Private life insurers, which have been seeing a decline in new business since last August when the new unit-linked insurance plan (Ulip) guidelines came into force, are hopeful of posting good numbers from this month.
“September onwards we are expecting a positive trend because the industry has been facing a sluggish growth since August last year and compared to those numbers, we see signs of growth going ahead,” said G N Agarwal, chief actuary, Future Generali Life Insurance Co.
According to a report from JP Morgan on August 26, capital market sluggishness and base effect may favour life insurance business in the coming months.
“Last year there was a steep decline in the business which was the immediate effect of the Ulip regulation. September 2010 witnessed some spillover volumes from August 2010 backlog and thus strong year-on-year growth from October 2011 can be expected,” the report said. Insurers said growth is usually sluggish in July and August as against the last two quarters of the year.
“The new business premium is cyclical. Usually July and August are sluggish, whereas quarters at the end of the year are comparatively larger because most of the companies run incentive plans by then,” says Anisha Motwani, director and chief marketing officer, Max New York Life Insurance Co (MNYL).
Private insurers feel Ulip norms are the main reason for declining annual premium equivalent (APE), or new business premium, of private life insurers to 38% on a year-on-year basis in July.
“Because of the adjustment period and the top markets fluctuating, the insurance market may see an upward trend going forward,” said Motwani of MNYL.
On a month-on-month basis, the new business premium of private life insurers grew 10% in July while the state-owned player, LIC, witnessed 77% growth.
However, the first-year premium collection declined 28.36% in April-June 2011 compared with the corresponding previous period.
Insurers said lower agent commissions on Ulips are a major concern for decline in the new business premium. The industry has been focusing on traditional products to boost sales.
“Industry’s almost 60%-70% business used to come via Ulips. With Ulips contributing so much to our business, it is obvious for the industry to face de-growth,” said Agarwal of Future Generali.
According to a JM Financial
report on life insurance sector dated August 26, all major private life insurers showed a significant decline in new business premium except MNYL, which saw a marginal year-on-year decline of 5%. The report said ICICI Prudential and Reliance Life Insurance were the main losers in market share on APE basis, marking a decline of 6.6% and 4.9%, respectively.
Regulation on pension products:
“The other reason for the fall in new business premium is decline in the pension products after 2010,” said Motwani.
Pension products had lost their sheen post September 2010 due to the regulation, which mandated offering minimum guaranteed returns of 4.5% on all pension and annuity products.
The Insurance Regulatory Development Authority has come up with a draft on pension products earlier this month removing the guaranteed return. Insurers are showing mixed reaction on this.
Insurance agent dropouts rising:
The increasing dropouts of private insurance agents is also a major concern for the industry. A national-level survey has revealed that dropouts are set to rise 25% in the current financial year. Fixed deposit Interest Rates
“Along with the reduced commissions on Ulips, the increase in the dropout rate of insurance agents may be a reason for the business decline. There may be less number of agents, most may be part-time, but unlike before, there is quality in their services because the regulator wanted more productive and serious agents rather than non-serious ones who hampered the industry’s growth,” said SB Mathur, secretary-general at Life Insurance Council, said.
No comments:
Post a Comment