Life insurance policies are now at high demand
By: Addi Vardhaman
The Indian insurance market has gained added momentum with the entry of private players after the liberalisation of the economy. The new players have not only taken away the market share of existing players(usually the public sector LIC) but also actually expanded and diversified the Indian insurance market. These private players' abilities to offer innovative and world class products and aggressive marketing strategy compounded with the general up-trend in economic growth has given a boost to the insurance industry in India.
The Indian insurance market is becoming more competitive day-by-day. Leading public sector banks and corporate houses are jumping into the fray to have their share of this untapped lucrative pie. The net increase in the disposable income of the Indians has created a increase in the sales of tax-saving life insurance policies. The gross premium collection in the Indian life insurance market grew 41% to Rs. 35,896 crore in the financial year 2006-07. This growth was due to a growth in individual premiums and policies. Individual non-single premiums grew 30% to Rs. 19,889 crore in this period, while individual single premiums witnessed growth at an even faster rate of 86% to a massive Rs. 10,998 crore.
With more and more Indians buying policies with investment options, the extent of investments is also rising in the Indian economy. The increasing ticket size of individual policies is the testimonial of this growth trend. For private players offering the life insurance policies, the average annual premium crossed the Rs. 20,000 level in the financial year 2006-07. Bullish conditions in the equity market and the high volatility of Bombay Stock Exchange spurred many individuals to invest in unit-linked insurance plans (ULIPs) in large amounts. ULIP policies comprised 44.8% of the overall Indian insurance business. In case of Life Insurance Corporation of India, the share of ULIP and non-ULIP policies was 29.8% and 70.2%, respectively, while the share of private insurers stood at 82.5% and 17.5%, in this time period.
The revenue (first year premiums) for many of the companies providing life insurance policy has been growing at double-digit rates in Financial Year 2006-07. Private players likeBajaj Allianz, MetLife, Aviva and Reliance saw at least a doubling of first year premiums. Bajaj Allianz witnessed a whooping 213% growth in new business collections to Rs. 2,700 crore in this period.
The new players in the life insurance sector are focusing more on IT innovation and diversification of life insurance policy facilities. The latest entrant in this field, IDBI Fortis Life Insurance, is planning innovative products coupled with an advanced technological platform to get the advanced edge. With an aim to break even period of 6-7 years, the company intends to use branch networks of both the Industrial Development Bank of India (IDBI) and Federal Bank to promote its life insurance policy business.
Diversification has become the new buzzword in the Indian insurance scenario. Apart from traditional tax saving life insurance policies, these companies are now offering life insurance policy as an investment tool. The Insurance Regulatory & Development Authority (IRDA) Board has recently approved of a set of guidelines that will give insurers greater freedom and flexibility in their investment portfolios. As per the new guidelines of the IRDA, insurers can have an exposure of 25% in a single group company, which was 10% earlier. Exposure limit in a single industry sector also has been increased to 25% from 10%. In a nutshell, the life insurance policy is no more a passive tool of tax reduction, rather it is an aggressive tool of investment.
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