Page 38 - Insurance Times December 2021

Insurers with targeted IT investments
In fact, insurers that invest more in technology outpace
competitors that don't pursue targeted investments in
business measures such as gross written premium (GWP)
growth, return to shareholders, and expense and loss ratio.
As an example, in life insurance, companies that invested
more in IT saw a greater reduction in expense ratios (by 2.0
percentage points) and higher returns on technical reserves2
(1.7 percentage points) when compared with insurers with
lower IT investments. Insurers achieved these outcomes
within three to five years of making their investments.
Marketing technology solutions can increase sales and
processing efficiency, improve the quality of core customer-
facing processes such as policy inquiries and policy too. At present, LIC policyholders have bought 289 m
applications, and improve customers' overall experiences. policies. According to IPO norms, an issuer company can
Investors are keen to know the embedded value of LIC and offer the shares to employees at a discount of a maximum
the value of its new business. 10% on the floor price at which the shares are offered to
other categories. LIC is the largest life insurer in India with
a total first-year premium of over Rs.
1.84 lakh crore in the year ended
March 2021. It commands a market
share of over 66%. LIC is the biggest
institutional investor in India and has
a huge investment portfolio. It's
employee reach is huge with 2.9 lakh
employees, and a network of 22.78
lakh agents.

LIC is the biggest institutional
investor in India and has a huge
investment portfolio. Even if the 22
lakh agents sell one additional policy
in a year, it will add huge volume.
Fixing the Price band
With its Rs. 31 lakh crore balance sheet, LIC is India's second-
Fixing the price band is vital here as past experiences have largest financial services institution, next only to SBI with
not been very good. In 2017, two general insurance Rs. 39.5 lakh crore assets. The insurer still has over 70%
companies, General Insurance Corporation of India and New share of all life insurance policies sold in the country. And its
India Assurance got listed. New India Assurance shares were assets under management stood at Rs. 31 trillion in 2020.
offered in the range Rs. 770-800 while General Insurance These facts alone make the IPO very enticing apart from its
Corporation shares were offered at Rs. 912. Both have fallen potential size.
significantly since then. New India Assurance shares trade
at Rs. 161 (after today's 19% gain), while General Insurance 60% of insurance business to be with
at Rs. 140. Both companies issued one bonus share for every
share held between June and July 2018 but even after that listed entities
bonus, investors would suffer a loss of over 60% from their The Union Cabinet recently approved the disinvestment of
investment in the IPO. equity in LIC and the process is on to appoint merchant
bankers to launch the IPO. For LIC's IPO, the centre amended
The government has given LIC policyholders a reason to the LIC Act of 1956. After the amendment, like any other
cheer as 10% of the issue size would be reserved for them. listed company, the corporation, now governed by the
What's more, there could be a discount on the floor price Companies Act and markets regulator Act (post-IPO), has

38 The Insurance Times, December 2021