LIC demerger pitched to aid efficiency

IIM Kozhikode report also suggests complete divestment of three general insurers

- AATHIRA VARIER

Splitting and unbundling Life Insurance Corporation (LIC) to improve efficiency, along with divestment of public-sector general insurers, is among the key recommendations of an expert panel from the Indian Institute of Management Kozhikode (IIMK).

The suggestions emerged from two days of deliberations by the Life Insurance and General Insurance Councils, aimed at achieving the objective of Insurance for All by 2047.

The report, submitted to the General and Life Insurance Councils and the Insurance Regulatory and Development Authority of India (Irdai), noted that achieving this goal will require technological leapfrogging, capital deepening, and strengthened institutional trust.

According to the report, LIC enjoys a virtual monopoly, which disrupts competition in the sector. In 2023-24, LIC accounted for roughly 57 per cent of life insurance premium collections and 87 per cent of non-linked insurance premium renewals. It also represented 70 per cent of new policies issued, 59 per cent of new business, and 71.8 per cent of assets under management.

“There appears to be a prima facie case for splitting (demerger), divestment, or unbundling of LIC’s business,” the report said.