Pvt life insurers see drop in policy sales
The private life insurance industry has witnessed a decline of about 10-15% in fresh policy sales since September 2010, with companies shying away from selling unit-linked pension products, which accounted for 30% of the total premium collection in 2009-10.india Updated: Jan 11, 2011 21:38 IST
The private life insurance industry has witnessed a decline of about 10-15% in fresh policy sales since September 2010, with companies shying away from selling unit-linked pension products, which accounted for 30% of the total premium collection in 2009-10. The Insurance Regulatory and Development Authority (IRDA), which introduced the new ULIP guidelines from September 1, 2010, has mandated companies to offer a guaranteed return of 4.5% on all unit-linked pension products.
During 2009-10, around Rs65,000 crore came from the sale of pension products — representing a quarter of the total premium collection of Rs2,61,025 crore.
Life Insurance Corporation of India's Pension Plus is the only unit-linked pension plan currently on offer. The guaranteed return regime would force them to move away from equities and increase debt exposure, which may affect profitability, firms said.
Most insurance biggies including ICICI Prudential, Bajaj Allianz, Birla Sunlife have been hit by the guidelines.
Life insurance majors have drastically cut workforce to bring down wage bills and other costs. More than 10,000 reportedly lost their jobs in the last few months. Companies are also looking to outsource many of their non-core areas to cut costs and remain competitive.
"A number of agents have gone out of business as the business is no more viable with the reduced commission income. Unlike telecom where sales increased manifold after the reduction in call rates, insurance sales are yet to witness a similar trend, because insurance is still product which has to be sold," a senior executive at Metlife told Hindustan Times.
ULIPs — a hybrid product where a part of the money is invested in equities and balance is set aside as premium and charges and fees — accounts for more than half of life insurance firms' total business.