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The Rediff Interview/ S B Mathur, chairman, LIC

LIC plans to woo the young executive

The is the first part of an interview with Business Standard:

You are losing your incremental market share to the competition. How will you counter this?

We are planning to focus on marketing. We intend to increase the strength of the direct marketing network, which is very important for a country as large as India. We also want to ensure that inputs are qualitative. When adding numbers to our marketing force, we intend to look at more qualified people such as retired bank employees, who are knowledgeable about financial markets.

We are also talking to brokers and sub-brokers in small towns. They may not have many contacts but they have the infrastructure and knowledge about their clients.

For our existing agents, we are imparting advanced training on the latest selling techniques to help them to operate in a competitive environment. Besides, we have tie ups with banks and institutions, and these have 7,000 outlets across the country.

We will also continue with our aggressive and product-focused publicity campaigns. Earlier, our campaigns were created for insurance awareness.

Now the focus is on products. We have also moved from conventional advertisements where we had older people. Today, we are trying to appeal to the younger and more upmarket segments.

Are you planning on launching new products?

We are assessing the mood of the market and will accordingly come out with new products. Jeevan Anand is a unique product that caters to those who buy our products at a young age. We often have young people who buy a cover for a term of 15 to 20 years; when the risk cover expires, they look for a fresh cover.

At this point, the cost of the cover would be higher because of the increased age. Jeevan Anand, a basic risk cover, continues for life, incorporating two sums assured. One gets paid on the expiry of the term, but if the individual survives, he continues to be covered for life.

Then, there is Jeevan Rekha, a whole life cover where we have made a provision of paying 10 per cent of the sum assured every five years if a person lives. This offers liquidity. We have 58 active products today, and our product focus is an on-going process.

Internally, are you feeling threatened?

Threatened is not the right word. We are quite aware that we will face serious challenges. Even today, Tata AIG came out with a statement that it is planning a 100,000 agency force and 10 per cent of this will be in Mumbai.

This means we need to be more active, especially in cities where people are more knowledgeable about insurance products. But there has been an awakening in our existing agency force. Many are willing to spend money and time to learn new skills and marketing techniques.

Would you like to continue with your assured return schemes, particularly when interest rates are going down?

We have set up a machinery that gives us an ongoing comparison of the returns on our schemes. Whenever we find products going out of tune, we can quickly scale down our assured returns.

Earlier, this used to happen once in two-three years. Now, the need for revision is more frequent. For instance, we have revised the returns on Bima Nivesh (a single premium product) four times in the last 16 months.

In the old Jeevan Shree (an endowment cover), we realised it did not offer the kind of returns we could afford in the long run. So, even as we mopped up 40 per cent of the first premium income from this product, we decided to revise it and bring down the returns.

We are trying to get one or two products pre-approved by the LIC board and the Insurance Regulatory and Development Authority (IRDA), so that we can introduce them conveniently.

Do you see any serious asset-liability mismatch in the LIC portfolio?

Ultimately, our bonus policy will depend totally on the kind of returns we get from the market. Whatever our past liabilities, these have been quickly taken care of. Some adjustments will have to be made, but the problem is that a insurance company's business depends largely on the internal relationships between various businesses.

We are going for low-cost businesses. Over time, the percentage of high yielding business will come down in relation to the total business. Some correction will come about.

Has your investment strategy changed?

We have a large portfolio of existing investments, both debt and equity. Earlier the feeling was that we are long-term holders of these papers and we should not be very active buyers and sellers. But now we feel that a certain percentage of investments will have to be traded in the market.

We should increase trading not just in equity but also government paper and corporate bonds. On the equity front, we are doing it on a selective basis. Gradually, as we gain confidence and we see that the market has the appetite for it, we will increase trade in equity.

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