MUMBAI: Health insurer Apollo DKV Insurance Co Ltd plans to invest up to Rs 5 billion in the next five years to increase market share, Vice Chairperson of the Apollo Hospitals Group, Shobana Kamineni, told reporters on the sidelines of a health insurance summit on Friday. "To be a significant player we need at least 15 per cent of business in the health insurance sector in India," she said. She estimated the health insurance business in India at $1 billion now. The addressable market is the 250 million middle class Indians, she said. The company is a joint venture between Apollo Hospitals Group, which holds 74 per cent in the venture, and DKV Deutsche Krankenversicherung AG, which is a part of German re-insurer Munich Re. Apollo Hospitals Enterprise Ltd is the flagship of the Apollo Hospitals Group. The venture has so far invested 1 billion rupees in India. In the five months of its operations in India, Apollo DKV Insurance Co has generated 100 million rupees revenue in premiums collected
Source: ET
Thursday, May 15, 2008
Aviva plans MF foray
15/May/2008
Life Insurance firm Aviva India is planning to foray into mutual funds by setting up an asset management company. The company is also doubling its sales force for the insurance business and plans to launch new products for the health insurance segment.
India and China have massive geographic potential and will continue to drive our growth in the Asia-Pacific region. In India, Aviva plans to foray in the asset management segment either through a joint venture with a local partner or independently. According to the existing laws, foreign companies will have to invest a minimum of $5 million if it wants to start an asset management company through a JV. If the overseas company pursues the venture independently, it will have to invest a minimum of $50 million. It takes around 6-12 months to get an asset management Licence in India.
Asset management is a key unit of the company. Globally, Aviva Plc has around $326 billion worth of funds as asset under management. An ideal Indian partner should have a large distribution network. However, he declined to comment if the company is in talks for an Indian partner. Aviva also intends to raise its stake in Aviva India to 49% whenever the government increases the FDI limit in the sector to 49% from the present 26%.
The hike in FDI in the sector has been opposed by the Left parties for the past 4 years. Aviva India is a 26:74 JV with the Dabur Group holding the majority stake.
One of the focus areas of the company is to drive its growth in India by augmenting its distribution channel.
Source: Insuremagic
Life Insurance firm Aviva India is planning to foray into mutual funds by setting up an asset management company. The company is also doubling its sales force for the insurance business and plans to launch new products for the health insurance segment.
India and China have massive geographic potential and will continue to drive our growth in the Asia-Pacific region. In India, Aviva plans to foray in the asset management segment either through a joint venture with a local partner or independently. According to the existing laws, foreign companies will have to invest a minimum of $5 million if it wants to start an asset management company through a JV. If the overseas company pursues the venture independently, it will have to invest a minimum of $50 million. It takes around 6-12 months to get an asset management Licence in India.
Asset management is a key unit of the company. Globally, Aviva Plc has around $326 billion worth of funds as asset under management. An ideal Indian partner should have a large distribution network. However, he declined to comment if the company is in talks for an Indian partner. Aviva also intends to raise its stake in Aviva India to 49% whenever the government increases the FDI limit in the sector to 49% from the present 26%.
The hike in FDI in the sector has been opposed by the Left parties for the past 4 years. Aviva India is a 26:74 JV with the Dabur Group holding the majority stake.
One of the focus areas of the company is to drive its growth in India by augmenting its distribution channel.
Source: Insuremagic
The bonus bounty: Play your cards right
MUMBAI: It’s that time of the year when your salary is supposed to look fatter — after all, the financial year has ended. And the New Year brings cheer with pay hikes and lumpsum performance bonus, if any. Are you one of those lucky employees to boast of such a windfall? If yes, ET congratulates you as it takes you through a financial plan to park your bonus money.
It’s better that you pay off your ‘bad and ugly loans’ with it. These could be your high interest-paying credit card bills, personal loans or car loan. “Any loan that costs above 14% should be paid off,” says Kartik Jhaveri, a certified financial planner, and director, Transcend India.
Never miss the wood for the trees and ensure that any investment is directed towards the ultimate financial goal, experts say. The idea is that you should see your money grow to meet your financial targets.
If you want to use the money for medium-term needs, say 3-4 years, consider safe instruments like debt. This could be debt funds or even arbitrage funds. Arbitrage funds generate fixed income by taking advantage of price differentials between the cash and the futures market.
“I would advise not to invest this bonus in aggressive instruments as this windfall is not part of regular investment plan. It’s better to park it in safe instruments, which can later be used for downpayment of home loan. This would lower the overall loan amount,” says Swapnil Pawar, director, Park Financial Advisors, a personal financial planning company.
If you are above 35 years old, you could also look at adding this amount to your retirement corpus. Consider index funds or balanced funds, Mr Pawar suggests. If you have smaller amounts like Rs 50,000 or below, you could look at PPF. That would shore up your long-term savings.
When you think long term, experts suggest equity. The reason being equity investments can give tremendous returns in the long term. This may be a good time to buy stocks, given that markets are looking choppy. But the bigger question is whether you want to enter the equity route via stocks or look at equity mutual funds? “You should look at splitting your money over 5-6 blue chip companies. If you don’t have the expertise, then a diversified equity fund will be a safe bet,” Mr Jhaveri adds.
Consider parking the money in liquid funds, fixed deposits if you require money in the near term. Liquid funds can be a good alternative as the effective tax rate would be less.
Every windfall comes with a price tag. In this case, the bonus amount will be taxed as part of your salary. How much it would exactly cost you would depend upon the tax slab. You could look at insurance, PPF or even equity-linked saving scheme, which would come under Section 80C. Even home loan could help.
The overall tax deduction on the interest component for a single borrower is Rs 1,50,000 and Rs 3 lakh in case of joint loans. Even the principal component of the loan enjoys tax rebate. So, base your decision on the post-tax return, not to mention your liquidity needs.
Source: Economic Times/15 May,2008
It’s better that you pay off your ‘bad and ugly loans’ with it. These could be your high interest-paying credit card bills, personal loans or car loan. “Any loan that costs above 14% should be paid off,” says Kartik Jhaveri, a certified financial planner, and director, Transcend India.
Never miss the wood for the trees and ensure that any investment is directed towards the ultimate financial goal, experts say. The idea is that you should see your money grow to meet your financial targets.
If you want to use the money for medium-term needs, say 3-4 years, consider safe instruments like debt. This could be debt funds or even arbitrage funds. Arbitrage funds generate fixed income by taking advantage of price differentials between the cash and the futures market.
“I would advise not to invest this bonus in aggressive instruments as this windfall is not part of regular investment plan. It’s better to park it in safe instruments, which can later be used for downpayment of home loan. This would lower the overall loan amount,” says Swapnil Pawar, director, Park Financial Advisors, a personal financial planning company.
If you are above 35 years old, you could also look at adding this amount to your retirement corpus. Consider index funds or balanced funds, Mr Pawar suggests. If you have smaller amounts like Rs 50,000 or below, you could look at PPF. That would shore up your long-term savings.
When you think long term, experts suggest equity. The reason being equity investments can give tremendous returns in the long term. This may be a good time to buy stocks, given that markets are looking choppy. But the bigger question is whether you want to enter the equity route via stocks or look at equity mutual funds? “You should look at splitting your money over 5-6 blue chip companies. If you don’t have the expertise, then a diversified equity fund will be a safe bet,” Mr Jhaveri adds.
Consider parking the money in liquid funds, fixed deposits if you require money in the near term. Liquid funds can be a good alternative as the effective tax rate would be less.
Every windfall comes with a price tag. In this case, the bonus amount will be taxed as part of your salary. How much it would exactly cost you would depend upon the tax slab. You could look at insurance, PPF or even equity-linked saving scheme, which would come under Section 80C. Even home loan could help.
The overall tax deduction on the interest component for a single borrower is Rs 1,50,000 and Rs 3 lakh in case of joint loans. Even the principal component of the loan enjoys tax rebate. So, base your decision on the post-tax return, not to mention your liquidity needs.
Source: Economic Times/15 May,2008
Munich Re, Hero start Indian life insurance venture
FRANKFURT: Germany's Ergo Insurance Group and India's Hero Group have agreed to form a life insurance joint venture in India, Ergo parent Munich Re said on Friday.
"Under the proposed agreement, equity will be shared between the two partners, and Ergo International AG will take a 26 per cent share in Hero Ergo Life Insurance Co Ltd, which is the maximum permissible limit under the existing guidelines for the insurance sector in India," a statement said.
The plan is to seek regulatory approval over the next 10 to 12 months and to start operations during the second quarter of 2009, it added.
"Our tie-up for life insurance will strengthen our primary insurance footprint in the entire insurance sector, that is life, health and non-life business in India," Munich Re Chief Executive Nikolaus von Bomhard said. It said the Indian life insurance market grew around 63 percent in 2006 and 47 per cent in 2007.
"With household earnings accelerating in the fast-growing economy, the life insurance market is projected to double in size from $40 billion in 2007 to $80 billion and may even grow to $100 billion by 2012, according to market research," it said.
Source: Economic Times/2 May, 2008
IRDA hikes cap on exposure to group cos from 10% to 25%
HYDERABAD/MUMBAI: Insurance companies will henceforth have the freedom to diversify their investment portfolio in stocks of corporate groups. The Insurance Regulatory Development Authority (IRDA) has decided to raise the existing cap of investment in a group companies from 10% to 25%. Similarly, insurers will also be allowed to have an exposure of 25% in a single industry sector against the earlier norm of 10%. The new cap will apply to all insurance products—ranging from traditional insurance products to Unit Linked Insurance Products, said IRDA chairman C S Rao.
The exposure in the stock of a single investee company will, however, continue to be capped at 10%.This means an insurance company can invest only up to 10% of its portfolio in the stock of a single company, say in the software sector. But if an insurer is bullish on stocks of group companies of this software firm, he can now invest an extra 15% of the portfolio in them. Similarly, the new norms will also enable insurers to take an extra exposure of up to 15% in the stocks of companies in a specific sector. This means the insurer can invest in, say, shares of more companies in the software sector, if they are upbeat about it.
The new caps will form a part of the new investment regulations to be notified shortly. An overhaul of the investment regulations was approved by the IRDA Board in March, this year. They have now been re-worked to curb over-regulation and give more flexibility to insurance companies to diversify their portfolio.
The Board has also approved bringing prudential norms for LIC on par with private insurers. LIC enjoyed the freedom to invest up to 30% of its portfolio in a single investee company as against 10% for private insurers. This enabled the Corporation to pick up over 27% in Corporation Bank.
The new norms are reckoned to be more stringent than Sebi’s norms for a mutual fund scheme. Going by Sebi’s norms, a mutual fund scheme cannot hold more than 10% its assets under management in the shares of a single company. There are also limits on how much one can invest in a promoter group company (that is companies that belong to the same promoter as that of the AMC.) But unlike insurance products, there are no limits on investment in a corporate group or that pertaining to industry sector exposure.
The IRDA has also allowed insurers to invest up to 10% of their portfolio in new instruments such as mortgage-backed securities (MBS). MBS are structured loan instruments where cash flows from home loans are pooled together and converted into marketable securities. The investment in these instruments will be subject to industry sector norms.
Exposure norms have also been made mandatory for Ulips that are similar to mutual funds in design with an added insurance cover. This has been done to mitigate possible risks arising from investments in a few companies. The investment norms for insurers are stipulated in the insurance legislation. Now, an overhaul has been made without taking recourse to legislative amendments. Currently, life insurance companies are allowed to invest 50% of their investible assets in government and other approved securities. Additionally, they can invest at least 15% in infrastructure instruments that qualify as approved instruments.
Insurers hold a discretionary control, subject to conditions, on the balance 35% of the assets. Of this, ‘other than approved’ investments cannot exceed 15% of assets. Non-life companies can invest 30% of their portfolio in government and other approved securities. They can invest at least 10% in infrastructure and 5% in housing. The balance 55% is the discretionary quota, which includes investment of up to 25% in the ‘other than approved’ category. This category will henceforth be known as ‘other investments’.
Source: Economic Times/5 May, 2008
Insurers to grow credit insurance portfolio
MUMBAI: Insurance companies are now sensing a huge opportunity in credit insurance, following the dispensation granted to them in the credit policy.
Private and state-owned companies are now looking at growing their credit insurance portfolio which was at one time the exclusive domain of the Export Credit Guarantee Corporation of India (ECGC). In its monetary policy, RBI had said, “To liberalise further the procedures relating to settlement of claims in respect of export bills, it is proposed to permit banks to write off, in addition to claims settled by ECGC, the outstanding export bills settled by other insurance companies which are regulated by the Insurance Regulatory Development Authority (IRDA).” Insurance companies say that this directive puts them on par with ECGC. Banks will also gain since they will save on capital. RBI has said that once an exporter confirms that the claims in respect of outstanding bills have been settled and that export incentives have been surrendered, they can write off the relative export bills. According to Tata AIG General Insurance managing director Gaurav Garg, the dispensation by RBI gives private insurance companies a large opportunity in this business. He added that Tata AIG was better placed in export credit cover as it was the most multinational among insurance companies and had a presence in most major markets. Besides Tata AIG, there are other companies that are looking forward to developing the credit insurance market. For instance, Bajaj Allianz provides credit insurance in India with support from Euler, a specialist credit insurer which is part of the Allianz Group. State-owned New India has tied up with Atradius (formerly Gerling), which is another specialised credit insurance company
Source: ET
Private and state-owned companies are now looking at growing their credit insurance portfolio which was at one time the exclusive domain of the Export Credit Guarantee Corporation of India (ECGC). In its monetary policy, RBI had said, “To liberalise further the procedures relating to settlement of claims in respect of export bills, it is proposed to permit banks to write off, in addition to claims settled by ECGC, the outstanding export bills settled by other insurance companies which are regulated by the Insurance Regulatory Development Authority (IRDA).” Insurance companies say that this directive puts them on par with ECGC. Banks will also gain since they will save on capital. RBI has said that once an exporter confirms that the claims in respect of outstanding bills have been settled and that export incentives have been surrendered, they can write off the relative export bills. According to Tata AIG General Insurance managing director Gaurav Garg, the dispensation by RBI gives private insurance companies a large opportunity in this business. He added that Tata AIG was better placed in export credit cover as it was the most multinational among insurance companies and had a presence in most major markets. Besides Tata AIG, there are other companies that are looking forward to developing the credit insurance market. For instance, Bajaj Allianz provides credit insurance in India with support from Euler, a specialist credit insurer which is part of the Allianz Group. State-owned New India has tied up with Atradius (formerly Gerling), which is another specialised credit insurance company
Source: ET
HSBC's Indian insurance JV gets regulatory nod
MUMBAI: Canara HSBC Oriental Bank of Commerce Life Insurance Co Ltd said on Thursday it has got the licence to operate in India from the Insurance Regulatory and Development Authority.
The company is a joint venture between state-run Canara Bank, Oriental Bank of Commerce and HSBC Insurance (Asia-Pacific) Holdings Ltd. The JV has been capitalised at Rs 325 crore, in which HSBC has contributed Rs 177 crore, it said in a statement.
HSBC holds 26 per cent in the joint venture, the maximum stake a foreign firm can hold in an Indian insurance company.
The company is a joint venture between state-run Canara Bank, Oriental Bank of Commerce and HSBC Insurance (Asia-Pacific) Holdings Ltd. The JV has been capitalised at Rs 325 crore, in which HSBC has contributed Rs 177 crore, it said in a statement.
HSBC holds 26 per cent in the joint venture, the maximum stake a foreign firm can hold in an Indian insurance company.
Source: Economic Times/8 May, 2008
Tata AIG plans to launch 'exotic' lifestyle covers
MUMBAI: Tata AIG General Insurance is planning to launch AIG’s lifestyle products in India, as it is witnessing a sea change in the manner in which consumers look at insurance covers these days. Some of the lifestyle products include the ‘wallet card policy’ and other niche covers such as a ‘golfer’s card’.
“We have mapped expected change in consumer behaviour for the next five years and drawn our plans accordingly,” said Tata AIG General managing director and CEO Gaurav Garg.
According to Mr Garg, considering the Indian market’s success is moving from a tariff regime to a deregulated regime, it is expected to achieve the status of a mature market much faster compared with other emerging markets. Although motor insurance and health are expected to account for close to 70% of the insurance industry portfolio this year, Tata AIG is following a different strategy to move ahead.
“Both motor and bank-financed properties require a market share. We also expect the entry of specialised monoline insurance companies in the motor and health insurance sector,” said Mr Garg. Given this, he expects retail and SME businesses to drive the growth factor in the market.
Tata AIG’s strategy, when it comes to mass retail markets, is to target products that are pre-underwritten. This, they think, will enable the distributor to offer a quote and at times, even issue a policy on the spot. The wallet card, for instance, is a policy which covers the insured against the loss of his wallet — not just the financial loss but even the consequential loss such as misuse of credit/debit card or any other important identity card. “The policy even covers assaults and robberies following ATM cash withdrawals,” said Mr Garg.
The golf card is another lifestyle product which is targeting a small segment. If the insured golf player scores a ‘hole in one’ — a feat rarely achieved in this sport — the policy provides for a payout, in addition to covering the liability to other players. Although, ‘a hole in one’ is considered as a major victory, the player ends up spending a lot of money on celebrations and gratuitous payments, which also includes the cost of treating his partners. The policy covers all these costs.
‘Exotic covers’ is not a completely novel concept. Before liberalisation, state-owned insurers had around 150 niche insurance products. But most of these did not reach to people since companies lacked appropriate marketing skills or did not know how to adjust the claims made by people. Mr Garg expects the buyer behaviour to change, when it realises the kind of potential the private sector has.
Currently, Tata AIG is a market leader in terms of travel insurance, liability insurance, covering personal accidents and loses reported in marine cargo. All these businesses are profitable except for marine cargo, which just manages to break-even. According to figures released by the insurance regulator, the company has recorded Rs 813.4 crore net profit, up from Rs 741.6 crore, thus posting a growth of nearly 10%.
Source: Economic Times/ 9 May, 2008
India a perfect market for insurance
With a population of 1.1 billion, India is a perfect market for insurance and can generate sufficient long-term funds for development of infrastructure sector. You cannot be anything but bullish about the Indian market if you are a multinational. With 1.1 billion population, relatively young and a well educated population, this is a perfect market for insurance.
Insurance is also important as it leads to capital formation. Countries with strong insurance industries have strong infrastructure and strong capital formation. It generates long term capital to build super highways, mortgages for buildings, at the same time it protects families and businesses in case somebody dies.
India and China are fast growing economies. It would be foolish not to be interested in this part of the world, especially India. In terms of the financial sector, India is in an excellent position to grow in exponential fashion in the short run. Referring to opening of the insurance sector, competition has made everybody sharper in their product design and pricing.
For exponential growth of insurance, the agents need proper education. If they feel good about their job, feel that they are doing social good and they are really contributing to the welfare of the society, then there will be more of them.
Presently, MDRT has about 2000 members from India, if there is an increase in the number of members, and then it can make this a much stronger organization. This will then impact India because the efforts will help in taking care of the needs of widows and orphans when people die.
The increasing presence of MDRT could also help in bringing latest insurance technology and improving the skills of the Indian insurance professionals.
The number of professional agents is very less, so with the help of MDRT enhancement of the lives of the professionals so that they become more educative, more knowledgeable, more professional by which they become better salespersons is taking place. Refuting the charge that MDRT charges a high membership fee, which is about 450 dollar per annum. People have a mindset: they are not focusing on value versus cost. They are focusing on cost alone.
The benefits far exceed the cost if you go to the meeting and pay attention. Cost is only important to the extent that the benefit you are getting is less than the cost.
Source: (an article from unknown person)
Insurance is also important as it leads to capital formation. Countries with strong insurance industries have strong infrastructure and strong capital formation. It generates long term capital to build super highways, mortgages for buildings, at the same time it protects families and businesses in case somebody dies.
India and China are fast growing economies. It would be foolish not to be interested in this part of the world, especially India. In terms of the financial sector, India is in an excellent position to grow in exponential fashion in the short run. Referring to opening of the insurance sector, competition has made everybody sharper in their product design and pricing.
For exponential growth of insurance, the agents need proper education. If they feel good about their job, feel that they are doing social good and they are really contributing to the welfare of the society, then there will be more of them.
Presently, MDRT has about 2000 members from India, if there is an increase in the number of members, and then it can make this a much stronger organization. This will then impact India because the efforts will help in taking care of the needs of widows and orphans when people die.
The increasing presence of MDRT could also help in bringing latest insurance technology and improving the skills of the Indian insurance professionals.
The number of professional agents is very less, so with the help of MDRT enhancement of the lives of the professionals so that they become more educative, more knowledgeable, more professional by which they become better salespersons is taking place. Refuting the charge that MDRT charges a high membership fee, which is about 450 dollar per annum. People have a mindset: they are not focusing on value versus cost. They are focusing on cost alone.
The benefits far exceed the cost if you go to the meeting and pay attention. Cost is only important to the extent that the benefit you are getting is less than the cost.
Source: (an article from unknown person)
Specialty health insurers seek nod for India entry
MUMBAI: With health insurance expected to grow 50% annually, several spe-cialised health insurance companies are waiting to launch business in India. The Insurance Regulatory and Development Authority (IRDA) has said that there are several specialised companies looking to set shop in India.
Already two specialised companies — Apollo DKV Health Insurance and Star Allied Health Insurance have received permission from the IRDA to do business in India. Another French insurer BUPA is understood to be in advanced talks.
Speaking on the sidelines of the First Health Insurance Summit organised by CII, Rao told reporters that health insurance was expected to continue growing at 50% making it the fastest growing business.
This growth is despite the fact that most insurance companies have been complaining of the lack of profits in this line of activity. At the same time the number of consumer complaints is the highest in health insurance.
According to Mr Rao, the premium collected under health insurance was only about Rs 600 crore when he took over as chairman of the regulatory body in 2003. Whereas, during 2006-07 the premium col-lection was about Rs 3,200 crore, having grown 35% over the previ-ous year. The figures for 2007-08 have so far not been released but are expected to be well over Rs 4,000 crore.
“The health insurance business is likely to grow by about 50% per an-num,” he said. Rao, who is close to completing his tenure as chairman of IRDA said: “The health insurance segment has been growing much more than the overall general insurance industry and collection of premium of health insurance now accounts for about 16-17% of the total collection of the general insurance industry.”
He, however, pointed out that the overall penetration made by the industry segment is still low. At present, there are quite a few players offering health in-surance and the IRDA chairman indicated that a few more are plan-ning to enter the sector.
Referring to the high claim ratio witnessed by health insurance com-panies, he said the ratio could come down if the volume of business goes up. Besides, he felt if the health policies are sold to different age groups, particularly young, the claim ratio could go down.
Already two specialised companies — Apollo DKV Health Insurance and Star Allied Health Insurance have received permission from the IRDA to do business in India. Another French insurer BUPA is understood to be in advanced talks.
Speaking on the sidelines of the First Health Insurance Summit organised by CII, Rao told reporters that health insurance was expected to continue growing at 50% making it the fastest growing business.
This growth is despite the fact that most insurance companies have been complaining of the lack of profits in this line of activity. At the same time the number of consumer complaints is the highest in health insurance.
According to Mr Rao, the premium collected under health insurance was only about Rs 600 crore when he took over as chairman of the regulatory body in 2003. Whereas, during 2006-07 the premium col-lection was about Rs 3,200 crore, having grown 35% over the previ-ous year. The figures for 2007-08 have so far not been released but are expected to be well over Rs 4,000 crore.
“The health insurance business is likely to grow by about 50% per an-num,” he said. Rao, who is close to completing his tenure as chairman of IRDA said: “The health insurance segment has been growing much more than the overall general insurance industry and collection of premium of health insurance now accounts for about 16-17% of the total collection of the general insurance industry.”
He, however, pointed out that the overall penetration made by the industry segment is still low. At present, there are quite a few players offering health in-surance and the IRDA chairman indicated that a few more are plan-ning to enter the sector.
Referring to the high claim ratio witnessed by health insurance com-panies, he said the ratio could come down if the volume of business goes up. Besides, he felt if the health policies are sold to different age groups, particularly young, the claim ratio could go down.
Source: Economic Times
Insurance growth slows down on volatile markets
Premium collection rises 13% in March 2008
Sales of life insurance premiums have seen a slowdown in March, a possible fallout of the volatile stock market. Given that nearly 90 per cent of the insurance policies sold are unit-linked insurance plans (Ulips), the premium of which is invested in equities and fixed income products, buyers appear to have turned somewhat cautious.
The growth in new business premium for private sector players slowed down to 53.6 per cent y-o-y for March 2008 compared with 90.5 per cent y-o-y for the period beween April 2007 and February 2008.
That dragged down the growth for the full year of 2007-08 to 83.7 per cent from 103.8 per cent in the prvious year. The slowdown was more marked for public sector Life Insurance Corporation. Given the somewhat subdued growth in March 2008, industry watchers are pencilling in lower new business premium growth for FY08. Against an earlier expectation of about 40-45 per cent for the year, analysts now believe the growth this year would be closer to 35 per cent.
Sales of life insurance premiums have seen a slowdown in March, a possible fallout of the volatile stock market. Given that nearly 90 per cent of the insurance policies sold are unit-linked insurance plans (Ulips), the premium of which is invested in equities and fixed income products, buyers appear to have turned somewhat cautious.
The growth in new business premium for private sector players slowed down to 53.6 per cent y-o-y for March 2008 compared with 90.5 per cent y-o-y for the period beween April 2007 and February 2008.
That dragged down the growth for the full year of 2007-08 to 83.7 per cent from 103.8 per cent in the prvious year. The slowdown was more marked for public sector Life Insurance Corporation. Given the somewhat subdued growth in March 2008, industry watchers are pencilling in lower new business premium growth for FY08. Against an earlier expectation of about 40-45 per cent for the year, analysts now believe the growth this year would be closer to 35 per cent.
Average returns from Ulips in the March 2008 quarter have been a negative 8-30 per cent. With the Sensex down about 23 per cent during this time, several schemes have underperformed the broader market.
Private life insurers improved their market share to nearly 52 per cent in FY08 from 37 per cent in the previous year, with LIC yielding ground. Among the fastest growing players in March were Birla Sun Life and SBI Life.
However, with a gain of 310 basis points to 13.7 per cent of industry share, ICICI Prudential retains the top spot among private insurers for the seventh year running. Others who have gained significant market share during the year are Reliance Life and Allianz Bajaj.
Interestingly, the average size of a policy increased sharply in March 2008 to Rs 10,592 from Rs 6,440 in March last year, with almost every insurer selling bigger policies. For FY08, the average ticket size for a policy fell marginally to Rs 9,595 from Rs 10,237 in FY07 though the size increased for the majority of the players in the industry. With life insurance firms aggressively expanding their distribution network especially in tier-II and tier-III towns, the ticket sizes were expected to fall significantly. However, that does not seem to have happened, implying that buyers in smaller towns too are picking up policies with fairly large premiums.
Source: BS Reporter / Mumbai May 15, 2008
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