(MENAFN Press) (EMAILWIRE.COM, November 16, 2012 ) Atlanta, GA --
The size of standard life insurance plans continues to sit below the 2008 level, which is the standard marker as just before the United States economic turmoil began.
With the equity marketing finding stabilization, private firms are once again selling unit-linked insurance policies, known as Ulips'. The average size for a standard premium policy has increased to Rs 16,205 during the April-September period. That is an improvement from 13,710 in the 2011-12 financial year. Even with the improvement, the size continues to remain below Rs 21,215 in 2008, according to the Kotak Institutional Equities Research.
HDFC Insurance has reduced the most out of private players, falling to Rs 37,817 in the April-September block, compared to 43,584 in FY12. Birla Sun Life Insurance increased most out of private insurers to 15,339, from 13,849 in FY12.
Malay Ghosh, who serves as executive director and president of Reliance Life Insurance, attempted to explain the trend, stating, the average ticket size today is much lower than what it was in 2008 because insurers at the time were mainly selling Ulips, while they mainly sell traditional plans today.
However, those insurers that have banks as distribution partners continue to focus on Ulips, he added. Continuing by stating, Traditional Insurance policies are longer tenure plans, say 15 years and more, and so people do not want to commit large premiums for a long term, while in the case of Ulips, they can surrender the policy after five years. The earlier regulations allowed them to surrender policy after three years with very low surrender charges. So, people were ready to commit large premium for Ulips mainly because they could surrender it after three years, said Ghosh.
A full 80% of new business premium for Reliance Life is being accumulated through traditional insurance policies. The ticket size average is Rs 13,000 and the average tenure is 15 years.
The Insurance Regulatory and Development Authority (Irda) revised its regulations regarding Ulips during 2010. The change reduced margins for insurance companies, and thereby forced them to devalue commissions for agents. The result was agents pushing traditional insurance plan that offered 20-35% commission within the first year.