Insurance to be available on Cell phones

India First Life Insurance is a joint venture among Bank of Baroda, Andhra Bank and UK-based Legal & General. They stepped late in the insurance sector but have done well in bancassurance model. P Nandagopal is the managing director and CEO of India First Life Insurance.

Business strategy for growth:

· He believes that since they are a new company and have entered late into the insurance, they can start afresh. There strategy will take into account the new regulatory changes right from the start. Their balanced approach will not be affected by the changes in regulation.

· They will be completing one year of operation this month. They boast of R600-700 crore worth of insurance policies sold in the very first year of business

· Their product mix comprises 90% of Ulip and remaining are traditional products. Total assets under management (AUM) is at R1,000 crore, 60% of which was constituted by Ulips.

· While many insurers are reducing the share of Ulips contribution in their growth portfolio, India First Life Insurance plan to continue to focus on Ulip products, rather than non-transparent and highly priced traditional products in future too. As they believe that even the traditional products bear risks.

· They don’t believe in technical differentiation of products but believe in creation of need-based product base. This does not mean that they don’t want sales from saving products rather they want to keep at least 30% of sales from savings products; 15-20% of revenue from health products; 30% from pension schemes and 20% of investment products.

· India First Life Insurance plans to launch three to four products during the next financial year and half of them will be Ulips. They may even launch Ulip-based pension products, (provided Irda liberalizes few of existing pension norms).

· 65% of company funds are invested in equities and remaining in debt.

· Currently, they have 1,200 employees and plan to add 300-400 staff during the next financial year.

· More than 95% of their sales come from bancassurance channels, which are operated through 3,000 branches of Bank of Baroda and Andhra Bank. They are eager to make their presence felt across all 5,000 branches of the two banks in coming three years.

· Their plans include reducing their dependence on bancassurance by two third in three years as well.

· IndiaFirst just launched its digital channel ‘LifeStore’ which is a do-it-yourself site that helps customers complete their insurance requirements online. They are even working towards making policy transactions possible over cell phones in near future.

SBI Life Smart Elite ULIP graph most Experienced

SBI Life-Smart Elite is a unit-linked life insurance plan crafted exclusively for high net worth individuals. The plan is no different from other Ulips offered by SBI Life except that it has a high premium bracket starting from Rs 1,50,000. It offers two protection options. Under the Gold option, the diagram provides a choice of higher of sum assured or fund value on unfortunate events.

Under the Platinum choice, the nominee of the policyholder would receive both. The scheme offers six alternative investment options (funds) with varying equity and debt exposure for the policyholder.

COST STRUCTURE: The large ticket size has helped keep the cost of this scheme low. The insurance company charges 15% premium allocation charges for a 5-year period. This is much lower than the 20-25% charged by some other insurers.

Additional premium paid towards investment purposes only (top-ups) attract a 2% allocation charge. The policy administration charge is fixed at Rs 600 per annum for a single premium policyholder and Rs 720 pa for the rest. This helps in keeping the cost organization low since the administration charge is defined in absolute terms and is not linked to the annual premium. It needs to be noted that the scheme's mortality charges are same as that of the LIC mortality table, unlike other insurance companies, which have higher charges.

BENEFITS: SBI Life-Smart Elite is a flexible plan with various premium payment modes. The system allows the policyholder to increase or reduce the sum assured based on the needs. However, this flexibility is only allowed three times in the entire policy tenure. An increase in the sum assured is subject to underwriting and is not available at 50 years and above. The plan offers a settlement option, under which a policyholder can take away the fund value at maturity in five instalments.

PERFORMANCE: SBI Life-Smart Elite offers a basket of six investment options of which three funds are more than five years old. These include Balanced Fund, Bond Fund and Money Market Fund, while the rest three are recently launched and are just about a year old.

While most of the old funds have outperformed the benchmark with good margins, the new funds are yet to show their sheen.Equity Elite fund is nowhere close to the regular equity fund of SBI Life which is the best performing fund in the category with more than 23% annualised returns. P/E Managed and Index funds, which are equity-oriented funds, have also not put up an encouraging show.

PORTFOLIO REVIEW: SBI Life Insurance primarily has a large-cap defined equity portfolio with just about 4-5% mid-cap stock holding. Top holdings of the portfolio include Infosys, Reliance Industries , ICICI Bank and L&T. Similar to most other funds, SBI Life has a higher exposure to the financial services and oil and gas sectors. The healthcare sector, a more defensive one, forms a small part of the portfolio due to a complex business model, according to the fund manager . The portfolios have very significant exposure in metal stocks, which are currently underperforming.

DEATH / MATURITY BENEFIT: On maturity, the policyholder gets the amount accumulated in the fund. In the case of demise, the nominee of the policyholder receives higher of the sum assured or the fund value or both, subject to a minimum of 105% of the basic total premium paid towards the policy over the period.

For instance, say a 35-year healthy male invests Rs 2,00,000 per annum in the equity fund for 10 years. Assuming that the sum assured is 20 times the annual premium, the total sum assured receivable, in case of any eventuality, would be Rs 40 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be Rs 36,65,524 and Rs 67,76,640 respectively.

OUR VIEW: Smart Elite is one of the most competent products in terms of its cost structure. It provides flexibility to investors.

Among its six funds, Balanced and Bond funds have shown a remarkable performance. But high net worth individuals generally have a high risk appetite. Since the returns from the equity-oriented funds in Smart Elite are not as good, prospective investors will be better-off by investing in other products of SBI Life.

LIC posts 35 per cent development in Apr-Feb

Public sector insurer Life Insurance Corporation of India (LIC) constant to maintain its market share for the 11-month period ended February 2011.

LIC has irregular up a total premium of R73,122 crore as against R54,320 crore reported during the same period in the previous financial year, recording a growth of 35(%) per cent. On the other hand, private sector companies together recorded a meagre growth of 4(%) per cent during the same period with a total premium of R30,756 crore. The insurance major notched a total premium of R5,986 crore in February 2011 and holds a total market share of 70.39%, according to a latest data.

However, the ticket size (calculated on individual non-single premium basis) of LIC stood at R7,597 for the period ended February, the data said.

Private sector companies together hold a market share of 29.61(%) per cent. For the month of February 2011 alone the total premium notched up by the 22 companies was estimated to be around R2.891.50 crore, the data maintained.

Consolidation seen in life insurance

A report by an international actuarial and consulting firm has warned that there is a sharp fall in investments by promoters of Indian life insurance companies, some of whom may either sell or close their companies to new business given capital constraints.

Investment by promoters of Indian life insurance companies has been over and over again dropping since the global financial crisis in 2008 although most companies are still to achieve break-even and are still in need of capital. Investments have halved from Rs 8170 crore in '08-09 to Rs 4152 crore in '09-10.

In the current fiscal (April 2010 till date), investment has again been half of the previous financial at Rs 2156 crore.

This reduction off reflects reluctance of promoters to pump in more funds although the industry still requires capital. According to a study by Milliman, an international actuarial firm, the main reasons for this are a general paucity of capital after the global economic downturn along with the careful approach taken by Indian insurers in light of a slowdown in new business volumes, high expense levels, and delayed break-even targets.

"Despite the recent slowdown in growth and capital infusions, we believe that the industry will still need to inject important volumes of capital in order to achieve the full potential that the sector has to offer. When the largest companies are in 1,500 to 2,000 locations, companies with a current footprint of only 200 to 300 branches and a desire to be national players are still looking at a lot of investment requirements," said Sanket Kawatkar, Practice Leader, Life Insurance, India, and Richard Holloway MD, South East Asia and India, in a white paper released on Wednesday.

According to the report, the recent IRDA guidelines capping charges on unit-linked products that were introduced on September 2010 may also have had a significant impact on promoters' desire to invest significant capital into the business in the near future. This is likely to impact the level of capital infusion in the near future until promoters gain greater confidence around the regulatory environment and revise their strategies accordingly.

"Promoters are questioning the merits of diverting available capital away from their core businesses to their life insurance businesses, where the break-even targets may now be further delayed following the recent regulatory developments," the report said.

The industry could get some relief in terms of capital if the foreign direct investment limits are raised or if companies are allowed to raise capital through an initial public offering. However, the regulation in respect of both these routes of capital recruitment has been delayed. The only option left for promoters is to raise capital through the private equity route at the holding company level. However, even in this way there are challenges because promoters value their companies much higher than private equity investors.

Indian Bank support for life insurance foray

Indian Bank has officially initiated its foray into the life insurance business with the invitation of request for proposal (RFP) from consultants to help its foray into the sector. The bank early this year said that it had received expression of interest from a few foreign players and domestic players to partner it in the life insurance foray.

Life insurance business in India is a highly crowded sector with the attendance of almost 23 players, including the market leader LIC. The first year premium collected by the life insurance firms saw a 23(%) per cent jump to Rs 1,03,875 crore during the April-February 2011 period against Rs 83,889 crore in the corresponding period the previous year.

However, there has been an 8(%) per cent drop in the number of policies sold, to 3.91 crore for the period April-February 2011 against 4.26 crore sold in the corresponding period the previous year. This has largely been attributed to the uncertainty relating to Ulip sales and the subsequent imposition of stiff regulations.

Indian bank has a bancassurance division through which it sells life insurance, non-life insurance and mutual fund products. “However the true potential for sale of life insurance products has not been fully exploited. With a view to participate in the growth of the life insurance industry, the bank would like to rope in a suitable partner for undertaking this business,” the bank said, in its tender notice.

Indian Bank’s bancassurance pact with HDFC Standard Life Insurance comes to an end by this month while its non-life bancassurance pact with United India Insurance would continue according to company officials.

Nippon Life has the same opinion to 5-yr lock-in

Japanese insurer Nippon Life has agreed to lock-in investment for 26 (%) stakes in Reliance Life Insurance for a period of 5 years.

In return for the stake, the company will get one permanent board seat and will also get to recommend one independent director for thought on the board. The Japanese insurer has gone in front with the transaction even after the earthquake tragedy. Both the partners have now submitted their proposal to the Insurance Regulatory and Development Authority.

Interestingly, although there is government proposal to increase foreign direct investment in insurance to 49(%) there is no clause providing for a higher stake. Both the partners have decided that if higher FDI is indeed allowed they will commence discussions afresh in good faith. If Nippon Life does not increase its stake Reliance Life can bring in a financial investor or sell shares through an initial public offering.

Last week, Reliance Capital signed an ultimate agreement with Nippon Life to sell a 26(%) stake in Reliance Life Insurance for Rs 3,062 crore ($680m). This transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($ 2.6 bn). Following the deal Bank of America Merrill Lynch in a research report said "The deal values R-Life at $2.6bn, which is over 60% higher than our estimates. RCap has invested around Rs3100cr till date in the life insurance venture. We maintain our life insurance business value at around Rs 7000 crore (Rs286/share), as we would like to still see improved operational performance across the sector currently experiencing regulatory headwinds".

In another report, Ambit said, "The management said that its a compulsory transaction for both the parties and only awaits regulatory approval from IRDA, RBI and Japanese Insurance regulator which management thinks might take anywhere from 1 to 3 months."

Life insurers' new premium collection drop 31% in Feb

New business premium (for individual regular policies) collections for life insurers fell 31(%) per cent in February, one of the steepest decrease in recent months.

The continued decline comes in the wake of more strict norms imposed by the Insurance Regulatory and Development Authority (IRDA) on guaranteeing a minimum return on pension policies besides scaling down the amount of commission payable to the agents.

The public sector giant LIC saw an even more sizeable decline with its new business premium collections registering a 44(%) per cent drop compared with the same time last year.

LIC collected Rs 2,273 crore compared with Rs 4,092 crore in February last. Private players put together saw a 12(%) per cent decline, though a few players suffered much steeper fall in collections. What should be a source of worry to the industry is that such a decline has come during its peak season for fresh business. As a rule, the industry collects close to 40(%) per cent of its total new business premium in the January to March quarter of a year — the tax-saving season for investors.

Fewer pension plans

The industry launched fewer pension plans this year as the insurance companies were guarded of the regulator's condition that the former spell out a minimum return to policyholders on such plans. New insurance regulations require players to guarantee a 4.5(%) per cent return for long durations under such plans. They accounted for 25-30(%) per cent of the business last year.

The introduction of new guidelines for ULIPs in September 2010, which required insurance companies to offer a minimum guarantee on pension plans, too has seen new business premium collections decrease for private players. For 12 of the 22 private insurers, new business premium collections for February were down with Bajaj Allianz Life insurance premium collection declining 53(%) per cent to Rs 190 crore.

For the first time since the insurance regulator put in place new guidelines for unit-linked insurance plans, LIC's premium collections have declined more than the private sector.

Among the private players SBI, Max New York Life and ING Vysya Life witnessed healthy growth in the band of 44(%) per cent, 39(%) per cent and 25(%) per cent respectively.

New traditional products

However, the positive development witnessed throughout the April 2010 - February 2011 period, is that insurers have started introducing traditional products where the risk of humanity alone is covered or additionally the policy promises a lump sum amount with a bonus amount thrown in.

With traditional products chipping in, year-to-date new business premium collection for regular policies witnessed a growth of 10(%) per cent to Rs 69,297 crore. LIC's growth of 16(%) per cent in new business premium has also helped.

Another factor that contributed to the better year-to-date figures is the higher ‘single premium' business collections.

In the normal times, private insurers are wary of selling the single premium products on account of lower profit margins. But with equity market turning unpredictable and minimum lock-in for the ULIPs being increased to 5 years, insurers have preferred to take the single premium route.

On a year to date basis, private players such as India First (BoB, Andhra Bank and Legal & General) witnessed healthy growth of 241 per cent to Rs 396 crore, followed by Shriram Life and HDFC Standard Life.

LIC collections build up for others slack

Premium collection in January was down by 14.5(%) per cent

On the back of a rush from the Life Insurance Corporation of India (LIC), the first-year premium collection by life insurance companies increased by 23.8(%) per cent to Rs 1,03,878 crore in the April-February period of the current financial year.

In this period, LIC collected Rs 73,122 crore by selling new policies, up 34.6(%) per cent compared to Rs 54,320 crore collected in the equivalent period last year.

During April-February 2009-10, the total first-year premium collected by the industry was Rs 83,891 crore.

According to data collected by the Insurance Regulatory and Development Authority (Irda), during the first 11 months of this financial year, private insurers posted a marginal 4(%) per cent rise in premium collection to Rs 30,756 crore, compared to Rs 29,571 crore in the corresponding period last year.

CONTRAST First year premium collection (Rs Crore)
Life insurance companies	April-February		Growth (%)
	2009-10	2010-11
Private	29,571	30,756	4.0
LIC	54,320	73,122	34.6
Total	83,891	1,03,878	23.8
Source: Irda

The industry recorded 7(%) per cent growth in premium collection on a month-on-month basis in February to Rs 8,344 crore, compared to Rs 8,301 crore collected in January 2011.

Industry sales took a hit after new norms were introduced in September and most of the growth in terms of premium income happened in the first six months of 2010-11.

The premium collection in January was down by 14.5 per cent, compared to Rs 9,709 crore in December. The new business income in November 2010 was Rs 7,282 crore.

In February, LIC’s new premium collection was up by 12.9(%) per cent on a year-on-year basis, whereas for its private peers the collection dipped by 5(%) per cent.

SBI Life, the largest private life insurer in terms of new business premium income, collected premiums worth Rs 5,845 crore during the first 11 months of 2010-11, up by 1.9(%) per cent compared to Rs 5,267 crore collected in the corresponding period a year earlier.

Know about LIC Samridhi Plus

Life insurers' new selling income falls 39% in Feb

New business premium income of life insurance companies fell for the sixth straight month as strict regulations on sale of the once popular Unit Linked Insurance Policy took sheen off investing in insurance products. Insurers collected new business premium of Rs 3,009 crore in February 2011, down 39% from Rs 4,896 crore a year earlier, according to the latest data collated by the industry.

The drop in collection is due to a shift towards straight insurance policies which have regulator-planned investment norms. These have lower-ticket size and not many pension products were sold either during the month. "Pension products contributed 30(%) per cent of the new business premium in the period last year which is missing,'' said India First MD and CEO P Nandagopal.

"Also, ticket size has dropped as industry has moved to traditional products." State-owned Life Insurance Corporation of India's sale plunged 45(%) per cent to Rs 1,296 crore in February. In the corresponding month last year, the company had collected a total new business premium of Rs 2,353 crore. Insurance company executives' said that offering a guarantee of 4.5(%) per cent on pension products is not viable for the industry.

"The product is not attractive with a mandatory two-third annuitisation, return of 4.5(%) per cent and compulsory life cover," said HDFC Life MD and CEO Amitabh Chaudhary. While the private players reported a drop of 33% during the month to Rs 1,713 crore against Rs 2,543 crore in February 2010. Private insurers such as ICICI Prudential and SBI Life reported a fall of 55% and 4% respectively. Generally, last quarter generates 40% of the total new business premium collected during the financial year as this is the tax season and individuals buy insurance policies to get benefit under Section 80C and Section 80 D of the Income Tax Act.

A subject of Insurance policy

Have you been waging a battle against insurance firms who do not honour promises? Keep heart. You are part of an army.

About two-thirds of the complaints received in the 5 consumer courts in Mumbai, Navi Mumbai and Thane in the last 4 years are insurance-related. Out of 1,488 complaints, 969 are against insurance firms, 299 against manufacturers of home appliances and consumer goods, and 220 against airlines and travel agencies.

Among insurance-related complaints, those pertaining to health insurance number more than the ones pertaining to vehicle insurance. A case in point is the South Mumbai consumer redressal forum, where 256 medical insurance and 116 vehicle insurance claims were filed from 2007 to 2010.

Consumer issue experts say the numbers exemplify how difficult it has become for policyholders to get medical insurance reimbursements. "Many cases related to medical claims come to consumer courts these days. Most are rejected on weak grounds like pre-existing disease and reasonability (of medical charges)," said consumer activist Jehangir Gai. "But there is a very good chance of consumers to win their cases if they approach the court with the relevant documents."

He said that through the reasonability clause, insurance firms try to level a policyholder over how much money a doctor can charge. He said he recently fought a case where the insurance firm rejected a chemotherapy claim for a cancer patient. "The insurance firm paid for three sessions but not the fourth. It said it would not incur the cost for outpatient treatment. But I won the case for the patient as the policy clearly says the clause is not applicable for chemotherapy."

Chetan Kothari, an activist who filed an RTI query on this issue said medical claims were rejected despite a stipulation by the Insurance Regulatory Development Authority (IRDA) that it was mandatory for doctors appointed by insurance firms to test customers before giving them policies. "Their own doctors are unable to discover pre-existing diseases. But when a claim is filed, the firm calls the disease pre-existing."

Rajan Alimchandani, a resident of Worli who had fought a medical claim case, said many policyholders do not know that IRDA rules state that if an insurance firm did not send objections to a claim within 15 days of it being filed, then the objections become invalid. "I fought a case where an insurance firm had rejected free medical check-up, which was part of the bonus package in the policy. Many policyholders do not even know they can avail of this facility."

Pvt Insurers look for level playing field with LIC

Urge Irda for a 3-5 yrs horizon to take on revised norms on Ulips.

Private sector life insurance companies have hunted a level playing field with government-owned Life Insurance Corporation of India (LIC), and have urged the insurance regulator for a 3-5 years horizon to adopt the revised regulatory architecture.

“One of the most worrying trends, post the new regulations, is that LIC accounted for 71(%) per cent of the new business income in the life insurance sector, during the first 10 months of the financial year. It is in difference to the trend in the last 2-3 years, when private sector players increased their share to around 50(%) percent of the new business income,” said P Nandagopal, managing director and CEO, IndiaFirst Life, during the Business Standard Insurance Round Table in Mumbai yesterday.

The Insurance Regulatory and Development Authority (Irda) had implemented new guidelines on unit-linked insurance plans (Ulips) from September, which capped the agent’s commission and mandated a minimum guarantee on pension products. The move was aimed at ensuring greater protection to policyholders and higher level of product disclosure.

First-year premium collections by life insurance companies increased 25.8(%) per cent to Rs 94,820 crore in the April-January period of the current financial year, mainly led by a surge in premium collection of LIC. The largest insurer’s premium income for April-January rose 36.9(%) per cent to Rs 67,135 crore, whereas private insurers posted a marginal 5.8(%) per cent increase to Rs 27,864 crore. During the same period last year, total first-year premium collected by the industry stood at Rs 75,347 crore.

“The new premium income of private insurance sector declined 40(%) per cent after September, which is not a good sign, whatever the growth may have been during the first 10 years. The new regulations have ensured that the industry is forced to sell more traditional products. And, since LIC has been selling traditional products, it has gained at the cost of private players,” said Amitabh Chaudhry, managing director and CEO, HDFC Standard Life.

“The main purpose of every regulation is customer protection. To this, there is no dispute and everybody is in the same pitch. When the main objective is the same, should we not have a level playing field between the private sector and the public sector, between the traditional plans and Ulips, between different distribution channels of the bank?” asked Nandagopal.

Keeping in mind the projected changes in the insurance industry, private players have sought a map for the next 3-5 years, so that companies can respond to changes quickly. “We would like to see a detailed map for the next 3-5 years, so that we can take the general industry forward. It would help us plan our business,” said Bhargav Dasgupta, CEO & managing director, ICICI Lombard General Insurance Company.

“As far as the upcoming challenges are concerned, the implementation of International Financial Reporting Services accounting norms will affect the industry, and also the Direct Taxes Code in its present form will be decremental to the industry’s growth,” said Gaurav Garg, managing director and CEO, Tata AIG General Insurance Company.

Industry would benefit if we have a map from the regulator as to what is expected in the next 4-5 years. We would be in a position to change our operating model and respond accordingly, Chaudhry added.

Japan's Nippon may purchase 26% in Reliance Life for $724 mn

Japan's largest life insurer Nippon Life Insurance is in talks with financial services firm Reliance Capital, controlled by Anil Ambani, to acquire a 26% stake into the Indian company's life insurance subsidiary for $724 million.

According to a person with information of the deal, the two companies have been in talks for more than 6 months now. “Reliance Life and Nippon Life have been in talks for more than six months. The deal was not going through because of some assessment issues. The talks got revived in the last two weeks," said the person, who declined to be identified as he is not authorized to talk to the media.

Reliance Life is the only life insurance company in which an Indian promoter owns 100% unlike many other ventures where overseas life insurers are partners. India's insurance sector laws have capped FDI at 26% although following governments have attempted to raise the foreign investment threshold.

Reliance Life MD and CEO Sam Ghosh declined to comment on the deal.

The life insurance business is highly capital intensive and takes close to 10 years for an insurer to break-even. That would mean only companies which have a cash pile or financial muscle can last the course. There have been reports of the Indian insurer planning an initial public offering and bringing in a strategic investor ahead of the planned share sale.

Earlier, Reliance Life was in talks with Swiss Life and China Life, but failed to close the deal. The company even tried to divest its stake through a public offer last year. It had approached the government to allow companies to list after carrying out five years of operation against the norm which stipulates that insurers can launch an IPO only after 10 years. Insurance companies are awaiting an adjustment to the Insurance Act, which will raise FDI to 49%.

Dai-ichi Life and Tokio Marine Life Insurance are the Japanese companies operating in India. Dai-ichi Life has tied up with Bank of India and Union Bank of India while Tokio Marine has partnered with Edelweiss for India foray.

Bharti Axa Life to launch two new plans

Private life insurer Bharti Axa Life Insurance will shortly launch two new products, one a traditional participating retirement plan and the other a child protection plan, to tap the prospective offered by these segments.

The company hopes to cash on the increased sales of life insurance policies that happen during March when people look at a choice of investment avenues to save their tax liability.

"We hope to earn 20-25(%) per cent of our total premium from the retirement product segment. We are in the process of launching our new product Wonder Years Retirement Plan," chief marketing and operations officer Mark Meehan told IANS on phone from Mumbai.

Further with its new retirement policy Bharti Axa Life plugs the opening that resulted in this product segment after the withdrawal of its unit linked retirement policy post new regulations brought in by the insurance regulator last year.

As per the new scheme, a policyholders can to choose the sum of money they would like to receive at their 60th year (the vesting age) or 10 years (the vesting term) and pay the premium till that period.

If the policyholder dies during the course of the policy then Bharti Axa Life would pay the premiums paid to the legal heir or nominee. "We will pay back the premium received plus 8(%) per cent interest on that," Meehan said.

Bonuses declared by the life insurer will be added to the corpus to be paid at maturity.

At the end of that period the policyholder has the option of withdrawing one-third of the total savings tax free and has to buy annuity from Bharti Axa Life or from any other life insurance company and enjoy a monthly pension.

Speaking about the future child protection product Bright Stars Power Plus, Meehan said it has evolved out of couple of other offerings.

He said the new child protection plan is unique as it builds savings for the child's key life stages and provides the family a triple benefit of sum assured, waiver of premium, and annual income support in case something ill-timed were to happen.

Life insurance IPO a distant vision

Domestic life insurance firms are in no hurry to hit the market with their initial public offerings (IPOs) even if the manager announces the guidelines now, according to a research report by HSBC.
According to the report, the hitches — such as limits on foreign direct venture, a 10-year track record and the absence of IPO guidelines — that have prevented floats by domestic life insurers will be removed this year.
However, it believes “only a brave Indian insurer” will come out with an IPO now, given the impact of the new regulations on unit-linked insurance plans (Ulips) and the pending direct tax code (DTC) bill.
New policy sales by private firms have fallen 20.78 per cent to 88,45,283 till the end of January this economic from 1,11,65,771 a year ago.
The refuse in the sale of individual regular premium policies was sharper at 22.7 per cent — from 1,05,67,140 to 81,68,782. “New business margins are also under pressure given the burden of fee and surrender penalty caps in Ulips,” the report said.
Following the new guidelines, the share of unit-linked business to total policy sales came down to 48 per cent from 52 per cent before September 2010.
Though the premium income (of private players) from new policy sales during April-January rose 5.84 per cent year-on-year, it came on the back of a steep increase in the premium rates of Ulips.
“Some insurers have started offering more guarantees on unit-linked products (such as NAV guarantee, capital protection) as they are not subject to Irda cap on charges and are hence high-margin business,” the report said.
“Insurers have also tried to tap conventional products that are also not subject to caps on charges and fees. However, it will be difficult for private insurers to compete on profitability because the Life Insurance Corporation of India is able to fund higher policyholder participation rate with free reserves accumulated over past generations.”
The DTC, if implemented unchanged in March 2012, could result in a collapse in sales and significantly lower earning for the life insurance sector.
The current DTC proposal will strip Ulips of all tax advantages and also does not provide relief to existing Ulips.
The latest published draft proposals for DTC provide for only Rs 50,000 tax deduction for life insurance premium, medical insurance premium and tuition fees taken together compared with Rs 1 lakh available for deduction now. Besides, the insurers’ corporate tax liability will also increase to 30 per cent from 14 per cent.
R. Krishnamurthy, former managing director of SBI Life Insurance Company and the present MD (distribution channel) of Towers Watson, had said, “Many domestic promoters of life insurers will be in a dilemma because these changes will put capital strain and promoters having non-financial sector as core business will find it difficult to pump in money in their insurance venture.”

Term plans score in excess of Ulips again

Term insurance products are back in favour with insurers. The cost of term plans has come down by 40-50 per cent over the past year.
A year before, a term plan insurance for a cover of Rs 50 lakh for a person aged 25-30 years attracted a premuim of Rs 12,000. The average cost of such a plan is now Rs 6,500-7,000.
A term insurance policy provides a confirmed benefit only upon the holder’s death, provided the death occurs within the policy period. There will be no stated benefits if the policy holder outlives the policy period.
With the Insurance Regulatory and Development Authority cracking a beat on the sale of unit-linked insurance plans, almost all major life insurers have launched a number of new term plans in recent months, to increase their sales and diversify the product portfolio. Examples are Aviva Life Shield Platinum, ICICI Prudential iProtect, Kotak e-Term, and Kotak e-Preferred Term plan, Met Suraksha Plus, SBI Life Smart Shield and HDFC Term Insurance.
Cost enticement
Other companies are in the process of doing so, citing reduced cost. For instance, Birla Sun Life Insurance will be revising its term plan, claiming the new one would cost 30(%) per cent less. “Most of our term plans were launched 10 years ago, so they have to repriced. Premiums are projected to come down by at least 30 per cent. It will be applicable for the existing customers as well,” said Fabien Jeudy, chief actuarial officer.
T R Ramachandran, MD & CEO, Aviva Life Insurance said also, “term plans are increasingly being launched in the online platform, where insurers save on overhead costs. Insurers are passing this savings on to the customers. Term plans are right for the online platform, as it is simple to understand,”. “Costs are particularly lower for those who start early. We are seeing an increased interest towards term plans in the 25-30 years population.”
Aviva recently introduced three term plans. Term plans constitute 16(%) per cent of its overall portfolio and 40(%) per cent of the traditional portfolio, he said.
Another reason for the lower cost is improvement in mortality rates, enabling insurers to issue term policies with longer tenures. “Mortality rates have improved by 10-15(%) per cent over the past few years. This is helping insurers to underwrite policies with higher tenure. Second, due to the same reason, reinsurance rates have also dropped by 20-25(%) per cent over the past one year, which is pushing the cost down,” said G N Agarwal, Chief Actuary, Future Genereli Life Insurance Co.
However, some industry experts believe an overdose of term plans is not ideal, as these address only a part of the risk. “According to statistics, only four of 1,000 policy holders dies during the policy period. There are other risks, apart from the life risks, which a term plan fails to cover. One needs a systemic savings plan and, ideally, term plans should be bundled with other hybrid products,” said P Nandagopal, MD & CEO, IndiaFirst Life Insurance.

ING Life plan at Rs 1939 crore premium in 2010-11

ING Vysya Life Insurance Company Ltd has set a pan-India premium collection target of Rs 1939 crore in the current financial year. The insurance company also aims to come out with a couple of new products in the first quarter of 2011-12.
Addressing media persons here, R Vishnu Kumar, director (sales), ING Vysya Life Insurance Company Ltd said, “We have recorded an overall premium collection of Rs 1109 crore by the end of December 2010 and have recorded a secondary growth of 1.76(%) per cent so far in this fiscal at a time when the insurance industry in the country has witnessed a negative growth. The company is targeting a premium collection of Rs 1939 crore by the end of March this year.”
The agency channels have the highest share of ING Life's premium collection at 68(%) per cent followed by ING Vysya Bank at 20(%) per cent and interchange channels like brokers and corporate agents account for 12(%) per cent.
ING Life on Wednesday, rolled out a traditional insurance product in the city- ING Ace with features like high guaranteed additions, limited premium payment and tax benefit under Section 80 C of the Income Tax Act.
The new plan comes in two variants- ING Ace Pension and ING Ace Life. The pension alternative offers the customers a guaranteed addition of 8.75(%) per cent throughout the 10-year term of the policy. The life version of ING Life offers 7.75(%) per cent or 7(%) per cent per annum guaranteed additions depending on the premium paid.
"I am delighted to launch both variants of ING Ace which we believe will appeal to a lot of our customers looking for tax saving solutions apart from attractive additions. ING Ace offers high guaranteed additions, tax benefits under Section 80 C and is available with low commitment from their side as they need to pay only 3 annual premiums”, Kumar said at the launch of the product.
The pension variant of ING Ace is planned for people in the age group of 35-60 years who are looking at building their corpus for post retirement.