LIC seeks alignment with global standards, EoM glide path in feedback to Irdai’s distribution proposals

Mumbai: Life Insurance Corp. of India (LIC) has asked the insurance regulator to align proposed limits on distribution costs and overall expenses with global practice and to give insurers more time to comply.

The country’s largest insurer made the request in its response to a 23 September consultation paper from the Insurance Regulatory and Development Authority of India (Irdai). The paper proposes caps on the expenses insurers can incur, including commissions to agents.

“Our suggestions are broadly based on what is the industry standard outside the country. We are requesting that it be in alignment with the international numbers,” managing director and chief executive R. Doraiswamy said on an earnings call late on Thursday.

LIC wants Irdai to account for current conditions, including the need to spend more on insurance awareness and technology. It has also sought a ‘kind of a glide path which is better than what has been given’, Doraiswamy said. The feedback, which also draws on talks with LIC’s agent network, covers premium-paying terms, lines of business and commission rates for specific products.

Suggestions also include feedback on various premium paying terms, different lines of business and the proposed commission rates for specific products.

“There are some product lines and some premium paying terms in which we are comfortably within the proposed caps. There are some premium paying terms and some product lines where we are getting impacted, which we have brought in our suggestions,” Doraiswamy said.

IDBI stake sale

On the proposed stake sale in IDBI Bank impacting LIC’s bancassurance business, Doraiswamy said that LIC is not dependent on any one bank and that an open architecture will allow the bank to continue to work with LIC as well as other insurance companies.

“We don’t expect too much of an impact in terms of the volume that they are currently doing,” he said, adding that LIC continues to strengthen its bank tie-ups.

This includes weeding out banks that have not been performing well as well as adding new banks such as RBL Bank and Yes Bank over the last two quarters. “Q3 will be a deciding kind of quarter wherein we (expect to) see a lot of traction emerging from these new partners,” he said.

The government and LIC have jointly proposed selling a 60.72% stake in IDBI Bank to Fairfax Financial Holdings for around ₹52,878 crore. The government will sell a 30.48% stake, whereas LIC will sell a 30.24% stake under the proposed deal termed a ‘strategic restructuring’ by the government.

The government will sell a 30.48% stake, whereas LIC will sell a 30.24% stake under the proposed deal, which also moots the merger of both the life and general insurance arms of GoDigit Insurance with IDBI Bank.

LIC results

The life insurer posted a 20.1% on-year rise in its net profit for Q2 FY27 to ₹12,076 crore, aided by a 16.2% growth in net premium income to ₹1.47 trillion. The results were declared after market hours.

LIC shares ended flat at ₹408 on NSE on Thursday.

For the six-month period ended 30 September, profit after tax was 21.5% higher at ₹25,568 crore. Annualised premium equivalent (APE) was up 5.7% at ₹30,696 crore, whereas value of new business (VNB) rose 34% to ₹6,846 crore.

VNB margin improved significantly by 470 basis points to 22.3% from 17.6% a year ago, largely led by an improvement in the distribution channel mix, rising ticket sizes in some lines of business, and an increase in the APE of non-par products, Doraiswamy said, adding that he expects margins to continue to improve going forward.

Net investment income increased 2.5% to ₹1.2 trillion, with the insurer attributing the muted growth to volatility in equity markets.

“We have booked marginally lower profit, maybe less than 5% compared to the same quarter in the previous year. We follow the contrarian way of investing,” chief investment officer Arindam Das Gupta said.

On LIC’s decision not to offload any of its 10.7% stake in the National Stock Exchange (NSE) during the bourse’s initial public offering. Doraiswamy said that, as a long-term investor, LIC did not feel the need to sell its shares and that its selling decisions are driven by asset-liability management rather than “based on the opportunity”. “We thought the stock still has good value and so instead of being a seller, we were a buyer,” he said.

Market volatility also weighed on the insurer’s unit-linked insurance plan (Ulip) portfolio, which led to the share of non-participating (non-par) products declining to 34.0% from 36.3% a year ago.

The insurer is choosing not to push Ulips given the market conditions and investor sentiment, working to boost the minimum ticket sizes under Ulip products, and focussing on protection and savings products which have “grown tremendously” aided by the launch of a new pure term plan introduced in September, Doraiswamy said, adding he remains hopeful of good growth in the second half of the financial year.