Traditionally, the second fortnight of March is the most productive period, as it accounts for around 15-18 per cent of the entire business. The industry reported a contraction in new business premiums for four straight months from March.
But it seems to have got back on track from July as premium collection has turned positive, boosted by increased interest in insurance.
“As of August 31, LIC’s premium income is back to previous year’s level. So, we have covered the gap that was there in April, May when the premium went down by about 32 per cent,” said Kumar.
LIC’s renewal premium is also showing growth. Till September 12, LIC collected Rs 87,327 crore in renewal premiums, against Rs 77,176 crore the previous year, up 13.15 per cent. However, the number of renewals has grown by only 0.4 per cent, which means only high value and ticket size renewals are coming.
On LIC’s proposed initial public offering (IPO), Kumar said, “Dipam (Department of Investment and Public Asset Management) has appointed two transaction analysts. Now they are in the process of engaging an actuarial firm and purchase of software. We have already started valuation of our properties. It is done every three years. But as per the Irdai (Insurance Regulatory and Development Authority of India) regulation, the valuation is done for the commercial property.”
“The embedded value calculation will take some time because the asset share for every policy has to be calculated. There are close to 500 million policies for which the asset share has to be calculated individually. It is very long drawn process,” he added.
Since the pandemic hit, interest and inquires for insurance products have seen an uptick but that has so far not translated into numbers. Kumar believes the numbers will come in the second half of FY21.
“There is increased interest in annuities, life and health products. Even group products are seeing good demand. We were of the view that the group products may get hit but LIC group premium is back to the same level as it was on August 31, 2019. We have got more than Rs 10,000 crore premium from annuities in this financial year,” Kumar added.
LIC had a surplus of Rs 67,000 crore and the investment income is Rs 1.02 trillion as of August 31. That means, LIC has almost Rs 1.7 trillion surplus funds or maturing funds that need to be reinvested. While decrease in interest rates has put pressure on insurers’ solvency ratios, there has been no default for LIC during this period. “We have got very few requests for moratorium and the total amount is not more than Rs 500 crore,” Kumar said.