Uncertainty over regulation of unit-linked insurance plans (Ulips) is taking its toll on sale of new policies, while existing policyholders are looking at surrendering their policies.
Despite the Insurance Regulatory & Development Authority (Irda) issuing a circular saying policyholders’ money remains safe, insurers are seeing more enquiries for withdrawal. Also, there are few takers for new policies.
Typically, April is a slow month for sales and accounts for less than 1 per cent of the new business premium collected in a year. April 2009 contributed around 0.3 per cent, or Rs 3,601 crore, to the overall sales of new policies in the last financial year. New business income of the industry stood at Rs 109,290 crore in 2009-10.
“The number of enquiries has gone up by 1.5 times. Earlier, we used to get 10 on withdrawal a day, now we see around 25 enquiries,” said a senior sales executive of Aviva Life.
Under the present norms, policyholders are locked in for a minimum of three years and a partial withdrawal is allowed only afterwards. Though Irda has said companies couldn’t levy any surrender charge after four years of Ulips, the earlier lock-in was three years.
“People are curious to know what the regulatory stance is. There is doubt as to how their investments will be looked at,” said Anand Pejawar, executive director (marketing), SBI Life.
“April is a slow month for the life insurance industry. Insurance companies are busy in March, which sees the highest sales in a year,” said Life Insurance Council Secretary General SB Mathur. Companies do not have detailed data on sales at present, and the first set of numbers are expected only next month.
After the turf war between Sebi and Irda intensified on April 10, the insurance regulator came out to protect the interest of policyholders. Sebi had banned 14 private insurance companies from selling Ulips and accepting renewal premium. But, on April 12, it allowed insurers to collect new as well as renewal premium, but asked insurers to take its permission before launching new schemes. Irda, however, held its ground and asked insurers to ignore Sebi’s order. The finance ministry has asked the two regulators to go to a court at the soonest to resolve the matter.
