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.
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