With growth in life insurers' new premium business declining, insurers and agents are increasingly shifting focus to renewal premiums.
In April-December period, growth in new premium income of life insurance companies fell 3.5 per cent to Rs 69,184.5 crore, compared with Rs 71, 953.5 crore in the year-ago period. According to data from the Insurance Regulatory and Development Authority (Irda), private life insurers collected Rs 18,907.1 crore from new policies in the April-December period, a fall of about five per cent from Rs 19,901.1 crore collected in the corresponding period of the previous year.
G N Agarwal, chief executive and chief actuary of Future Generali India Life Insurance, said insurers planned to increase renewal premium collections. As agents received renewal commissions and they didn't want to lose clients due to policies lapsing, they, too, were focusing on renewals, he added.
A senior executive with a private life insurer said agents played a major role in renewals, as their commissions and licence renewal depended on renewals. "In product categories like Ulips, in which there is a fluctuation in market conditions, many policies have lapsed. It is in these situations that renewals play a big role," he said.
According to Irda guidelines on the persistency of life insurance policies for individual agents, for renewals before 2014-15, the average persistency rate for an agent for 2011-12, 2012-13 and 2013-14 would be at least 50 per cent, in terms of the policies and premium procured by such agent. From 2014-15, the rate for each agent would be at least 75 per cent.
In the health insurance space, too, insurers are looking to tap the renewal premium market. "Agents are finding it tough to acquire new business, as convincing new clients to buy a policy is getting difficult these days. This is because most think nothing can happen to them, a typical Indian psyche," said a senior Tata AIG General Insurance executive.
Tapan Singhel, managing director and chief executive of Bajaj Allianz General Insurance, said earlier, private general insurers focused on new business, as they were of building their businesses. "But now, both insurers and agents have turned their efforts to renewals, a bigger proportion of the total premium income compared to new business premium," he said.
Agents are drawn to the renewal business because commission for health insurance agents from new business and renewal business is the same---15 per cent.
Experts say customers contact agents during renewals. Though client retention is challenging, it is tougher to secure new clients, as only those aged more than 45 buy individual health plans. And, the underwriting norms for this group vary across insurers. As a result, the agent spends more time in closing the business. Renewing a business, however, isn't difficult.
Companies are also strengthening their back-office infrastructure to ensure smooth policy renewals. Many general insurance companies now have in-house renewal businesses so that agents can concentrate on new business. For instance, Tata AIG General Insurance has set up a 'rollover shoppe model' for policy renewals. Through this, the company plans to extend all the help that agents do for policies due for renewal. Some also look at addressing client retention. In such cases, agents are paid lower commissions---between seven and 10 per cent. For large insurance companies, this helps cut costs, as paying commission is more expensive than the one-time expenditure on infrastructure for renewal business.
According to Irda's annual report for 2011-12, while renewal premiums accounted for 60.3 per cent of the premium of life insurers (56.7 per cent in 2010-11), first-year premiums contributed the rest. In 2011-12, of the total premium of Rs 84,182.8 crore for private life insurers, renewal premiums accounted for Rs 52,102.9 crore.
In April-December period, growth in new premium income of life insurance companies fell 3.5 per cent to Rs 69,184.5 crore, compared with Rs 71, 953.5 crore in the year-ago period. According to data from the Insurance Regulatory and Development Authority (Irda), private life insurers collected Rs 18,907.1 crore from new policies in the April-December period, a fall of about five per cent from Rs 19,901.1 crore collected in the corresponding period of the previous year.
G N Agarwal, chief executive and chief actuary of Future Generali India Life Insurance, said insurers planned to increase renewal premium collections. As agents received renewal commissions and they didn't want to lose clients due to policies lapsing, they, too, were focusing on renewals, he added.
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Today, a traditional insurance product (term or endowment) typically earns agents 30-35 per cent of the first-year premium, seven-eight per cent of the second-year premium and four-five per cent of the premium during the rest of the policy term. For unit-linked insurance plans (Ulips), they earn up to seven per cent in first year and five per cent thereafter. Online term plans fetch agents six per cent, albeit only in the first year.
A senior executive with a private life insurer said agents played a major role in renewals, as their commissions and licence renewal depended on renewals. "In product categories like Ulips, in which there is a fluctuation in market conditions, many policies have lapsed. It is in these situations that renewals play a big role," he said.
According to Irda guidelines on the persistency of life insurance policies for individual agents, for renewals before 2014-15, the average persistency rate for an agent for 2011-12, 2012-13 and 2013-14 would be at least 50 per cent, in terms of the policies and premium procured by such agent. From 2014-15, the rate for each agent would be at least 75 per cent.
In the health insurance space, too, insurers are looking to tap the renewal premium market. "Agents are finding it tough to acquire new business, as convincing new clients to buy a policy is getting difficult these days. This is because most think nothing can happen to them, a typical Indian psyche," said a senior Tata AIG General Insurance executive.
Tapan Singhel, managing director and chief executive of Bajaj Allianz General Insurance, said earlier, private general insurers focused on new business, as they were of building their businesses. "But now, both insurers and agents have turned their efforts to renewals, a bigger proportion of the total premium income compared to new business premium," he said.
Agents are drawn to the renewal business because commission for health insurance agents from new business and renewal business is the same---15 per cent.
Experts say customers contact agents during renewals. Though client retention is challenging, it is tougher to secure new clients, as only those aged more than 45 buy individual health plans. And, the underwriting norms for this group vary across insurers. As a result, the agent spends more time in closing the business. Renewing a business, however, isn't difficult.
Companies are also strengthening their back-office infrastructure to ensure smooth policy renewals. Many general insurance companies now have in-house renewal businesses so that agents can concentrate on new business. For instance, Tata AIG General Insurance has set up a 'rollover shoppe model' for policy renewals. Through this, the company plans to extend all the help that agents do for policies due for renewal. Some also look at addressing client retention. In such cases, agents are paid lower commissions---between seven and 10 per cent. For large insurance companies, this helps cut costs, as paying commission is more expensive than the one-time expenditure on infrastructure for renewal business.
According to Irda's annual report for 2011-12, while renewal premiums accounted for 60.3 per cent of the premium of life insurers (56.7 per cent in 2010-11), first-year premiums contributed the rest. In 2011-12, of the total premium of Rs 84,182.8 crore for private life insurers, renewal premiums accounted for Rs 52,102.9 crore.