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Life insurance policies as a means to save on tax, especially a favourite in the last quarter of the financial year, seem to be losing favour with the salaried class.
And banks are ‘gaining' vis-à-vis insurance companies in luring investors.
Trends
“The sale of unit-linked insurance products during October 2010-Febraury 2011 period fell by over 40 per cent compared with the same period last year,” Mr V. Srinivasan, Chief Financial Officer, Bharti AXA Life Insurance Company, Ltd told Business Line .
The IRDA data would also support such a conclusion, he added.
The reasons behind this are varied. Changes in ULIP regulations, decrease in agent's commission and engagement of some insurers in training/orientation of their sales staff on new products and strategies could be behind this, say industry experts.
As term deposits rates are higher, banks are attracting a chunk of savings that could have come to insurance, Mr Srinivasan said.
“The total industry and private insurers recorded a decline of 19 per cent and 35 per cent respectively during September 2010 to January 2011 and 15 out of 23 life insurers recorded a decline during this period,” Mr Viswanand, Director and Head of Product Management and Persistency, Max New York Life Insurance, said.
Max New York Life's adjusted individual first year premium, however, grew by 8 per cent to Rs 728 crore during September 10 – January 11, he added.
While observing that high, guaranteed interest offer by banks could lure investors, he said, “Our research shows that consumers predominantly view bank deposits as a short term instrument and life insurance as long-term savings and protection vehicle.”
Bonds do serve the purpose of long-term savings but they do not promote disciplined savings as is the case with regular pay life insurance plans.
The product mix in the market has also changed. “At present, traditional plans and ULIPs are in the ratio of 50:50,” Mr Srinivasan said.
Before September last, the ratio was 30:70 in the industry while for most private insurers ULIPs share was as high as 90 per cent.
The Insurance Regulatory and Development Authority, however, is not worried over the trend.
“We expect lower sales initially post ULIP reforms,” Mr J. Hari Narayan, Chairman, IRDA, told Business Line in a recent interaction.
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