Following the Insurance Regulatory Development Authority’s (Irda’s) cap on insurance charges, Life Insurance Corporation (LIC) is looking at measures like increasing the minimum premium and lock-in period, and rejigging other expenses such as fund management charges, for unit-linked insurance plans (Ulips).
Addressing LIC agents at the 38th Chairman’s Club’s Convention meeting in Kolkata on Saturday, T S Vijayan, chairman, LIC, also assured agents that their commission would not be reduced to comply with the new regulations. “We saw that two-three products need to be restructured. We will redesign the products by cutting expenses such as fund management. We will not touch our agents’ commission. In some cases, the minimum single premium will have to be increased from Rs 25,000 to Rs 31,000 or Rs 40,000, or we may have to increase the minimum term from five to 10 years,” he said. This year, LIC has set a first premium collection target of Rs 48,000 crore, and so far it has collected about Rs 17,000 crore.
The total assets under LIC was close to Rs 10 lakh crore, at present, with about 25o million policy holders, said Vijayan.
Irda had recently prescribed caps on the overall charges that life insurance companies can levy on subscribers of their Ulips. It had capped the difference between gross and net yield to customers at 3 per cent for 10-year policies and at 2.25 per cent for policies of more than 10 years.
The regulator had said insurers could withdraw all existing policies that did not meet the requirement by December 31, 2009, while all policies filed after October 1, 2009, would be governed by the new rules.
On the Swarup panel recommendations that the current agency system be replaced with a system whereby customers pay fees to advisors, Vijayan said, the move would not help in the growth of LIC. Also, one should wait for the regulator’s move, rather than being worried about the draft report, he told the agents.
