Amidst the historic market share decline of 13%, LIC embarks on agency selection

India’s largest insurer, Life Insurance Corporation (LIC), has initiated the agency selection process for advertising, digital and media buying duties. As per LIC’s website, the insurer will choose three separate agencies based on L1 tendering process. According to Law Insider, “L1 means the lowest tender or lowest bid or lowest quotation received in tender as adjudged in the evaluation process as per the tender.”

As per sources close to the development, the digital mandate may be given to the lowest bidder, which is a media buying company. It is learnt that the agency has only made a bid of Rs 50,000 per month, which is raising doubt as the mandate will require at least 15 to 20 people as per the RFP requirement.

Meanwhile, the digital media buying mandate is said to have been won by an independent agency that specialises in PSU advertising. As per sources in the know, the agency has quoted a mere 0.1% commission, which is significantly lower than 2% to 5% charged by the industry.

It was a closed door pitch. It is learnt that the empanelled agencies normally close to LIC were invited for the pitch. This is raising doubts about the logic and efficiency of the whole process.

LIC’s IPO debut in May 2022 was hugely anticipated, however, it failed to meet the investors’ expectations. As per media reports, the insurer got listed with an issue price of Rs 949 after a 9% discount. A year later in May 2023, LIC’s shares were trading at Rs 567, the stock never rallied. This brought down the insurer’s market valuation by almost Rs 2 lakh crore to stand at Rs 3.58 lakh crore in May 2023. As of October 14, 2023, the share price of LIC hovers at around Rs 632.

In the process, lakhs of retail investors lost their money. As a listed entity, the LIC is now regulated by market regulator SEBI and insurance regulator IRDA. It is pertinent to note that the Government of India still has over 95% shareholding in LIC.

It is also pertinent to mention that LIC’s market share has witnessed a historic drop of nearly 13% in the last one year alone, raising questions about the effectiveness of LIC’s marketing and advertising efforts.

Will the new agencies to be empanelled as per the L1 tender at such ridiculously low rates be the much needed competitive advantage for LIC in the insurance market?