Cost cuts put pvt insurers in a spot

Cost cuts put pvt insurers in a स्पोट

Mumbai: The insurance regulator’s recent directive to cap expenses on unit-linked insurance policies and private insurers’ consequent bid to trim costs by shutting some of their smaller branches seem to have had a collateral impact: Though the policyholders’ investments are safe and the company strong, many customers start worrying when a branch downs shutters.

“Some insurers are facing this crisis now. Though nothing is wrong with the company, branch closures create a wrong impression. People feel private life insurers are fly-by-night operators. What is being faced by a few companies will be faced by others too,’’ said the CEO of a leading private insurer.

Private life insurers are cutting costs as they implement the stringent Ulip norms. Sources say many insurers including ICICI Pru Life, HDFC Life and Max New York Life are adjusting to the low-margin Ulip regime by closing branches. Private life insurers have shut almost 400 branches since...September 10.

However, Irda chairman J Hari Narayan said there was no fear among the policyholders as their investments were quite safe. “If any branch closure was happening in the industry, then it was due to the fact that the life insurers’ administrative expenses can’t exceed their certain specified limits as per the Insurance Regulation Act. We don’t force life insurers to cut their costs for the initial five years. But, by sixth year onwards, we do strictly enforce the rule on them,’’ he clarified.

SB Mathur, secretary general, Life Insurance Council explained that when insurers were worried about their bottomline and topline, they couldn’t leave their policyholders in the lurch. “There is no fear psychosis. There was a 40% growth in the first-year premium in October. If the net reduction in terms of number of branches has happened by 60, it doesn’t make any difference as it doesn’t even.