LIC Wants Axis Bank to Sell its Insurance Policies

Life Insurance Corporation, often accused of being a passive investor, is beginning to exploit its ownership to expand its own business which is becoming intensely competitive. And the target is Axis Bank BSE -0.06 %. The state-run insurer, which owns about 15% in the lender, is nudging the bank to sell insurance policies offered by it through its more than 2,500 branches, testing its existing partnership with Max Life, a top performing private insurer, said two people familiar with the  matter.But that could be a drawback for those like Max which already have an alliance to sell their products exclusively.An email written to LIC went unanswered, and Axis Bank said: "We cannot respond on the matter." The insurance industry is undergoing a paradigm shift in the way it sells policies. State-run LIC, which controls more than three-fourths of the market , had built an edifice on the individual agents' platform who sell its products door-to-door. But the late private sector entrants found it difficult to break LIC's network.

Hence, some got into exclusive tie-ups with banks to sell their policies, but that blocked others from doing so. Hence, the regulator forced banks to go for as many as three bank alliances. LIC, which gets less than 5% premium income through banks, would immensely benefit if Axis agrees since banks are key growth drivers. Other insurers get as much as a quarter of their overall new premium income selling via banks. The share of banks in new business was 20.84% for the private sector industry in 2014-15, data from the insurance regulator shows. 

LIC has a stake of over 10% in most public sector and private banks. Every year, it ends up increasing stake in public sector banks. LIC has an asset size of close to Rs 18 lakh crore. The country's largest institution sells insurance policies through 11 public sector banks and three private sector banks. Besides this, it has tie-up with 10 regional rural banks, 32 co-operative banks and one foreign bank.