LIC IPO: Insurance claims rise during Covid-19, lives insured drop

Life Insurance Corporation of India (LIC) saw insurance claims increase during peak Covid-19 period while the number of lives insured in India through individual and group policies decreased 16.76%. There was also a 17.48% dip in the number of its active individual agents who had sold at least one policy in the last 12 months during the peak pandemic days, the draft red herring prospectus (DHRP) filed by LIC as part of its public listing formalities indicates.

The company has disclosed that for fiscal year (FY) 2019, FY 2020, FY 2021 and the six months ended September 30, 2021, LIC’s insurance claims by death in benefits paid (net) were ₹17,128.84 crore, ₹17,527.99 crore, ₹23,926.89 crore and ₹21,734.15 crore, respectively, on a consolidated basis, which were 6.79%, 6.86%, 8.29% and 14.47% of its total insurance claims, respectively. It said that the number of individual policies and group policies (in terms of lives insured) issued in India decreased by 16.76% from 75 million for FY 2019 to 62.43 million for FY 2020 and further decreased by 15.84% to 52.54 million for FY 2021. The number of active agents decreased by 17.48% from 1,086,000 as on March 31, 2021, to 896,208 as on September 30, 2021.

“Our individual policies are primarily distributed by our individual agents. For FY 2019, FY 2020, FY 2021 and the six months ended September 30, 2021, our individual agents procured ₹49,338.01 crore, ₹49,210.05 crore, ₹53,574.65 crore and ₹21,122.04 crore of our new business premium (NBP) for our individual products in India, respectively, which was 96.69%, 95.73%, 94.78% and 96.42% of our NBP for individual products in India, respectively,” the DRHP points out.

The accommodative stance of Reserve Bank of India which kept the interest rates low also impacted returns from LIC’s investments. “The Covid-19 pandemic has created a low interest rate environment, with the RBI bringing the reverse repo rate to 3.35% and the repo rate to 4% on May 22, 2020, which remained unchanged as at September 30, 2021. To tide over any unwarranted volatility, the RBI also increased borrowing limits under the marginal standing facility of the liquidity adjustment facility window from 2% to 3% as at June 30, 2020, where it stood as at September 30, 2021. The marginal standing facility stood at 4.25% as at September 30, 2021 (lowered from 4.65% as at May 22, 2020). Investment returns are expected to remain subdued as interest rates stay low for longer, thereby impacting life insurance products,” the prospectus said.