The Life Insurance Corporation of India has placed six to seven assured return policies on a watch list, senior LIC officials admitted.

However, the management declined to identify the plans, fearing a mad rush by policyholders to invest in these before their closure.

Many of the plans put on the watch list offer returns in excess of 7 per cent. In 2002-2003, LIC closed over 20 plans as its investment returns fell by over five percentage points in the last 18-20 months.

After careful consideration of the impact of these plans on the institution's balance sheet, LIC will close the ones that are highly popular and are long-term in nature.

The trigger for this is the falling interest rates, which can no longer support returns of 7 per cent-plus.

However, LIC agents have jumped the gun and are already advertising the closure of plans like Jeevan Asha II and Jeevan Akshay.

With LIC having only seen 1 per cent growth in premium income in the first quarter of 2003-2004, its agents are trying to capitalise on the policyholders' psyche of rushing to buy plans being closed down.

This market tendency stems from the fact that many of LIC's old schemes continue to offer better returns than many other investments today.

In 2000-2001, when G N Bajpai was LIC chairman, LIC faced huge mop-ups in premium income from single premium plans -- Bima Nivesh and Jeevan Shree -- which added to its liabilities just before the plans were scheduled to be discontinued for fresh subscriptions.

LIC saw a phenomenal 137 per cent growth in first premium income collection.

Fearing similar consequences that could add to its long-term liabilities, the present management is wary about disclosing the names of the schemes on the watchlist, for the time being.

Exit mode

• Many of the plans put on the watchlist offer returns in excess of 7%.
• In 2002-2003, LIC closed over 20 plans as investment returns fell sharply by over 5 percentage points.
• LIC will close plans which are popular and long-term in nature.