The Budget proposal to tax income from all non-ULIP products where aggregate insurance premium paid in a year exceeds Rs 5 lakh will have a “minimal” impact on Life Insurance Corporation of India, its chairman MR Kumar said on Friday.
“Last time, a detailed circular was issued (in case of Ulips)… we better wait for a circular. We have done certain calculations, and based on that, the impact for us is minimal,” Kumar said during a conference call with analysts and investors.
Life insurance companies are expected to take a hit, and has sought a review of the proposal. The main demand is to increase the threshold premium for taxation for non-ulip products from proposed Rs 5 lakh to Rs 10 lakh.
Kumar also said LIC would be happy to enter the health insurance space if composite licences come into effect.
The government has put out draft amendments for more reforms in the insurance sector, including a provision for composite licence. A composite licence will allow an insurer to undertake multiple lines of businesses.
“We are quite excited about the possibility of selling liability insurance. And, we had done it in the past as well when the regulator had allowed life insurers to sell liability insurance. Later, it was withdrawn. So, if it comes back, we would be happy to get back to that space. I am sure the agents, who are selling health products for other companies, will come back to sell our products,” Kumar said.
LIC said on an annualised premium equivalent (APE) basis, the total premium was Rs 37,545 crore for the nine months ended December 31, 2022. Of this, Rs 23,419 crore (62.38%) was accounted for by the individual business and Rs 14,126 crore (37.62%) by the group business. Within the individual business, the share of par products on the APE basis was 90.55% and the balance 9.45% was non-par products.
The value of new business (VNB) (gross) for the nine months to December 31, 2022, was Rs 7,187 crore and the gross VNB margin was 19.1%. The net VNB margin was at 14.6%.
“As a contribution to the overall portfolio, Ulips are growing more than non-par savings products. But margins on Ulip products are low. So, these products bring down margins slightly. Obviously, it will be taken care of from other segments like annuity and non-par savings,” a senior official of LIC pointed out.