LIC is working on a low-cost life insurance product for covering COVID-19 deaths, LIC’s MD, Vipin Anand tells Preeti Kulkarni in a freewheeling chat. He also explains why the insurer included a COVID-19 questionnaire as part of pre-policy issuance process.
What has been LIC’s experience during the lockdown in the last three months? How have your customers responded to the shift towards digital?
Customers are adapting quickly. We are accepting payments through all online channels and during the current financial year, we have collected more than Rs 13,000 crore in premiums so far, which is more than double the premium collected through this mode last year.
Claim processing, which often requires extensive documentation, must have been a challenge in times such as these…
Since April 1, we have paid over 21 lakh claims, amounting to over Rs 11,500 crore. In the case of COVID-19 claims, especially where family members were in quarantine, we have processed claims on the basis of documents sent through WhatsApp too. People do find it difficult to submit key papers due to the lack of mobility at this point in time. Therefore, we have allowed submission of moneyback and maturity claim papers in a standardised format through email. Every branch has been given a separate mailbox for accepting soft copies of claim documents and we will proceed with claim payments on this basis. It is available for in-force policies, which are not assigned or under loan, and are being serviced in the branch where they were issued. This apart, many are dependent on us for pension payments too. We have made sure that even at the peak of the lockdown, we enabled people and banks to make pension payments to annuity holders in time.
How many COVID-19 claims have you received? What is the amount disbursed so far?
There are over 103 claims where payments have been made, with amounts aggregating to Rs 7.61 crore. At this point of time, there are certain issues. Even if we get the list (of fatalities) from the government, the phone numbers, at times, are not available. Family members, in a state of shock, are not in a position to discuss claims.
LIC has tightened its underwriting norms by introducing a COVID-19 questionnaire before policy issuance…
Yes, there is an extra questionnaire, which is understandable in the current situation. Premium rates obviously did not contain any provision for COVID-19 claims. However, we have taken a conscious decision right from the beginning that if in any policy the cause of death is COVID-19, we will accept it as natural death claim. So, definitely there is some strain because of that and it is necessary to screen those who are currently considered COVID positive. Reinsurers had serious concerns in cases of large sums insured or NRIs, so there was a temporary hiatus, but not anymore. We are only asking prospective policyholders to answer this questionnaire.
LIC is India’s biggest institutional investor. Where is it investing these days?
LIC has been impacted by the market crash. But after that, there have been opportunities to buy as well. In fact, we have invested more than Rs 12,000 crore so far in the equity market. We are a contrarian investor and so this is actually the time for us to pick up good stocks at reasonable prices. We have also managed to invest in 30-year to 40-year government securities (more than Rs 60,000 crore) at good prices. Since a large part of our business comes from annuities, we need long-term investments.
Did LIC see a spurt in surrenders, as some private insurers have, in this lockdown?
No, in fact, it is the other way round. This is the time when people have become more conscious of the need for insurance as a result of which surrenders are just one-third of what they were last year. They may liquidate their fixed deposits or mutual funds, but this is the time when people have to think of retaining their risk cover, so surrender is not an option. I fully understand that liquidity is an issue, so they may take a loan against their life policy instead. Our loan book size is over Rs 1 lakh crore, which is larger than those of many banks. We are putting in place a complete online loan application and disbursement process by June-end.
Insurers – both life and non-life – expect demand for insurance covers to surge, due to the pandemic panic. Will high-value protection covers see a sharper spike in demand?
This remains to be seen but I feel more people becoming conscious about the urgency of buying life policies. The number of people opting for life insurance will increase. At LIC, we are looking at developing a low-cost life product that will cover death only through COVID-19.
Some private firms have raised premiums substantially for pure protection term policies due to the rise in reinsurance rates. Will LIC also pass on the hike to customers this year?
For a long time, the complaint has been that LIC premiums were higher. The problem was not that we were charging more, but that the others were charging much less. The premium rates in the Indian term life market were unsustainable. Now, reinsurers have realised that it doesn’t work, as a result of which they have raised premiums by 20 per cent. Private companies are not in a position to absorb this hike and some have passed it on to their customers. When our reinsurer gave a notice, we told them very clearly that you cannot walk out in the middle of a deal. We negotiated with another reinsurer at the same rate. In another two months, it is expected that private players will raise their rates further. Then, LIC’s term products launched last year, with lower premiums, could be the cheapest ones available in the market.
Term plans do not account for significant proportion of the LIC’s product mix…
It is a misconception that LIC does not promote term policies. With term rates undergoing a correction, market will show interest again. Business had gone elsewhere just because of cut-throat prices, which is something LIC does not believe in. As a leading life insurer in the country, with our kind of brand value, we are entitled to a certain amount of premium.
Will the alternative tax regime be a dampener for the life insurers this year, given that many invest in LIC policies to avail of the section 80C benefits?
We have no issues with the new regime. The damage was already done when section 80C was revised to bring in a host of instruments into it. I do not think many people buy life insurance policy for this tax benefit anymore. Today, salaries have reached a level where the provident fund itself covers the entire section 80C limit for many. It may cause temporary disruption, but no long-term negative impact is possible.