BSLI ‘s record performance

Birla Sun Life Insurance has netted more than Rs.2500 crore under asset management this fiscal against Rs.1350 crore in 04-05. Their Life Funds have also grown to Rs2000 crore by Mid August 06 touching almost 100% over corresponding year figure of Rs.1001 crore in the AUM. Similarly AUM for their growth fund and retirement plans has also registered exceptional growth.

Insurance in Year 2005-06

During financial year 05-06 Life insurance premiums grew by 41% to Rs.35896/- Setting at rest the earlier fears of liberalizing life insurance business the trend in growth indicates only a wider coverage with private insurers playing a vital role in rolling out innovative and attractive insurance options Average annual premium was above Rs.20000 for private players. The growth in percentage terms was 77.9% for HDFC Standard, 47.2% for Sahara Life, 41.4% for SBI Life and 36.2% for Kotak Life. ULIP policies comprised 44.8% of the total business. In the case of LIC the share of ULIP policies was 29.8% of its business in FY 05/06 while with private insurers the share was 82.5% of their business in the year. First year premium collections were also growing in double digits among many insurers, as per reports. Overall, LIC remained the market leader with 70.1% market share and Bajaj Allianz was 2nd with a market share of 8% and ICICI Prudential was third with 7.4% among private players.

Though the life insurance sector has shown a remarkable growth of 122% on compounded annual growth rate, during the last two years, in 05-06 the life segment has decreased from 81.7% in 03/04 to 73.6% in 05/06. However this is expected to change since the market is still not penetrated well. The Pension segment has shown high growth, based on its CAGR at 265% during the last two years. Share of the segment rose from 9% in 03/04 to 22% in 05/06. Mr. Rahul Sinha Sr.VP Kotak Mahindra Old Mutual Life opines that ‘pension segment will continue to grow at a very rapid pace’ as customers now have more information on better options that are available in this segment to plan for their retirement.

LIC’s ambitious target for 06-07

According to Mr.Vijayan Chairman LIC, they have settled 1.8 crore claims for Rs.28512 crore. They are targeting a 40 % growth of premium during current fiscal year. For this, they have come up with Bima Gold II and also planning to enter micro-insurance which is almost ready. They also plan to open 13 satellite offices to provide hassle free services to customers.

AML and KYC norms

Close on the heels of the regulatory norms for ULIPS which came into effect on July 1, ’06, two more guidelines , AML ‘Anti Money Laundering’ and KYC ‘know your customer’ have come into effect from August 1,06. The norms are strict requiring every proposal to be backed by many documents. For pension scheme IT returns are to be enclosed which was not so earlier. Many such conditions have come up, which the industry feels are not customer friendly and may cause hardship to many genuine investors.

The AML regulations are expected to cause decline in number of high premium policies.
Last year also a sharp fall in high premium policies was observed when insurance regulations barred businesses from taking out keyman policies on behalf of their employees. The new norms require that the premium should be paid only out of proposers’ own bank account. The insurance companies have also to ascertain the source of funds in addition to checking the proposer’s earned income.

Bonanza for LIC employees

In celebration of its Golden Jubilee , LIC has decided to make a gift of 8gm cold coin to each of its employee along with an amount equal to 5% of their salary as performance linked incentive. For the customers LIC has launched Bima Gold II a close ended policy which would continue to be in force for half the original sum assured even after maturity.

Annuities on Offer

So far it was observed that policy holders have remained under- insured. With increase in life expectancy whole life annuities are attracting investment. LIC only offered sole annuities till recently. Now private insurers have also started launching many immediate annuity plans. LIC offers under Jeevan Akshay III annuities for individuals aged 40 to 79 years. Presently an investment of rupees ten lakh by a sixty year old would fetch an annual payment of Rs.90000/- or a monthly payment of Rs.7500 for life... Here also ICICI Prudential‘s offer of Rs.91434/- pa on ten lakh has triggered a competition of sorts making LIC raise its offer to Rs.95600/ pa on ten lakh and other different offers from
Private insurers.

Tata AIG chains to Sangli

Tata AIG Life Insurance Co Ltd., has partnered with Sangli Bank of Maharashtra to promote their insurance products through the latter’s 189 branches across the country. Mr. Trevor Bull MD of Tata AIG said that together with Sangli Bank Tata AIG are’ well positioned to provide for the growing rural market for Life Insurance’. Mr. SR Godbole GM of SANGLI bank told on the occasion that they have trained 75 people specially to handle Insurance products and the products offered would suit the need of their customers.

Free Pricing Market from January 07

IRDA chairman Mr.CS Rao while addressing a seminar on Free pricing of insurance products from January 2007 said that the challenge to IRDA when industry shifts to free pricing, would be to monitor the solvency of the insurance companies. He added that IRDA would come up with detailed guidelines on the code of conduct for the companies and brokers in functions in the ensuing deregulated market.

OECD to rescue Insurers

Organization for Economic Co-operation and Development [OECD] has decided to ‘set up catastrophe network of insurers for disaster preparedness, to identify threats, swap info, and develop policies’. The committee would also analyze financial sector and public sector participation in catastrophe risk management.

Insurance Institute of India

III is introducing subjects and course materials to suit the changing insurance sector scenario. It is reported that the institute has received permission to start course on actuarial science for non-life industry from the Casualty Actuarial Society of US. In India, so far, the non life insurance industry functioned on pricing fixed by tariff. With the detariff system starting from Jan 07 it is only necessary that qualified persons handle the pricings.

Aviva with Doha

Aviva Life Insurance has tied up with Doha Bank based in Qatar for Bancassurance initiative. Mr. Anil Sehgal Director Bancassurance at Aviva said in a press release that ‘customers of Doha Bank who are mainly salaried NRIs will benefit through our unit linked products. They will be enabled to channelise their savings in prudent investment plans’. With this tie-up Aviva’s products will be available in 40 locations in Doha.. Aviva Life Insurance is a joint venture between Dabur and Aviva with Dabur holding 74% stake. Aviva currently has 22 banks as their bank assurance partners

FDI in insurance

The employees union of LIC has opposed the government decision of opening up the sector to foreign institutions. National Jt. Secretary of the Union, Mr. Jayanta Mukherjee, alleged that’ these foreign companies have failed in their own countries and were unable to settle claims ‘and they had come to India to make money. The leaders further alleged that public money in their hands will not be safe unless they are forced to invest the money in India. They further claimed that the claim settlement rate of LIC was 99% and LIC was settling 2 claims every second.

Life Insurance Firms to tie up with Gen.Insurance

The IRDA are reported to be considering a proposal to allow Life insurance companies to enter into tie up with one or more Gen.Ins firms to enter micro insurance business. This was also confirmed by Chairman IRDA Shri.CS Rao.The proposal if approved would benefit LIC hugely. LIC at present plans to tie up with New India in western zone, National in East, United India in the south and Oriental in the north. Their Micro insurance products will be a package policy of Life and General cover for the poor. Discussing about the IRDA’s decision to disallow permission to change terms and condition for 15 months from January 2007 when the detariffing of insurance products would commence, Mr Rao said “We have noticed considerable confusion in markets where detariffing has happened. Thus, for now, the terms and conditions should be frozen.”

IRDA Moots Level Playing Field For LIC Also

In their efforts to ensure level playing field to all insurers IRDA the regulatory authority have written to the Government that it should withdraw the sovereign guarantee it extends to LIC’s policies. To give effect to this proposal amendment to LIC Acts would be required. Mr. Vinod Rai, special secretary to Govt in financial services told that the recommendations are being examined.

Job hopping in Insurance Sector too

It is reported that about 40 to 60 percent attrition level is experienced in insurance sector also as in IT or ITeS companies. It is further reported that new entrants to Insurance are poaching trained front and middle level managers from old private insurance companies. In this connection, Mr. K.H Venkatachalam, VP / HR Birla Sun Life said, “Like most prudent organizations we do invest in our better performers a little more”.

MNYL plans geographic expansion

Max New York Life has infused Rs.30 crore more raising its capital base to Rs.617 crore, in order to support its expansion plans and to meet solvency norms. Mr. Gary Bennet, MD and CEO, Max New York Life said, “both the JV partners are committed to growth of Max New York Life Insurance.” and that ‘the company has embarked a major geographical expansion drive’.
MNYL has been at No.3 in New Individual Life policies with over a million policies and cumulative sum assured of Rs.32000 crore.

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