The launch of the ?reformed' unit-linked products (ULIPs), policies that give the option to invest in the stock market and have a life cover, has made life difficult for agents and insurance companies. The changes came into force from September 2010. Over the past four months life has changed drastically for many of them.

Mr Anil Kumar, 27, an agent with a private insurance company for the past three years, is struggling to pay his car loan instalments of Rs 5,000 for the past five months.. His commission, the only source of income, has dropped to less than Rs 10,000 a month from about Rs 30,000 he earned six months ago.

Life (for) Agents

In sharp contrast is the experience of forty-six-year-old Mr R. Vasagan Arasu, who quit his job as an accountant and has been a life-insurance agent with a private insurer for the last nine years. Ask him how the going has been after September 1, 2010, and he says, ?It is easier to sell ULIPs now to customers as it could be compared to other financial instruments with costs coming down,? he replies.

The insurance regulator brought in new rules on ULIPs ? such as a cap on charges, increase in the lock-in period for investments to five years from three years and a guarantee of 4.5 per cent return on pension products.

Mr Arasu said many of his younger colleagues are finding it tough to sell policies. He gives a comparison: their company paid a travel allowance of Rs 1,500 for well-performing agents who bring in a premium income of Rs 20,000 by selling four insurance policies a month, but after September, as not many are able to meet this target, the insurer has agreed to pay Rs 750 as travel allowance for agents who bring in a premium income of Rs 10,000 by selling two policies a month.

To overcome this difficulty, most agents have taken to selling more of traditional policies, where the commission can be as high as 40 per cent on the first-year premium.

How has it been for 1.3 million agents of Life Insurance Corporation?

Mr G. Murugan, 50 years, and Mr V. Gunasekeran, 45 years, have been agents for more than 20 years. They said it did not impact them and chorused that the changes were in the interest of the policyholder. Before September, LIC agents were paid 10 per cent commission on ULIPs, which has since been reduced to 6.5 per cent. Private insurers and agents were hit harder as commission was as high as 40 per cent and fund-allocation charges in the first year went up to 60 per cent on certain ULIPs.

Life of Insurers

The reformed ULIPs have turned the heat on life-insurance companies also.

Mr Kamesh Goyal, CEO, Bajaj Allianz Life, said the business is moving towards single-premium and traditional products. The number of policies have dropped leading to an overall drop in business, he said.

With most life insurers yet to break even, shrinking margins are expected to postpone profitability of insurers. Mr G. Murlidhar, Chief Operating Officer, Kotak Life Insurance, said lower margins and lag in allowances released for expenses could have a bearing. However, the new regulations have made ULIPs attractive to the customer. Sales are witnessing steady increase month-on-month, but stabilisation will take time, he said.

So are agents quitting? ?Agency attrition is a natural phenomenon ? non-performing agents tend to discontinue. However, this year agent attrition is neither alarming nor significantly different from past,? said Mr Rajesh Sud, CEO and Managing Director, Max New York Life.

Mr S.B. Mathur, Secretary General, Life Insurance Council, said insurers have been asking for review of the changes made to ULIPs. However, the council has decided to wait till March-end to see the data, and then make a representation to the insurance regulator

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