SRIKUMAR BONDYOPADHYAY
Article from The Telegraph
Calcutta, Jan. 7: Insurance companies have been witnessing a steady decline both in policy sales and premium income even as they are trying to cope with regulatory hurdles.
Throughout the last calendar year, a number of private life insurers such as Aviva, Tata AIG, ING Vysya, Kotak Life and IDBI Federal launched children education plans to turn the tide in sales but with little effect.
According to data published by the Insurance Regulatory and Development Authority (IRDA), new business premium income of life insurers, particularly the private players, from individual policy sales during April-November 2011 declined 33.57 per cent over the same period a year ago. The number of individual policies sold by private insurers also declined by a steep 32 per cent during the period.
After September 2010, the number of policies sold and the premium income nosedived following new regulations on unit-linked insurance plans. However, insurers had exuded hope that new premium income and policy sales will start showing positive growth from the second half of the current financial year following the low base during the same period in 2010.
But the decline became more steep as policyholders dumped insurers for misselling Ulips.
IRDA’s annual report revealed that in 2010-11, policyholders surrendered policies worth Rs 76,712 crore, more than double the amount (Rs 36,225 crore) in the previous financial year.
This trend seems to continue unabated in 2011-12 as well. Quarterly provisional estimates of the Life Insurance Council, the lobbying body of life insurers in the country, reveal that total benefits paid by insurers in the first six months of the current financial year stood at Rs 67,064 crore, of which death claims constitute only Rs 5,451 crore.
Besides, sales of unit-linked pension plans, which accounted for 25-30 per cent of the total premium income from new businesses a year ago, plummeted to a meagre 1.2 per cent during the first six months of the current financial year.
Any pick-up in pension plans in 2012 seems unlikely as the insurance regulator has further tightened its rules on such plans from December 2011.
Under the new regulations, insurers will not only have to show a minimum guaranteed maturity benefit at the time of selling a policy, they will also have to provide the annuity after the accumulation phase of a pension plan.
“Private insurers have been selling pension plans only for the accumulation phase. When the time for paying the annuity or pension comes, they direct their policyholders to Life Insurance Corporation. We tried to plug this wrong practice through the new regulations. Now, the insurer who sells the deferred annuity plan (read, the pension plan) will also have to provide the immediate annuity (read, pension) on vesting of the policy,” IRDA chairman J. Hari Narayan said.
Insurers are not sure how the new year will pan out. “The first three months of the calendar year (generally the best selling period for the life insurance business because of tax saving investment) will set the tone for the 2012-13 financial year. For 2011-12, we have not set any business target,” said Yateesh Srivastava, chief marketing officer of Aegon Religare Life Insurance Company. Aegon Religare has launched a conventional children’s education plan in the beginning of this year.
Star Union Dai-ichi Life Insurance, a joint venture of Bank of India, Union Bank and Dai-ichi of Japan, has also launched a limited period, single premium endowment plan, targeting tax saving investments during the January-March period.
Article from The Telegraph
