Health Insurance: A turning point? LIC could enter indemnity health insurance sector by buying an independent private insurer, says CEO

LIC’s productivity gains are due to the following: Digital efficiency has come into play. Digital business is increasing. New products are being launched, especially in the non-peer sector and then in bancassurance. What are the next steps for productivity gains expected from LIC?
Siddhartha Mohanty: At the next level, we will be fully digital, so productivity will also increase. We are also interested in analytics and artificial intelligence because we will advance with time. Now, digital transformation does not only mean eliminating paper. But beyond paper, everything that is required to grow the market, to stay in the market, to remain competitive, all those things we will adopt as soon as possible. Therefore, they will also improve our productivity.

The general view among many market players is that LIC is still selling policies through the traditional method, branch network and agents. What proportion of new policies are coming from purely digital channels and what proportion is coming from the old channels?
Siddhartha Mohanty: The pure digital market is just starting; it is currently less than 1%, but we are increasingly focusing on these two plans that we launched, which are also available in digital mode. Yuva Term and Yuva Credit Life, both through an agent, can be taken up and also in digital mode directly through our website. In India, insurance is a direct-sold product. Now also, many people, unless everything is explained to them, have the need for the agency channel and it will continue to be so. Even in developed countries, most of it is also agent-driven, though the digital channel is there. Of course, here, we get 96% from agents; in other countries, they get 40%, 35%, 60% or something like that. It may not be 90%, but still, agency is a dominant channel and it will continue. So, our strategy will be to focus on digital without compromising on the agency channel. Also, that provides a lot of employment. We have 14 lakh agents. His family, everyone, depends on LIC. We are working on a strategy to grow the digital channel.

What is happening in the entire financial savings sector? SIPs have started, banks are taking less responsibility and money is moving into the stock markets. Could this be a long-term challenge even for LICs?
Siddhartha Mohanty: When you talk about LIC or any insurance company, we are competing in the domestic savings market. People have many avenues and opportunities to invest and the way the market is growing, retail investors have invested long ago and the way mutual funds are getting Rs 20,000 crore every month, where will they park the money? They will park it in the market. But that will be a challenge for all the banks and insurance companies as well. So, I feel that there should be a fine balance. The market should grow but insurance companies, banks and everyone has a role in the total economy. Insurance awareness has to increase because there cannot be any compromise in life insurance. People will definitely have a life insurance policy. Of course, they can choose from different baskets. They may not go for pure savings or something, they may go for pure term. But because of the market, our ULIP is also going up. ULIP sales have grown by 134% in the first quarter. So we have to work on that.

But is there a structural obstacle to the insurance sector Because there was a time when insurance was more of a protection and investment product. By default, whatever your savings were, out of that amount, more than 20% came directly and indirectly from insurance. And those tax benefits are no longer there, at least for those with Rs 500,000 or more. Is there now a structural obstacle for the insurance sector in India?
Siddhartha Mohanty: I don’t think so, because people who buy insurance do so just for the sake of buying it. Also, the tax benefits were also limited, so the tax won’t have much impact. People will buy insurance, but what insurance product? Within insurance, the composition of the product line may change: savings, term insurance, annuities, life insurance with limited life coverage, and other products. The composition may have some impact because of the market and the preferences of the consumers who buy here. All those things will have an impact, but as such, insurance will grow.

But the fact is that the tax benefit on insurance of Rs 500,000 or more was removed 24 months ago. Has that affected that group of policy buyers?
Siddhartha Mohanty: For us it was very insignificant.The LIC was less than 5%, I think.
Siddhartha Mohanty: Very, very insignificant. It didn’t have much impact.

But the country is also preparing to adopt the new tax regime, which does not involve exemptions. And that, in a certain sense, could also be a problem for LIC?
Siddhartha Mohanty: For the insurance sector, this will not be a problem because all the benefits will be withdrawn. The benefits on home loans will also be withdrawn. The new tax regime means that there will be no exemptions and taxes will be rationalised. I don’t think it will have any impact on the housing or insurance sector which used to receive tax benefits. Initially, there may be some impact, but gradually people will adapt.

Two years ago, when we met and spoke to some of your predecessors, the first question was about Adani, and the last question was about Adani.
Siddhartha Mohanty: It is just a matter of time. You see, we always tell the market because historically, LIC has never reacted impulsively to market movement. We have a strong research team. We continue with our research. Sometimes we take a contrary view. People object. After two or three years, they appreciate that LIC has taken a right decision.

But have you made any profits on Adani shares? Or are you still holding them?
Siddhartha Mohanty: We never had any losses.

But have you started to see profits yet?
Siddhartha Mohanty: At that time, we never had losses. The stock price went up, but in terms of book value, we never had losses.

But you are not answering my question. Have you started booking profits in Adani shares?
Siddhartha Mohanty: We book profits on all stocks. This is no exception. Let me be very clear to everyone. We book profits on all stocks wherever there is an opportunity. Whatever name you choose. We are independent of people or companies.

But are you planning to increase your aggregate commitment to stocks for fiscal year 2025?
Siddhartha Mohanty: Every year we invest in stocks. Last year, it was Rs 1.35 trillion. This year, it will depend on the market movements and the market situation.

So the figure could be close to last year’s?
Siddhartha Mohanty: We aim to have at least some positive impact.

Health insurance, something you have said that even if the composite leave rules are not changed, LIC will venture to do so. Could that be a game changer for LIC?
Siddhartha Mohanty: Now we see that there is a lot of scope for health, indemnity health. We are already in the health insurance space. We are selling fixed benefit products, but indemnity health which is sold by other GIC companies, stand-alone health insurance. In that space, there is a lot of scope. Most of the LIC agents are selling those health insurance products. They are my agents because they can sell life insurance, health insurance and non-life insurance. So they are selling. So that advantage is there with LIC. The distribution channel is already ready.

The only thing we have to think about is how to grow organically or inorganically. We see that if we do it ourselves, it will take us a lot of time, experience, energy and money. So why shouldn’t we try something that is already ready to use, invest a good amount of money and enter the healthcare sector? We are in life, in the accident. Entering the indemnity healthcare sector will be a total change. We are now exploring possibilities.

But would you consider buying a PSE or a state-owned insurance company or would you also consider a private company?
Siddhartha Mohanty: No, self-employed health insurance, only private. Self-employed, only private.

Then you will have to buy a private health company.
Siddhartha Mohanty: Yes, yes.

The government has consolidated the banking sector. Three big banks and everything has been put under the same umbrella. Do you think it is necessary to do the same in the insurance sector? Maybe just two big companies?
Siddhartha Mohanty: That government will decide.

But do you think it makes sense?
Siddhartha Mohanty: The Government will examine the matter and make a decision in due course.

LIC is one of the cheapest insurance stocks in the world. I was just looking at the figure.
Siddhartha Mohanty: Underrated.

Undervalued. Why do you think this is? Do you think markets are not realising the potential of low-cost bonds?
Siddhartha Mohanty: So there are many factors at play, but little by little people are showing interest and the situation is escalating. Therefore, all other factors will be taken into account in the coming days.

How do you think FY2025 will be different for LIC than FY2024?
Siddhartha Mohanty: There will be positive growth. We are aiming for double-digit growth in fiscal 2025 and we will fulfill the commitments we made after the IPO. Those commitments will be fulfilled. We are working sincerely on that. We are working sincerely on all fronts.