One of India’s largest and oldest insures LIC aka the Life Insurance Corporation of India has brought forward an opportunity of a lifetime for all the digital payment processing entities in India.
In order to digitise and ease the payment of premiums, LIC is currently inviting bids from Indian digital payment aggregators – a golden shot that the likes of PayTM, PayU, Razorpay and more are sure to gobble up in order to gain vast swathes of users overnight.
According to media reports, on February 5, 2021, LIC floated an RFP aka ‘request for proposal’ for a contract regarding the same which will be valid for five long years. The insurer floated a similar bid back in 2017 but it never saw the light of the day.
This time, however, the bid is concrete. Razorpay has confirmed it has been invited for the same and affirmed that it will be submitting its proposal within March itself.
A Win-Winn Situation For Both LIC & Payment Aggregators
Now, note here that the proposed collaboration between LIC and online payment aggregators will be a win-win situation. LIC would be able to leverage the data payment aggregators have and sell more policies to the right user and in turn make way for deeper penetration of users in India. While for payment aggregators it will serve as a way to gain more users and process more recurring transactions.
In 2019-20, LIC alone processed premiums amounting to a whopping Rs 3.79 lakh crores. It has room to grow even further as India ranks very poorly when it comes to insurance. With just 4% market penetration Insurance sector posses a big window of opportunity for all the players operating in this sector.
LIC IPO is on the cards as well, and by partnering with digital payment processing entities transaction numbers and more insurance penetration will be accelerated.
However, that being said, the partnership will not come easy.
LIC Tender: Criteria For Bidding
LIC, in their recently floated RFP, issued eligibility criteria consisting of multiple factors. Each of those factors, in turn, lead to a set number of points. For instance, points will be awarded on factors such as – the total value of transactions a digital payment processor completed by 2019-20, years of experience in the industry and so on.
For a payments company to win LIC’s bid, it will require a minimum of 75 points.
But that is not all!
In order to bid for LIC, a digital payment aggregator will also have to first give a Rs 10 lakh Earnest Money Deposit while the final winner will need to submit a PBG aka Performance Bank Guarantee of Rs 10 crores.
While the deposit money may not be a point of concern for any of digital payment processing companies, meeting the other qualification criteria to reach 75 point figure could be tricky for some of startups operating in digital payment space.
Now, it remains to be seen which digital payments’ company ends up winning the golden goose i.e the LIC bid. We will keep you updated on all future developments. Until then, stay tuned .