurance Corp. of India (LIC) has been a partner of middle-class India for decades in building an annual saving habit towards a future corpus. Its army of agents provided doorstep service to millions of Indian investors at a time when there were few long-term corpus-building financial products in the country. But the feature of a monopoly, and that too owned by the government, is that it is slow to take note of change and upgrade processes and practices. The post-2010 Indian financial sector is very different from the 1980s and even 1990s with modern financial products and mark-to-market practices on equity, bond and loan valuations to ensure transparency and fairness. As of 31 March 2019, LIC managed almost 80% or ₹27.61 trillion of Indian household money in the life insurance sector, and had an annual premium book of just over ₹3 trillion in 2018-19, that’s about 66% of the total market. As this behemoth, also used by the government of the day to bail out its stock and bond paper, which carries a sovereign guarantee gets ready to list on the stock market, it is important that the business of life insurance is better understood by policyholders, investors and commentators.