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C. Shivkumar

BANGALORE, July 4

THE four general insurance companies have begun working on introducing savings-linked products into the insurance market.

Sources said that these products are likely to be introduced this year itself. Such policies have never been offered in Indian markets. The entire savings linked policies are currently offered only by life insurers.

Saving linked products would involve marrying some of the concepts of life insurance into the general insurance products. A cue for the introduction of this product came from ICICI Prudential Life Insurance, which borrowed some of the concepts of the general insurance and introduced some of the protection plans. One of ICICI's successful products provides risk cover without any savings linkage.

General insurers in turn intend borrowing some of the life insurance concepts and offer savings linked insurance covers. Such savings linked covers would be mostly in the personal lines of business, either medical or household policies, the sources said. Such a policy would offer risk cover, for an annual premium payment as well as a lump-sum repayment at the demise of the policy.

PSU general insurers like United India Insurance are already offering products like householders policy, to enhance customer comfort during repayment of housing loans. These covers are likely to be upgraded into savings linked policies, they added. Others like Oriental Insurance Company Ltd are also expected to follow suit.

However, all such cover would be entirely close ended. But none of the proposed savings linked covers though would be in a position to offer any assured rates of return, especially in view of the volatility in the financial markets.

The sources also said that such covers would ensure that claims are restricted to the barest minimum. The corpus collected through these kinds of policies would be invested in Government or designated securities as directed by the Insurance Regulatory and Development Authority (IRDA). These investments would generate returns, which would also be passed on to the investors, they added. However, such a product would automatically depreciate in value in the event of claims being made. This is because the claims would be netted from the cumulative payouts, they said.

Currently none of the four public sector general insurance companies have savings linked products. Most the products on offer are risk covers for either property or liabilities. For these combination policies, the sources could be designed specifically, since all the insurance companies have appointed actuaries as mandated by the IRDA.

But such covers are unlikely to be offered in motor insurance products, especially in the third party components. However, where the savings links are likely to be brought in would be in the personal lines of cover in motor insurance. This the sources said would help in automatic renewal of insurance with the same company and help in retaining customers for a longer period of time, at least for five years, when there is the possibility of a refund of insurance premiums at the end of the term.

One of the major reasons for the four public sector companies to introduce such products stems from the intensifying competition in the general insurance sector, from the private sector. Expanding the insurance coverage in the country and widening the premium income sources are factors, which have prompted the public sector to begin offering such products.

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