Life Insurance Corp. of India was seeded by the government in New Delhi, but nourishing the sapling to a colossus with Rs 39.6 trillion ($525 billion) in assets under management — and more lives assured than Pakistan’s population — has fallen on generations of loyal customers. Which is why LIC’s upcoming initial public offering, India’s biggest ever share sale, raises a troubling question: Will a cash-strapped state get greedy and end up shaking the money tree so hard that it stops bearing fruit for future policyholders?
LIC was born in 1956 after 25 private insurance players went bust in India in the decade after World War II. Alarmed by the destruction of savings in the newly independent nation, and impatient to expand coverage beyond a tiny urban affluent class, a socialist-minded government nationalized the insurance business, giving the state-owned firm just about $10 million in seed capital and an undisturbed monopoly.
The monopoly ended in 2000, but the moat re intact. Even now, when it spars with nearly two dozen non-state rivals, LIC has a 64% share of gross written premiums; it issues three out of India’s four individual policies and holds 4% of all publicly traded shares in the country. The all-pervasive role that LIC plays in India’s financial life has made the IPO a contentious exercise — just like the privatization of Japan Post.
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