New business income for life insurance companies down 17%: IRDA

Sales of life insurance policies continue to decline even during the tax-saving season. According to the data released by the Insurance Regulatory and Development Authority, or Irda, new business premium income for life insurance has fallen by 17% to Rs 71,953 crore during April-December, 2011, from Rs 86,698 crore a year ago.

While private sector saw a drop of 20.34% in income from sales of new policies during the first nine months, state-run Life Insurance Corporation registered a 15.86% fall. Large private insurers like SBI Life and ICICI Prudential witnessed a drop of 19.82% and 33%, respectively.

Industry experts blame non-availability of pension products, curbs on guaranteed products and delay in product approvals for the drop in income from insurance. The only private sector insurer to register an increase in income was MetLife.

The company recently sold its stake to the second-largest public sector lender Punjab National Bank. It has done a business of Rs 150 crore through the bank. The company has applied to the insurance regulator for approval of the deal. The regulator is reviewing the proposal and is likely to announce the deal in a month.

The volatility in the market has also acted as a deterrent for the sales of policies, especially Ulips.

Wait for bancassurance norms gets longer

The much-awaited bancassurance guidelines might take some more time to come out. The regulator is considering the reaction to certain issues, such as protests from bank-backed insurance companies and the Life Insurance Corporation of India (LIC).

The bancassurance report, which came out in June, recommended that banks be allowed to tie-up with two types of insurance companies (life and non-life) for distributing insurance products.

Bank-backed insurance companies are protesting against the opening up of the channel, allowing banks to sell products of more than one insurance company. Some feel the channel, if at all, should be opened for only two companies. New entrants opine that banks should be allowed to sell products of multiple insurance companies.

LIC, the largest life insurer, is particularly against opening the channel. While it has a tie-up with at least 20 banks across the country for selling life insurance products, it says if more than one insurer is allowed to tie-up with a bank, it might lead to a “highly questionable business practice”.

“There is no easy solution to the debate on whether the bancassurance channel should be opened up. We in LIC still feel it is advisable to have a tied-agency system with one insurance company, rather than two. If banks are allowed to tie-up with more than one insurance company, then the most likely situation would be evolution of a highly questionable business practice and competition, as had happened in the case of the mutual fund industry,” said Sushobhan Sarkar, executive director (international operations) of LIC.

“It requires a huge amount of commitment from both the insurers and the banks to set up a successful bancassurance partnership. To that extent the Indian financial system has not matured and, in our opinion, banks should be allowed to tie-up with one or, at the most, two insurance companies,” said M N Rao, CEO of SBI Life, promoted by the country's largest lender, State Bank of India.

“Most bank-promoted insurance companies are against opening the sector, as it might start a commission war,” said K Sahay, CEO of Star Union Dai-ichi Life Insurance Co, jointly promoted by Bank of India and Union Bank of India.

There is also the issue of upfront payments and on equity, which, after protests from banks led by Punjab National Bank (PNB), the insurance regulator might allow. This means banks might be allowed to treat payments and discounts on equity separately, rather than treating it as an advanced commission.

The draft report recommended that any upfront payments or equity discount offered by insurers to banks be treated as advance commission and amortised within three years of the deal. “This could have an effect on future deals, so the regulator is seriously examining it,” said sources. The issue is important, in the wake of the proposed deal between PNB and MetLife, which saw the bank getting nearly Rs 750 crore as discount.

PNB buys 30% stake in MetLife India

Public sector Punjab National Bank (PNB) has decided to acquire 30 per cent stake in MetLife India, an affiliate of MetLife Inc, and become a joint venture partner in the life insurance company. Following the closing of the transaction, the joint venture will rebrand as PNB MetLife o leverage the strengths of the two brands in the Indian market.

PNB started the process in December last year when it invited expression of interest from insurance companies across the world.

The bank received responses from 26 Indian and international companies proposing different models.

After evaluation of the various models, the bank opted to participate in a brownfield venture by acquiring stake in an existing Indian life insurance company. Accordingly, RFP was issued to 10 Indian insurance companies which had proposed this model. The bank shortlisted three life insurance companies after evaluating the technical bids: Bharti AXA, Aviva and MetLife, and based on the financial bids accepted MetLife India’s offer. PNB did not reveal the financial details of the deal. The transaction is subject to approvals from the Irda, the Reserve Bank of India and other regulatory bodies.

PNB, Metlife partner for life insurance venture

The country's second largest public sector lender, Punjab National Bank (PNB), today said it has selected Metlife as its partner for a proposed foray into the life insurance segment.

"We have considered offers made by various companies and selected MetLife as our partner," PNB chairman and managing director KR Kamath told reporters here after announcing the bank's quarterly numbers.

PNB had earlier shortlisted 10 entities from a preliminary list of 41 and further narrowed it to three for forming a partnership in the life insurance venture.

The three shortlisted life insurers were Bharti AXA, Aviva and Metlife.

Metlife India stakeholders include Jammu and Kashmir Bank, Shapoorji Pallonji and other investors, besides Metlife of the US.

Last year, PNB announced plans for a strategic partnership with an insurance player. The bank said it has decided to participate in the life insurance venture through "a corporate agency tie-up along with equity participation in an existing Indian life insurance company".

PNB is among the few banks with a large branch network that do not have a stake in a life insurance company.

Last year, PNB decided to part ways with its foreign partner in a proposed life insurance joint venture it set up four years ago.

PNB bought the entire 26% stake held by Principal Financial Group and the 32% participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company.

PNB's stake in the proposed joint venture was 30 per cent, while that of Vijaya Bank was 12%.

PNB to finalize life insurance partner by June

The country second largest public sector lender, Punjab National Bank (PNB), intends to finalize the partner for its life insurance foray by June.

"We hope to finalize the partner this quarter," Punjab National Bank Chairman and Managing Director K R Kamath said.

The bank short listed 10 entities from 41 and further it was narrowed down to three, he said.

The three short listed life insurers include Bharti AXA, Aviva and Metlife.

The bank will finalize the partner for life insurance business based on the evaluation of the proposals submitted by these insurance companies, he said.

If PNB picks up stake in any life insurer, either domestic or overseas partner will have to dilute stake in the insurance firm.

Aviva India is 74:26(%) per cent joint venture between FMCG player Dabur India and UK-based Aviva Plc while Bharti AXA Life Insurance is joint venture between Bharti Enterprises and AXA of France.

Metlife India stakeholders include Jammu and Kashmir Bank, Shapoorji Pallonji and other investors besides Metlife of the US.

Last year, PNB announced its plans for a strategic partnership with an insurance player. The bank had said it has decided to participate in the life insurance venture through "a corporate agency tie-up along with equity participation in an existing Indian life insurance company".

PNB is among the few banks with a large branch network which does not have a stake in a life insurance company.

Last year, PNB decided to part ways with it foreign partner in a proposed life insurance joint venture it set up four years ago.

PNB bought the entire 26(%) per cent stake held by Principal Financial Group and the 32(%) per cent participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.

PNB's stake in the proposed joint venture was 30 per cent, while that of Vijaya Bank was 12(%) per cent.

PNB shortlists Aviva, MetLife & Bharti Axa for Life Venture

Punjab National Bank, a state-run lender, will choose from a list of life insurance companies - Bharti Axa Life, Aviva Life and MetLife - to buy an equity stake, after dropping Reliance Life and Birla Sun Life , among others, from potential investments. The bank will call for commercial bids this week and evaluate on the tie-up.

The bank will finalize a partner based on the evaluation of the proposals submitted by these insurance companies. "We had divided the companies in three bands. Aviva, Bharti Axa and MetLife are in band 1. We will call for commercial bids this week and decide on a partner," said PNB chairman KR Kamath. Sources close to the development said the bank was interested in taking a substantial stake, and therefore , opted for smaller companies.

In order to achieve scale within the new distribution cost structure prescribed by the regulator, the smaller players are willing to offer a high stake. Off late, it has become essential for insurers to bring down their distribution cost. Bancassurance provides low cost of distribution as insurers sell policies through bank branches. Aviva, MetLife and Bharti Axa had a market share of 2.4%, 2.1% and 1.4%, respectively, at the end of February.

On a year up to February, Aviva saw its new business income slip by 13% while MetLife saw a drop of 45% in new business income. Bharti Axa Life Insurance registered a fall of 1.4% in income by selling new policies. Mr Kamath said the bank would look at non-life venture after forming a life insurance venture.

New Term Insurance product launched| MetLife

MetLife India Insurance has launched a term insurance product - Met Protect - the first such life cover plan (by the company) which is made available online.

• Met Protect would allow customers within the age group of 21-45 years to avail of life cover protection through the Internet.

• Met Protect would offer customers single and semi-annual premium payment option - the first of its kind amongst all the term products available online.


What is Term Insurance?
Term Insurance is a product that provides protection only for a specified period of time.

About the Company:-
MetLife currently has over 55,000 financial advisers and bancassurance distribution channel offering products to 17 million customers.

MetLife India is a joint venture between the US-based MetLife International Holdings, The Jammu and Kashmir Bank, M Pallonji and other private investors.