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The life insurance sector, which has seen a dip in new business premiums in the past 12-15 months, is expected to see a spike in premium collection for the three-months ended December 31. This is because insurers are anticipating an increase in sales, since new product guidelines will only be implemented from January 1, 2014.
“There are a lot of anxious customers who have approached us, expressing an intent to buy a life cover before the deadline for re-filing comes to an end. Hence, we expect to see a 10-15 per cent rise in new premium collection. However, we are ensuring customers are aware the new guidelines will make our products more transparent,” said the chief marketing officer of a large life insurance firm.
The Insurance Regulatory and Development Authority (Irda) had brought out a new set of guidelines for life insurance products in February. While the minimum death benefit and surrender value have been altered for traditional product customers who stay invested in a policy for a longer period, in the case of unit-linked insurance products (Ulips), insurers will have to intimate customers about changes in the yield of the Ulip every month.
While the original deadline for phasing out the old products was September 30, the regulator extended it till December 31 so that life insurers had adequate time for transition to the new regime. However, Irda has clarified that sale of products linked to an external index (index-linked insurance products) and highest net asset value (NAV) guarantee products have to be stopped from October 1.
Officials at the regulatory body have already started noticing the trend. A senior Irda official explained the new premia for September for large insurers have been exceptionally better than the other months, adding this could be due to the fact that insurers had marketed their products to be sold before the earlier October 1 deadline.
Life insurers also admit that they have advertised their products, catering to the customer base that wanted to purchase products in their present format. A senior executive of a private life insurance company explained several life insurers have had campaigns to enable customers purchase products before the deadline approaches.
Experts also note products with such a high NAV guarantee and Ulips still have a small customer base, which has the risk-appetite to purchase these. “Though the regulator has stopped the sale of these products, some savvy customers wanted to buy these. Hence, we saw a larger proportion of sale coming from these products in the September quarter, unlike other periods. In normal circumstances, these constitute three-four per cent of the new premiums of industry. However, in the last one to two months, it has gone up to 7-10 per cent,” said the chief actuary of a life insurance firm.
The new guidelines to be implemented from January 1 will make products more transparent. Each life insurance policy will have a benefit illustration from January 1, providing details of all returns and benefits provided by the insurance plan, which till now was mandatory only for unit-linked products.
