Insurance remains a push product

Insurance remains a push product

he annualised premium equivalent for the life insurance industry grew by just 1.3% year-on-year in September, the first month after new norms for product pricing were announced by the insurance regulator IRDA. While business for private sector players declined 13% year-on-year, the state-owned LIC managed to do reasonably well. TS Vijayan, chairman, LIC, tells Shobhana Subramanian that sales of ULIPs may not really come down since buyers seem to like the product.

September has been a dull month for life insurers but, traditionally, almost 22% of the first half sales for the industry come in at this time. Are we looking at a degrowth?

August has been an exceptionally good month, so it’s not surprising that September has been slow. This happens in March too, typically a good month for the industry, following which April and May tend to be dull. September is the first month in which the industry operated under the new guidelines and I think it will take some time for people to understand the new products. Ultimately, the distribution happens through the agents, and it will take time for us to introduce them to the new products and train them. I believe that volumes will pick up in 3 or 4 months even in this new regime. This year, at LIC, we are expecting a 25-30% growth in new premiums and the industry too should do well.

But the apprehension is that with distributors’ commissions having been reduced, volumes may not be too high...

That may be true for ULIPs on which distributors may not be making too much of a commission but we have traditional products that can be sold. What is really happening is that with the new regulation, the smaller ticket ULIP policies have gone out of the system. Today, the minimum annual premium has to be something like Rs 15,000 while earlier, policies with premiums of even Rs 5,000 could be sold. So an agent who is dependent on customers, who can afford an annual premium of only Rs 8,000 or Rs 9,000, doesn’t have a customer base. ULIPs have accounted for a large share of total premiums; at LIC, the share of ULIPs is around 60%. Maybe the industry has to look at some other products but I don’t see any significant fall in volumes this year because we still have 5 months till March, 2011. At least in LIC, we are not expecting volumes...

http://www.financialexpress.com/news/Insurance-remains-a-push-product/706826/

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Insurance always has and always will be a push product, that will never change. The fact is most people won’t, or at least will be hoping they will never have to claim on the policy, therefore a lot of people do not see the need to take out a policy.