Market doldrums could hit Ulip sales

Life insurance companies are putting on a brave face amid the jittery stock market, but the coming months will be crucial for unit-linked investment plans (Ulips), which constitute over 90% of life insurance policies at present.

Analysts and industry insiders apprehend a slowdown in the next two quarters. A Credit Suisse reports says new business premium growth could slow down significantly to 20-45% on a year-on-year basis.

Growth in new business premium in April-May was 11% for the industry. While the private sector grew 73%, the state-run Life Insurance Corp registered a decline in growth of 17%.

Ulips have always been hot picks in the life insurance basket and past figures indicate sales did not wane even during a market downturn. "

"The relatively strong growth rates for April-May 2008 suggest upside to our growth forecasts," the Credit Suisse report says, before warning, "However we remain watchful. Sales will weaken significantly if markets remain weak."

According to Morgan Stanley, investors have been looking at life insurance as a way to participate in the bull run. "We believe the over-penetration in life insurance was driven by investors using the insurance route to invest in markets. If markets remain weak, then we may see continued slowdown in life insurance business in India," analysts at the investment bank said in a report.

Most insurers contacted by DNA Money said the stock market volatility has not seen people staying away. They said since Ulips are positioned for the long term, there are few reasons to worry.

But some insurers admit volume growth could be hit if market volatility continues in the long run.

A report by Alchemy Equity Research says, "After a sharp slowdown in March 2008, we believe that the sector will continue to face pressures due to capital market turmoil even as it grows steady."

Source: DNA Money

ICICI Pru Life takes e-way to customers

ICICI Prudential is relying on technology to improve services without adding cost.

"Close to 60% of our customer services are now on the electronic channels. We are constantly trying to add value to customer services. Had we done that through hiring more people, it would have cost us hugely. But by putting our services on the mobile and Internet, we are saving costs and improving efficiency and accuracy," said ICICI Prudential Life Insurance executive vice-president Anita Pai.

The company uses the Internet, mobile phones and call centres to facilitate premium payment from customers, informing them on policy details and track the net asset value of unit-linked plans. The company claims it gets 20 lakh SMSs every month to inquire NAVs. It has also begun selling insurance policies on its website, but such sales are small in number.

Pai said the company's robust growth was stretching the its break-even period: "Generally, the break-even for a life insurance firm is 10 years. But in this industry, the more growth you have, the longer is the break-even."

Source: DNA Money

Women need insurance, too

Let’s face it. Everybody needs insurance.

In its purest form, life insurance is a risk-management tool that provides financial protection to one’s family against unforeseen events. In its current avatar, though, it has come to mean a basket of solutions for diverse needs, including savings, investment, health, pension and combinations thereof. So much so, it has come to be viewed as an integral part of financial planning.

However, the off-take of insurance by women has not been encouraging so far. This, despite the fact that an increasing number of them today share the responsibilities as part of working couples, and even provide for entire households on their own. It is imperative that a woman ask herself three simple questions: Do

I need a financial plan to ensure my family maintains its lifestyle in my absence? Do I need to make provisions for income in old age? Do I need to provide for health-related expenses? If the answer is in the affirmative, she needs insurance.

The kind of insurance plan one needs, however, will depend on a number of factors. Every woman is different and has her individual needs and aspirations.

Along with these, the type of plan one chooses will depend on the stage of life she is in.



Generally speaking, being a long-term investment, an insurance plan not only provides a life cover but also helps build a corpus to achieve financial goals and maintain the present standard of living in future.

At each stage of your life, you would have a core financial need and what you would like for the future, for your own self and for your loved ones.

If you are a working woman and part of a two-income family, your need to protect your share of the family income and to provide for your family is as important as that of any earning member of a household. If you are a single working woman and the financial head of the household, you are likely to have major financial responsibilities and risk protection is critical.

For example, 38-year-old Geeta Kapoor, working for an IT company at a senior level, heads her household and has 2 dependants. She wants to retire from her job when she turns 55. Thus, she needs to protect her loved ones from any unanticipated incident as well as create a corpus that will provide her income post retirement.

Hence, she should buy a term product as well as a pension plan that enforces the discipline of saving to give her a regular income when she stops working. A health plan will also help her pay for the hospitalisation and other treatment expenses in case she or her dependants are diagnosed with a critical illness.

This would ensure that her long-term goals are unaltered.

In other words, the type of insurance you need is related to the financial implications your loss of income can have on your loved ones. At the same time, everyone needs to make provisions for regular income in old age to cover living as well as health-related expenses.

Women have a higher life expectancy compared with men and hence will need income for more years. Women’s working life also tends to be more unpredictable than those of their male counterparts — whether it involves giving up work altogether or taking a temporary break or working part-time.

Given all this, it is imperative that they have a good financial plan in place and are adequately covered against uncertainties through a mix of savings, investment and insurance.

Source: DNA Money

Non-life growth rises, while life insurance falls

The non-life insurance business has grown at 14% during first two months of FY 2009 against 11.2% in the corresponding period last year on fears that de-tariff introduction will reduce industry growth. Life insurance growth, on the other hand, has fallen to just 10% from last year's 25%.

A 17% fall in LIC's business is being cited as the reason behind this fall, since private players continue to enjoy more than 70% growth in premiums.

The gross premium underwritten in the non-life insurance industry has grown to Rs6,000 crore during first two months of FY 09 against the same period last year, thanks to a 25% growth in premiums of private players. Public sector growth contributed 7%. National Insurance topped the list of public sector firms, with a 13% premium growth. ICICI Lombard and Bajaj Allianz continued to attain higher premium growth, with 23% and 30%, respectively. Reliance General's premium growth has slowed down from more than 200% from the year ago period to 17.5%.

"Non life insurance industry will maintain a steady growth rate of around 12% for the next five years" said MD, Cholamandalam MS, SS Gopal Rathnam. "New product launches, combined with variations and combinations in existing products will keep the sector growth high. After de-tarrifing, premiums in fire and engineering are likely to take another hit of 10-15% in 2009, while health insurance is likely to get dearer by 5-6%," he said.

Collections of life insurance companies crossed the Rs8,000 crore mark in the first two months of FY 2009, growing roughly 10.7% against last year's 25%, in the same period.

In the life insurance segment, LIC registered a 17% fall in premiums during Apr-May 2008. It collected Rs4,170 crore in premiums during the period, Rs879 crore less than Apr-May 2007.

"The negative growth is a result of failing to launch any successful products in the new fiscal," said a senior LIC official, who did not wish to be named. "We generally have a lean business period every year, after March. Last year, we received a good response to our 'Money Plus' product. We expect the same for the two products recently launched - 'Money Plus Fund' and 'Market Plus Fund'," this official added.

In the private sector, SBI garnered Rs546 crore in business premium in Apr-May 2008, more than double of last year's growth. ICICI Prudential and Bajaj Allianz followed, with a growth in premium collection of 50% and 19%, respectively.

Source: Gopal Modi/ DNA MONEY