LIC got a setback before IPO came, there was a strong decline in insurance policy sales

LIC IPO: Claims of Credit Suisse – LIC will become a big challenge for private insurers with emphasis on non-participating policy

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new Delhi. The country’s largest insurance company Life Insurance Corporation of India (LIC) is preparing for the launch of the IPO. At the same time, according to a report by Swiss brokerage firm Credit Suisse, LIC can give a tough challenge to private insurance companies in the coming times by turning its business in the direction of non-participating policy. Credit Suisse has expressed this possibility in a report prepared after analyzing the IPO filings.

The report says that life insurance companies like SBI Life, ICICI Prudential, HDFC Life and Max Life will bear the biggest impact of this business change of LIC.

Also read- LIC IPO: This IPO will break many records, 1 crore retail investors can take part, know other important things

LIC has reached the margin at 9.9 percent
According to the report, LIC has already improved its margin by 700 bps points to 9.9 per cent. The government has eased the way for LIC to increase its margins by making changes in the surplus and profit distribution rules. Due to this, LIC will be able to give 10 percent space to non-participating policies along with participating policies in its business, which is currently only 4 percent. With this, LIC can take its margin up to 20 percent.

This estimate by Credit Suisse is based on the assumption that the insurance business of LIC will shift completely to the new surplus distribution. At present the non-participating policy is 100% and the participating policy is 10%.

Also read- LIC IPO: LIC’s IPO will come on March 11, first common investors will not get a chance

What is Non-Participating Policy
Under participating insurance policies, both guaranteed and unguaranteed benefits are given to the policyholders in the form of bonus or dividend distribution. Whereas in non-participating policies, the policyholder usually gets guaranteed benefits but they are not given profits or dividends. At present, only 4% of LIC’s new business premium comes from non-participating policies. In contrast, this ratio of top 5 insurance companies in the private sector ranges from 20 to 45 percent.

Tags: IPO, LIC IPO, Life Insurance Corporation of India (LIC)

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