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LIC likely to offer insurance covers with new options

Freny Patel

Customers have responded positively to the sales pitch of new life insurance players, with a clear paradigm shift in the demand for protection cover over money-back policies. The emphasis on protection in the advertising campaigns has resulted in more than 60 per cent of policies sold by the new players to be endowment covers with just 20 per cent accounted for by money-back covers.

This is a major shift from the past trend where 48 per cent of policies sold by the incumbent -- Life Insurance Corporation of India -- have been money-back policies. These had in the past gained popularity as people associated such plans with recurring fixed deposits that had an added advantage of a life cover.

Riders have been a hit among policyholders as they offer flexibility in the risk products, said Shikha Sharma, chief executive officer & managing director, ICICI Prudential Life Insurance.

More than 60 per cent of policyholders opted for riders, with a distinct preference for health riders, she added.

"With the addition of the three riders, our insurance solutions offers 63 customised choices to customers," said Birla Sun Life Insurance Company's director S K Mitra.

Riders have been attractively priced by the players. "By paying just 30 per cent extra premium from the base, a policyholder gets triple the life cover that would include critical illness, term insurance and major surgery," said Saugata Gupta, ICICI Prudential Life's chief marketing officer.

LIC has taken the cue from this preference in demand and plans to redesign its policies with similar riders. LIC's managing director N C Sharma said, "We are looking at more flexibility in our products. The feed-back from our development officers identify that customers presently are forced to fit into our mould, as we do not customise products for them." However, he pointed out that with a big organisation like LIC selling so many policies where the decision making process is centralised, it will be difficult to gauge the impact such customisation would have in smaller markets.

Contrary to expectation that it will be a while before new players gain public confidence, ICICI Prudential Life sold 6,400 policies in the first three months of its launch in December last year.

HDFC-Standard Life official stated that the average term of policies stands at 21 years, giving clear indication of the long-term faith of policyholders.

ICICI Prudential Life earned a premium income of Rs 60 million, with an average premium per policy at Rs 7,500 for the three-month period. The average premium size compares favourably with LIC's average of Rs 2,138. Similarly, even as the total sum assured in the case of ICICI Prudential amounted to Rs 1 billion, the average size of policies stood at Rs 150,000. This is higher than the average sum assured of LIC policies at Rs 63,332 overall and Rs 80,000 in the case of policies sold in Bombay.

ICICI Prudential Life has budgeted a sale of 100,000 policies during the current fiscal and estimates a premium income of Rs 550 million. HDFC-Standard Life is confident of meeting the 25,000-policy target by December 2001. "We are right now in the phase of rapid roll-out as we enter a new city every three weeks," said a senior company official. HDFC-Standard Life has aimed at setting up base in 18 cities by the yearend.

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