New norms fail to dent insurance income growth

KOLKATA: Insurance regulator's revised norms on unit-linked products did not have a major effect on the life insurance industry's first premium income growth. At least, that's what the data for new premium income during April-December 2010 period shows.

Data released by the regulator show that the life insurance industry registered a 28% growth in first premium income during April-December 2010, against an achieved growth of 29% during the previous corresponding period - a marginal 1% fall.

Average premium paid during the period per policy has, in fact, increased to Rs 2,825 from Rs 1,996 in the previous period - a 41% rise in average premium paid. For private players, the average premium per policy was Rs 3,139 during April-December 2010, against Rs 2,342 in the previous period - a 34% jump. LIC managed to increase its average premium per policy by almost 47%.

Premiums may have witnessed a marginal fall, but the number of policies sold has taken a beating. The industry as a whole sold 9% less policies during the period than in the previous period. LIC sold 4.76% less, while private companies saw a 20% decline in number of policies sold.

Interestingly, the private players - 22 of them - managed a higher growth at 7% against 2% in the previous period, but they cumulatively lost 6% market share to the Life Insurance Corporation of India (LIC), the only public sector insurer.

LIC now holds a 71% market share while the private players held 28% of the market share during the period. Private players managed to mop up a total first premium income of Rs 24,980 crore during April-December 2010 against Rs 23,379 crore in the previous period.

LIC, however, witnessed a more than 10-percentage point decline in growth rates to 40% during the period under review against 50% in the previous corresponding period. It registered a first premium income of Rs 61,718 crore during the period, against Rs 44,178 crore in the previous period. Insurers feared a drop in growth rates since they were forced to withdraw at least 208 unit-linked policies (Ulips) from the market during August.

Only about 42 new Ulips were launched from September. "Brokers and insurers felt the market will witness a rationalisation in terms of the number of Ulips and every insurer's practice of launching a host of policies will be replaced with 3-5 Ulips per company.

Some felt the current situation is creating a dearth of investment options for investors as far as Ulips are concerned," an insurance analyst said. Ravi Trivedi, executive director at KPMG, however, feels that the number of Ulips on offer will gradually rise, but may not match the number of products that were withdrawn.

"Insurers will focus on rationalisation and retention of clients. With all the new guidelines that cap commissions and surrender values, insurers now need more time to design their products," he said. Bajaj Allianz, ING Vysya, Reliance Life, Birla Sun Life, Aviva Met Life were among those which saw a decline in premium income during the period.