The insurance sector in India has been facing many new challenges in the past few months. New ULIP regulations in September 2010 and stringent norms had put all the insurance companies in a fix.
IRDA Chairman J Hari Narayan
According to J Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA), the rate of growth in the insurance sector is likely to decline during 2010-11. In a recent interaction with media persons, he said that, even though the overall first premium collection by insurance companies had increased, there was a slowdown in their growth rate. There could be various reasons for this however the most apparent one is the new regulations which came into effect in September, 2010. He further added, “The rate of growth will certainly come down. It may take another year or so before the insurance companies stabilize.”
IRDA is planning to expand the scope of pension products, as this is turning out to be an area of concern for them. However the Chairman clarified that they will not re-look the rate of return on these pension products which stands at 4.5%. They are also looking at a proposal to link the persistency ratio of insurance products to the agents’ license. Persistency ratio is an indicator that tracks policies that continue to get regular premiums by the customers. It can be co-related to the policyholder’s faith in the insurance product.
ULIP sales is another area of concern for the life insurance companies. There may be a dip in the ULIP sales as agents may not be as willing to push for these products, because of reduction in their commissions. Also capping of surrender charges and the even distribution of charges over the lock-in period of five years may also affect sales and profitability of these insurance companies.
