The pension product market that took a big beating in the insurance industry will be revived in the next one to two quarters, according to insurance industry players.
Life Insurance Corporation of India (LIC) is perhaps the only player that offers pension products in the market presently. Its immediate product offering is the Jeevan Akshay, This is a voluntary pension plan meant for employees retiring with inadequate pension benefits or none at all. A monthly pension is paid to the purchaser and on his death, a guaranteed insurance sum (GIS) equal to the purchase price is paid to the nominee. The final bonus, depending on the surplus generated during the period of pension, is also payable in addition to GIS.
D K Mehrotra, chairman of LIC has earlier told Business Standard that except what LIC is offering, there is no pension product available in the market. "Pension product should be targeted to a young population and it has to be incentivised," he had said earlier. Mehrotra had added that they had given a suggestion to have a separate window of relief for pension. so that it gives an incentive to people who invest.
In January this year, Insurance Regulatory and Development Authority (Irda) had said that pension products will have to guarantee an assured benefit in the form of a non-zero rate of return, that would be disclosed upfront. Before this, insurers were required to give a 4.5% guarantee on pension products.
The new regulations in January had led to slower approvals of pension product, as a result of which there has been a dearth of products in the market. Life insurance players including Birla Sun Life Insurance and HDFC Standard Life Insurance have told Business Standard that they have filed for products but are yet to get approval.
The players, however, are of the view that the pension market is on the verge of a revival. "Pensions, which used to 25% of the industry is now down to one%. Obviously, the guarantees which were expected were far too onerous over a long term horizon and with instruments which were not supporting it. Hence nobody filed. But now, it has come down to capital guarantee and I think the product filings have started," Jayant Dua, MD & CEO of Birla Sun Life Insurance said.
Similarly, Amitabh Chaudhry, MD & CEO of HDFC Standard Life informed that they had raised the pension-market revival issue in the recent meeting with the finance minister "Hopefully our products would be approved in the next three months and we believe that by the fourth quarter, pension product sales will start happening," he said.
Reliance Life Insurance officials had recently said that the company planned to launch a new pension plan as early as next month and has sought the sector regulator approval for the same, a top official said.
