Private insurers are not even snapping at LIC’s heels
Moneylife Digital Team 29 October 2010

It has been more than a decade now that private insurance players have been trying to gain a foothold in the market. But despite tying up with global leaders and having some of the best brains on board, private insurers seem to be headed nowhere   

Private sector insurers are witnessing rapid erosion in market share. Despite having been around for a decade, even reaching break-even seems a distant dream for a number of them. On top of this, private players are even planning initial public offerings (IPOs)!

The numbers do all the talking. Between March 2009 to September 2010, domestic giant Life Insurance Corp of India (LIC) increased its market share in terms of first year premium to 73.27% (from 60.77%) while its market share in terms of number of policies increased to 72.20% (from 70.52%).

Moneylife calculated the first premium market share of life insurance companies as of September 2009 and September 2010, based on data from the Insurance Regulatory and Development Authority (IRDA). We considered first-year premium of individual single, individual non-single, group single and group non-single policies. (Please see:

The writing on the wall couldn't be any clearer. LIC has taken away market share from almost all the players.

So is this endgame for private operators? How long will they keep flogging tired revenue models and continue to support balance sheets bleeding red?
Coming back to the IPOs that these private insurers are planning, IRDA is currently readying its guidelines for such offers. Already, questions are being asked over the quality of disclosures mandated and whether investors would really be able to analyse the prospects of such companies.

Speaking about the challenges in the valuation process of insurance companies at a seminar held in Mumbai recently, Ashvin Parekh, partner and national leader - Global Financial Services, Ernst & Young Pvt Ltd, said: "Disclosures for profitability of different product lines should have been made long ago. It would have helped not just for IPOs, but also for corporate governance. But the regulators have already missed the boat by 7-8 years. The authorities kept dragging their feet on Embedded Value (EV) disclosure even after three committees have gone into it. They kept saying it was too technical for them. If it is introduced now, it is impossible for investors to get (an) accurate picture from the disclosure that will be submitted to regulators as per the new guidelines. The regulators should have taken the lead, but confirmed the age-old belief that business is always ahead of regulators."

But regulatory lapses aside, why have private insurers not been able to take on the public sector behemoth? Agreed, LIC is huge, its size bigger than the GDP of almost 80% of countries in this planet- but whatever happened to private ingenuity and nimbleness? 

Till 2000, LIC enjoyed a monopoly. But elephants can dance, too. After the market was thrown open to private players, it got its act together. According to TS Vijayan, chairman, LIC, "The company felt threatened, but made changes and prospered."

According to Vipin Anand, chief-corporate communications, LIC, "The opening (up) of (the) insurance sector to private insurers did shake us up, but LIC responded well due to its intrinsic strength. We have 14 lakh agents as of today who cover every part of the country. We were the first government company to go for computerisation. Our computer network is (the) largest in the country after the Indian Railways. Even with the volume of our business we are able to have speed ratio (settlement within stipulated time, usually 30 days) of settling claims at 97.47% (maturity claims) and 95.29% (death claims) for 2009-10. We have excellent investment expertise to manage funds in-house."
Is it too late for private insurers to go back to the drawing board?

Prem Panjwani
1 decade ago
opening of insurance sector hv infact given boom to LIC buisness.....It is the number that talks.....First number agents force in the country who open up mouth for insurance selling was X slowly Yr to Yr base opening of mouth for insurance in front of client is X for LIC X for pvt companies put means 2X are talking to customer all over country and then due to trust with LIC brand people listen all with PVt insurance X and then buy from LIC....
One more fact people have realised pvt insurance company have nothing more attractive then ULIP n some company with cheap Term policy which both product is not the liking of Indian scene...
ULIP all over the Globe have poor returns....
Come what may be LIC will always remain the best not only in India but will be respected and followed by all over world by insurance companies.
Replied to Prem Panjwani comment 1 decade ago
You are indeed correct.ULIPs and term insurance are have given poor returns...See the returns of Mastershare and Reliance growth fund? Term Insurance are also cheap because if policy holder survives than nothing is paid to him? What is the point if entire premium is swallowed.Traditional plans are good from the point of views of excellent returns,compare it with returns of Bank FDs,NSC, and PPF?.Traditional plans offers so much liquidity[we can get loans],transparency[every year BONUS is credited] and liquidity[the surrender value is perhaps high than ULIPs] & Flexibility[We can always reduce the sum assured] In this inflationary times it has given returns which can beat inflation.
ULIPs and Term Plans will never make JEEVAN SARAL hence Traditional plans are eighth wonder of the world.
1 decade ago
Just a thought..... if tomorrow the Government decides its got no business insuring people's lives and sold it to a private sector player, will they continue to grow at the same rate ? i think the main strength along with the first mover advantage/ penetration is the invisible hand of the Govt....
Truth Hurts
1 decade ago
is life insurance truly competitive/fair in india? does goverment need to support guarantees on LIC policies? is LIC complying with all regulations complied by private players? Why did government reintroduce LIC amendment bill and what is the outcome?
1 decade ago
when insurance sector was opened for pvt players, =multinationals,etc the pvt players thought that it is easy to market insurance policies in India, but they never knew LIC has got a very strong development officer and agents base who have been laying foundations for the last 50 odd years in the field and further many people never knew that insurance in India cannot be sold like chocolates and biscuts.
with regards,
arunachalam development officer LIC of India, coonoor
1 decade ago
Simply superb article.. This is really an eye opener for the public that no longer they can be fooled by this private people in the name of globalisation, service , safety and quality.
1 decade ago
LIC agents always sell product such as Jeevan Anand , Money back to get commission for years to come. After 15-20 years only investor will realize. LIC agents never talk or know about term plans. Private Insurers always tell about ULIP and promise huge returns. Investor will realize the dupe in 3-4 years.
Never go for investment to Insurer go to good funds, or other pure savings products.
1 decade ago
I want you to investigate the Air India equity infusion. Check this:

Don't you think Air India is a big scam and why is government putting so much money in an airline? And who is making these decisions?
1 decade ago
Its the lack of good products and gross misselling which is hurting the private space. Its a herd mentality that is dragging the private insurers down moreover Govt backing is perceived to be a plus for LIC though it is equally pathetic in its portfolio management.
k a prasanna
1 decade ago
Life insurance business is about trust and relationship. Both are missing with the private players. Hence, they are not able to make any head way in this regard.
Deepak R khemani
Replied to k a prasanna comment 1 decade ago
agree 100% with what you have said sir. Trust is the most important factor here. Always buy your policy from a trusted aide/ friend/ family advisor so that you do not get cheated and get service when it is required the most.
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