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The income from the sale of new insurance policies has declined 11.88% in April this year compared with the corresponding period last year. According to the latest data released by the Insurance Regulatory and Development Authority (Irda), the life insurance industry collected 5,063.37 crore as premium through new policies in April, compared with 5,746 crore collected in April 2010. The Life Insurance Corporation of India (LIC), the country’s largest life insurer, collected 3,719 crore by selling new policies in April. Private life insurance players also recorded a decline of 14.5% in premium collection in April. While April is typically a lean month for the life insurance industry, the data is significant since it has come after the regulatory changes. As expected, two segments-pension and regular unit-linked insurance plans (Ulips)-have been affected the most. Pension products contributed around 30% to the industry’s income. But after the regulator mandated a minimum return on the product, its sales have come to a standstill. Apart from the drop in commissions, the sales were also affected because of the increase in the minimum ticket size of the policy, which has moved up to 20,000 in the changed regime. Earlier, the minimum ticket size was at around 10,000. During the last three years, the industry had registered a growth of over 25% in the new premium income. However, the sales took a hit after new norms were introduced in September 2010, with the first six months of 2010-11 accounting for most of the growth in premium income. Insurers, however, saw an increase in the sale of single-premium products. The profitability in single premium products is low as it is a one-time sale and the company does not earn premium on a regular basis. After the regulator imposed stiff norms on Ulips, the industry has moved towards traditional products, which are opaque compared with market-linked products. Traditional policies are different from Ulips as they are not market linked and the investments are guided by regulations. Source : The Economic Times
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