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Informist, Friday, Feb. 7, 2025

--LIC: Made revisions in products after Oct to improve margins 

--CONTEXT: Comments by LIC's management in post-earnings analyst concall 

--LIC: Increased ticket size in some products to improve persistency 

--LIC: Open architecture for agency not a good idea 

--LIC: Will have to recalibrate agency model if open architecture implemented 

By Ashna Mariam George 

MUMBAI - The senior management of Life Insurance Corp. of India on Friday said it would not be a "good idea" to develop the proposed open architecture for individual agents. Open architecture will adversely impact the growth of the industry and recruitment of individual agents, the management said in a post-earnings analyst call. 

"Any captive distribution channel takes lot of time, energy, and cost...so if you allow suddenly your captive agency channel to work for others, overall growth of the industry will also be impacted because if one agent works for all other companies, companies themselves may not be interested to recruit... because recruitment and training involves a lot of costs," the management said. 

Under the proposed open architecture concept, individual insurance agents would be allowed to partner with multiple life, general, and standalone health insurance companies to promote insurance penetration in the country. Currently, agents can only associate with one insurer in each category.

The management also said if the scheme is implemented, the company will have to recalibrate its approach to the agency model, including perks and benefits to individual agents. 

Life Insurance Corp. also said it had made revisions to its products post the implementation of revised surrender value norms in October. "Post the implementation of the IRDAI Insurance Product Regulations 2024, effective from Oct. 1, we have launched a comprehensive suite of 38 products which includes 24 individual products, eight group products, five individual riders and 1 group rider...all of which are fully compliant with the regulatory requirement related to surrender value and the IRDI Master Circular on Life Insurance products," the management said.

The Insurance Regulatory and Development Authority of India revised surrender value norms in June 2024, effective October 2024, to ensure better payouts for policyholders who exit their policies early. This has led to a fall in the first-year commission for agents. 

"The surrender values methodology as well as the payouts have changed and that would have had an impact on the viability of the product and, of course, on the margins also, so from that point of view, we did some critical changes in our products," the management said. Besides ensuring that we should be compliant to the regulations, "the ultimate focus was the profitability of the product as well as the persistency of the products to be ensured going forward." The management also said that it has increased ticket size in some products to improve persistency.  

The life insurer on Friday reported a net profit of INR 110.56 billion for the quarter ended December, up 17% on year, due to a fall in commissions and employee costs. The company announced its financial results post market hours and its shares ended 1.5% lower at INR 816.10 on the National Stock Exchange.  End

Edited by Vandana Hingorani

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