Think of Life Insurance Corporation (LIC) and you get the image of agents selling their policies. The country’s biggest and oldest life insurer recently expanded its distribution reach further by tying up with Policybazaar.com, an online insurance aggregator.
LIC wants to reach out to the young and millennials and its tie-up with Policybazaar.com will help the insurance giant do just that. “The average age of our customers is 30-32 years. This segment is the core target group for the tie-up,” says Sajja Praveen Chowdhury, BU Head, Term Insurance, Policybazaar.com.
Reaching out to customers, digitally
Policybazaar will offer LIC’s term as well as investment products through its online as well as offline platforms. This move is for “facilitating seamless digital distribution of life insurance products… (these) channels will further help in accelerating insurance awareness and penetration,” Policybazaar said in its press release on the tie-up.
For now, the online aggregator will be selling LIC’s policies through offline mode. “At the moment, we have started selling LIC’s products through offline channels (our branches). In a month, once the integration with LIC’s portal is complete, we will start selling these products online,” adds Chowdhury. The company has started offering LIC’s Bima Jyoti, a traditional guaranteed returns product at present. It will expand the product suite, particularly term insurance offerings, in the days to come.
“Ahead of its IPO, this sends a signal that LIC, which has traditionally relied on individual agents, is willing to diversify its distribution network. Since its listing, Policybazaar, too, has been facing questions on why the biggest insurer was missing from its list of partner insurers. So, this tie-up makes for good optics for both,” says an insurance analyst, speaking on the condition of anonymity.
LIC’s product mix is skewed towards traditional endowment plans, with participating products making up over 70 percent of this portfolio, with annuity pension and Ulips accounting for 24.86 percent and 3.84 percent shares respectively. Guaranteed savings products constitute 0.26 percent of its portfolio, while pure risk term insurance plans contribute just 0.41 percent. Private sector players, on the other hand, have been increasingly focusing on growing their protection portfolio, as this is a high-margin business.
Not having a bank limits the reach
While policies can be purchased online through the LIC portal, this tie-up will add value, thanks to the easy user interface and comparison tools that Policybazaar provides, say analysts. “With Policybazaar tie-up, customers can compare LIC policies with other companies’ products,” says Siji Philip, Senior Research Analyst, Axis Securities. Philip adds that young and millennial customers will be able to see a lot of LIC, in days to come, on online channels. By doing this, she adds, LIC also intends to catch up with new private sector insurance companies in the way they reach out to newer customers. “But we will have to wait to find out how far this will translate into actual sales,” she cautions.
Other life insurers such as SBI Life Insurance, HDFC Life Insurance, ICICI Prudential Life Insurance have a strong presence in the bancassurance space thanks to their promoter banks and have been gaining market share at LIC’s expense. “This channel has played a key role in boosting private insurers’ market share. Also, in the last two years, online channels have picked up the pace and private players have benefited. LIC, on the other hand, is continuously losing market share,” says Phillip. The state-owned behemoth’s share in new business premium collections has dipped to 61.16 percent as on January 31, 2022, from 67.38 percent during the same period last year. “With the bank channel increasingly becoming important for savings product distribution and digital channels for retail protection, LIC may witness turbulent times in terms of growth due to its heavy reliance on the agency-led distribution mix,” said an Emkay Global research report.
Can LIC break away from its agent army?
While LIC exploring newer distribution channels is a good sign, it remains to be seen how productive this platform will prove to be. “It is yet to be seen how LIC will utilize this platform. The digital medium typically lends itself very well to term and Ulip products, which have not been LIC’s core focus areas in the past. LIC has a long history of relying largely on its individual agents and has not replicated that kind of success with other channels such as bancassurance. So we need to wait and watch to see how the online distribution partnership unfolds,” as per Emkay Global research.
Its ability to reverse this trend by diversifying its distribution network as well as customer profile and regain its market share will be a key factor affecting its valuations. This is critical as LIC is set to float its maiden initial public offering (IPO) in March.