It turns 50 this year and has already announced a special golden-jubilee bonus for its policy-holders. The first five years of competition have been good for Life Insurance Corporation (LIC) of India. The behemoth (assets: Rs 4,62,000 crore) has reinvented itself, got aggressive with marketing (to the extent of launching ulips or unit-linked insurance plans of its own), adopted technology, and tried to service its 160 million customers better. It is growing at over 18 per cent and sells 10 million policies a year. The market leader, however, can do better, especially, as its Managing Director T.S. Vijayan admits in this interview with BT's Anand Adhikari, in the area of servicing. Excerpts:

LIC continues to grow comfortably despite intense competition from private sector companies. Do you expect to maintain the current rate of growth? What challenges do you see as you continue to grow?

We are growing at a comfortable rate of more than 18 per cent in terms of total premium income. In fact, the new premium income is growing at over 60 per cent. If the economy continues to grow at this rate (around 7 per cent plus), we will continue to maintain this growth momentum. In terms of challenges, servicing of customers is one area where we would like to focus. We already have 170 million policies and servicing more is a big issue. We want to invest very heavily on servicing issues like back-office work. We are also looking at centralisation of data, which is currently spread over 2,000 offices. We are also aggressively looking at alternate distribution channels.

Is the life market going to expand further in a big way?

India's GDP has grown phenomenally in the last five years. And with every point increase in the growth rate, the number of people who can afford insurance has also gone up. The market itself is expanding. LIC, with a big reach, network and products, has been able to take advantage of that. Today, it is a lot easier to sell a policy than it was five years ago.

The private sector is also making rapid strides with innovative products and aggressive marketing, isn't it?

You must understand that the base of private sector companies is also very small. LIC, an established player with a huge base, cannot grow at the same pace. We are quite satisfied with our progress. Our outstanding claims ratio is less than 1 per cent. On the investment side also, we are doing exceedingly well.

"We are quite satisfied with our progress. Our outstanding claims ratio is less than 1 per cent. On the investment side also, we are doing exceedingly well" "We are quite satisfied with our progress. Our outstanding claims ratio is less than 1 per cent. On the investment side also, we are doing exceedingly well"

LIC seems to be reacting to competition from the private sector by launching ULIPs and using the Bancassurance distribution model.

We brought a ULIP-based product way back in 2000 in the form of Bima Plus when the private sector players were just entering the scene. I must say here that the ULIPs got popular only recently. We have also modified our ULIP plan by offering lot of flexibility to holders. There is a big market that has emerged for unit-linked plans on the back of buoyancy in the capital market.

Why are ULIPs occupying the centrestage despite LIC's strong record of selling traditional policies such as endowment and money-back policies?

It is easier to sell ULIPs because of their transparency. You can actually see the performance of the fund as against in an endowment policy, which is close ended. But there is a big market for endowment policies. There is an element of guarantee in these in terms of bonus.

Why is health (insurance) not getting much attention?

It is very easy to sell a health insurance policy in India, but the problem arises with the health infrastructure and administration of a health policy. In developed countries, the health records are kept and there is standardisation of cost also, but we don't have some things here. This model has to develop in India.

To come back to the question, why are you exploring new distribution channels when you have an army of agents?

New distribution channels like banks and corporate agencies came with new IRDA (Insurance Regulatory and Development Authority) regulations. We are targeting nearly Rs 800 crore from Bancassurance, while we expect Rs 16,000 crore premium from our traditional distribution channel. In fact, there are some policies that can be sold only through a bank channel-the policy to cover home loans, for instance.

What challenges do you see ahead for LIC?

By and large, our challenges are higher in urban market today, where distribution and servicing of policies are easier. In the rural market, the premium per policy tends to be lower, which results in an increase in the cost of servicing. LIC, with its strong brand equity, wants to dominate both urban and rural markets.