- Date : 31/03/2022
- Read: 3 mins
LIC is partnering with Policybazaar in a bid to go digital and appeal to younger customers.
Government-run businesses are pretty much seen as dinosaurs by millennials, and our own insurance behemoth Life Insurance Corporation of India (LIC) is perceived no differently. But now, aiming to reach out to younger age groups and remain competitive, LIC is collaborating with digital aggregator Policybazaar.com as an online distributor.
Where does LIC stand currently?
Over the past decade, digital channels have grown rapidly to become the medium of choice for purchasing investment products. A strong online presence, coupled with organic bancassurance partnerships, has enabled other life insurance providers such as ICICI Prudential, SBI Life, and HDFC Life to expand their customer base.
On the other hand, LIC has been continuously losing market share. Its new business premium collections fell to 61.16% in January 2022 compared to 67.38% a year ago. Not having a bank limits LIC’s reach in the savings products market. So far, LIC has relied on its strong network of 1.33 million agents to distribute insurance products. The Policybazaar-LIC tie-up is going to be the national insurer’s maiden association with any private insurance agency.
How will the collaboration work?
A score of products from LIC will be available on Policybazaar once the integration is complete. In the meantime, the digital agency has started selling LIC’s traditional guaranteed returns product Bima Jyoti through its branches and other offline channels. While new policies can be purchased directly from the LIC portal, collaborating with an aggregator gives customers the option to compare products from different insurers and make an informed decision.
Ahead of LIC’s IPO, this diversification will allow the state-run insurer to gain traction with the 25-35 age group and further strengthen its valuation and listing prospects. The alliance works positively for Policybazaar too, allowing it to expand its product base and drive greater traffic to the site. The tie-up can also help increase digital penetration of insurance across the country, especially in semi-urban and rural areas where government-run programs have a higher acceptance.
Will LIC be able to recoup lost ground?
Digital channels are seen to work better for protection products such as term insurance and ULIPs. These are also high-margin products. On the other hand, LIC’s product portfolio is skewed towards endowment plans that make up about 70% of the mix, followed by annuity pension plans at 24.86%. Conversely, ULIPs and pure risk term products make up just 3.84% and 0.41% of the portfolio respectively.
As LIC gears up to compete with other insurance providers on a level playing ground, it will have to become a lot more agile and receptive to new-age customer needs. The shift towards digital channels is definitely a step in the right direction, but whether it translates into actual sales will be evident only after the new partnership unfolds.