Anticipating a fall in sales of pension products after new guidelines kick in from July, life insurance companies are making a strong pitch to sell these this month.
For the country’s largest insurer, Life Insurance Corporation (LIC), Market Plus, a unit-linked pension plan, contributed 42 per cent to the new business premium income in 2009-10. It garnered Rs 18,155 crore for the corporation.
“We have asked our agents to sell Market Plus during the next one month. It is one of our best-selling products. It will lose its charm after the new guideline comes into force and the product is restructured,” said LIC Managing Director D K Mehrotra.
“We would like pension to account for at least 10 per cent of our total business in this financial year. Last year, 50 per cent of our new business premium came from pension. Since the products will be restructured, we are pushing sales now. Also, the first two months have been lean. We want to achieve the target in June,” said K Sahay, CEO, Star Union Daiichi Life Insurance.
The chief executive of a large insurance company said now it would be difficult to write pension plans for senior citizens. “We have policies for people up to 65 years. It will not be sustainable to offer pension to these people if life cover is bundled with pension. We have asked agents to increase sales in June in the senior citizen category,” he said.
The regulator is contemplating making either a life cover, a health cover or a minimum guarantee mandatory with pension plans. This will be beneficial for senior citizens as insurers hesitate to write health or life cover for them. The products will also become costly.
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In its latest circular, Irda mandated life cover with unit-linked pension products. It also banned partial withdrawals during the policy term. Moreover, policyholders have to compulsorily buy annuity at the time of maturity or surrender, with two-third of the fund accumulated. The rest can be withdrawn.
Insurers like Aviva Life say the changes will make the product more attractive. “Our target segment for pension is not 50-55 years but 20-30 years. This will lead to medical underwriting, which will be beneficial for both longevity and annuity risk,” said Aviva Life MD and CEO T R Ramachandran.