Balanced portfolio helps LIC dominate new business growth

28-Apr-2011
Source : Financial Chronicle

First year premium data, which indicates the growth in insurance sector, clearly signals that the individual policyholders have maintained distance from the sector.
While the industry was growing at 25.47 per cent in FY10, the growth has dropped to 15.13 per cent in FY11. Although the government-run Life Insurance Corporation of India, managed a growth of 21.94 per cent, the private insurers grew at only 2.56 per cent.
The 22 private life insurers has contributed only 31.3 per cent or Rs 39,381.30 crore of the total first year premium of Rs 1,25,826.03 crore compared to Rs 86,444.72 crore by LIC of India, almost 69 per cent.
The premium collected by private insurers at the end of financial year 2008-09 was Rs 34,153.71 crore, approximately 40 per cent of total premium of Rs 87,107.62 crore and by the end of year 2009-10, although premium had increased to Rs 38,399.33 it accounted for 35.14 per cent of total industry premium of Rs 1,09,290.37.
“LIC having balanced portfolio of traditional and Ulip plans was able to increase its market share this year after the change in Ulip norms, however, we hope that private players by introducing right mix of Ulips and traditional plans will get back their due share,” said Vinay Taluja, principal officer, Bajaj Capital.
The new Ulip norms have forced insurers to restructure their product portfolio, which hurt individual regular premium policies. The total collection from individual regular premium policies is Rs 46,781.08 crore this year, showing a fall of 10.13 per cent, as 15 out of 23 insurers saw negative growth. In FY10, the segment was, however, growing at 16.49 per cent with total premium of Rs 52,056 crore.
“At present, the shift is towards traditional and single premium policies, however, the insurers have now factored in the change and are coming out with regular premium products,” said MN Rao, MD and CEO, SBI Life Insurance Company.
“The guideline has made Ulips a very viable option for policyholders and once they understand the product and cost structure the sale will rise,” said Joseph Thomas, head of investment advisory and financial planning at Aditya Birla Money.