INVESTORS SEEK RELIEF IN INSURANCE PRODUCTS

New Delhi: Indian investors are now seeking refuge in insurance products. With diminishing returns coming from equities and mutual funds, the life insurance industry has seen a sudden jump in sales activity during the first two months of the current fiscal. Cashing in on this uncertainty in the capital markets, insurance companies are now coming up with different variants of both traditional policies and Unit Linked Insurance Plans (Ulips).

Typically, the first six months of a financial year is seen as a lean period for the life insurance industry, and majority of the sales occur in the second half when people buy insurance policies to claim tax deductions. In fact, the life insurance companies are also looking at the current market scenario as an opportunity to increase its manpower, which they feel will benefit them during the second half of the current fiscal.

During the first two-months of current fiscal 2008-09, the life insurance sector collected fresh individual premium worth Rs 6,436 crore, an increase of almost 6% from Rs 6,091 crore premium collected during the same period previous year, as per the latest insurance regulator, Insurance Regulatory and Development Authority (IRDA) figures.

Says, Gaurang Shah, MD, Kotak Mahindra Old Mutual Life Insurance: “Given the current volatility, insurance as an investment ranks high on a risk-return matrix because of its long-term nature. We’re looking at this as an opportunity in disguise. In fact, we’re already in a hiring mode and are currently working on launching new products, which are a balance between traditional products and Unit Linked Policies (Ulips).”

With the regular individual premium collections for the said period increasing by more than 8%, insurance companies believe that the lean phase may well set the stage for coming months, when the activity heightens in this space. Concurs Prashant Tripathy, executive vice-president, strategic initiatives and business development, Max New York Life insurance: “We’ve achieved a growth rate of 90% in the last five months. Currently, we’re strengthening our product portfolio and the focus right now is towards those policies which provide some kind of capital guarantee to the customers.” Mr Tripathy feels that if the current volatility continues for another six months, the sales volumes of the insurance companies may also get affected. “But right now, we’ve yet to see any slack,” he asserts.

According to N S Kannan, executive director, ICICI Prudential Life Insurance, the industry has remained passive to any volatility in the markets because insurance is a long-term investment. “The fundamentals of the Indian economy are still strong and there are no doubts that the life insurance industry will continue its march forward. We expect life insurance space to grow by more than 40% this financial year. Probably, the stage is now set for secondgeneration Ulip products,” he says.

A similar optimist view is shared by ING Vysya Life Insurance, which has achieved a growth rate of 50% during the first five months of 2008. Says, Amit Gupta, director, marketing, ING Vysya: “There’s no letdown in advertising budget or hiring plans. If this slowdown continues for some more months, there can be a slowdown in Ulip products but then you’ll see the sales of traditional products going up.”

S B Mathur, secretary general, Life Insurance Council, believes that the stage has come for the insurance industry to introduce more innovative products besides Ulips. “This is the right time for insurance industry to focus on other traditional products. The next few months will see insurance companies coming up with more unique policies,” he says.

Sameer Bali, partner, Ernst & Young India, however, feels that the recent surge in the life insurance volumes is more a result of the private life insurers bearing fruit for tapping into new markets and the infrastructure they had set up in the last year or so.

“This scramble for people and resources will continue. Every private company is currently busy establishing base for future expansion. This, in fact, will set the tone for future action in the life insurance segment,” he says.

According to Associated Chambers of Commerce and Industry of India (ASSOCHAM), the life insurance industry in India will witness an increase of almost 500% in the size of its business which will grow to $60 billion (Rs 2,40,000 crore) by 2010 from the current size of around $10 billion (Rs 40,000 crore) as the growing competitive age is developing a larger appetite among people for wider insurance coverage.

Source: Aman Dhall & Dheeraj Tiwari
The Economic Times