Ulip-wary investors upset cos' premium growth plans

Saturday 27, November, 2010 For the first time in several years, the life insurance industry has reported a drop in the renewal premium. For the first half of the current fiscal, life companies have reported a renewal premium income of Rs 62,805 crore, which is over Rs 100 crore lower than the renewal premium of Rs 62,911 crore in the corresponding period last year. “The drop is marginal and we are still looking at the trends,” said SB Mathur, chief executive of the Life Insurance Council, an association of life companies. The drop in renewal premium collections has been in unit-linked insurance plans, where the renewal premium has come down by Rs 3,159 crore. However, the dip in Ulip renewals has been compensated by the increase in premium from traditional policies which has grown Rs 3,051 crore, resulting in a net reduction of Rs 104 crore. “In percentage terms, it is only a 0.15% drop, but it is highly unusual, given that the Indian industry has been seeing double-digit growth in the sales of new policies,” said an industry official. The dip despite the growth in sales could only mean that a large part of the sales came from single premium policies and the possibility that many policyholders have chosen to discontinue their policies. This is highly unusual for the life insurance market, which has been witnessing high growth. According to industry officials, the drop in renewal premium could have occurred on account of four reasons: high level of single-premium policies being sold last year, Ulip investors taking a premium holiday or booking profits as markets peak, policies with limited premium paying term being sold in the past years and also lapsation of policies. According to figures compiled by the Life Insurance Council, the total renewal premium collected in the quarter from unit-linked policies was Rs 22,716 crore compared with Rs 25,950 crore in the corresponding quarter last year.

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