Single premium ULIPs get a push even as insurance business gets bogged down

Insurers are focussing on single premium ULIPs due to the relative ease of sale and customers are looking for convenience of one-time payment. Is this in the interest of the customer or are they missing the principle of insurance being long-term disciplined savings?

Leading private insurers like ICICI Prudential Life, HDFC Life and SBI Life have made significant inroads into the single premium insurance business even after the end of financial year 2010-11. ICICI Prudential Life had new business premium collection of Rs58.86 crore in April and May 2011 compared to only Rs2.60 crore in April and May 2010. HDFC Life had Rs32.27 crore versus Rs12.08 crore of new business premium for the same period; SBI Life had Rs143.23 crore versus Rs59.15 crore of new business premium for the same period. The total premium collection across all the companies (including the Life Insurance Corporation of India, LIC) had declined by over 12% for the same period.

Interestingly, LIC exhibited a decline in individual single premium insurance business in April and May 2011 by almost 40% compared to business in April and May 2010, yet it was able to gain market share from private players. The market share of private players came down from 31.4% in March 2011 to 26.1% in May 2011. It means that LIC increased its market share from 68.6% to 73.9% in the same period.

ICICI Prudential remains the market leader among private insurers with a market share of 27.2% followed by HDFC Life Insurance with a market share of 14%. They are followed by SBI Life (11.2% market share), Max New York Life and Bajaj Allianz (8.4% market share each).

The question remains whether single premium is a better option than regular premium insurance policies. According to Dr P Nandagopal, chief executive officer and managing director, IndiaFirst Life, "A regular long-term plan is the right way to buy insurance, but people are buying single-premium and shorter-term policies. People are not properly informed and incentivised." He added, "Our focus is on long term regular ULIP (unit-linked insurance plan) business." The average ticket size of a single premium policy purchased by a customer since September 2010 (for IndiaFirst Life) is Rs1,30,551 which points to its value for customers looking to invest up to Rs1 lakh in 80(C) tax savings or customers who want to invest surplus funds.

According to a veteran life insurance agent Shrigopal Jhunjhunwala, "Customers go for single premium insurance for convenience of one premium, 80(C) tax savings and to park excess funds into savings. Single premium insurance is also for the customer who is not sure about his ability to pay in the future. There are repeat customers of single premium insurance, but mostly in case of bancassurance. Insurance companies are focussing on single premium to generate new business premium. Single premium pension products are easy to sell and the paperwork is minimal."

According to a Sharekhan report, "The APE (annual premium equivalent) of the life insurance industry has contracted significantly over the past nine months with the new ULIP guidelines setting in and insurers awaiting the clearance from IRDA (the Insurance Regulatory and Development Authority) for launching new products. In view of the new guidelines, insurance companies have revamped their distribution structure to curtail the expenses. In the near term, players with strong bancassurance tie-ups will have an advantage over those primarily dependent on the agency-led distribution channel."


India, Australia to hold 1st round of FTA talks by end-July

Australia's trade with India has been growing rapidly, with exports, dominated by gold and coal, soaring from $11.8 billion to $20 billion in the past two years. However, imports from India in the past year were worth only $2.5 billion

Melbourne: Australia and India are all set to hold the first preliminary round of Free Trade Agreement (FTA) negotiations in India by the end of this month, according to Australian high commissioner to India Peter Varghese, reports PTI.

"Negotiators are currently doing consultations with the industry, stakeholders and then they will meet at the end of this month in India," Mr Varghese told PTI here during his mid-term consular visit.

Mr Varghese stressed that though the two sides were not naive about the challenges involved in the proposal, there was a strong expectation that there was something fruitful in store for the two.

In May this year, Indian commerce and industry minister Anand Sharma met Australian trade minister Craig Emerson in Canberra, where it was agreed by both sides to start negotiations on a comprehensive economic cooperation agreement.

India had already given the green signal to negotiate for an FTA with the Australian side following the completion of a feasibility study showing each side would gain more than $30 billion over 20 years from lowering barriers.

Australia's trade with India has been growing rapidly, with exports, dominated by gold and coal, soaring from $11.8 billion to $20 billion in the past two years.

Trade is heavily in Australia's favour, with imports in the past year of only $2.5 billion from India.

The Australian side has been particularly interested in improving the ability for Australian services firms to operate in India, while Australian farm producers want improved access to Indian meat markets.

India also wants to improve opportunities for its services exports to Australia, including information technology.

Mr Emerson said Indian business was keen to invest directly in Australia. A free trade agreement with India was first canvassed under the Kevin Rudd government, with the feasibility study completed last July.

Mr Varghese said the interests of India and Australia were converging fast and in a way that they had not been for a long time.

"It provides a very good basis to build the strategic partnership we both want to do. Economic relations are booming, particularly in terms of trade and investment. The more we build that up, the easier it will be to broaden the relationship into non-economic relations areas," Mr Varghese said.

However, he said the process to bridge the two sides differences would, however, take time.

"It's now a question of patiently building substance into the relationship... the more substance we have, the more capable we will be in dealing with any differences or views or issues that come out of the left field and could disrupt the bilateral ties. I think that is what we are doing, particularly on the economic front," he commented.

"Firstly, the trade, that will be central. It's going to be the load-bearing pillar of the relationship. That is developing very well and we are looking at a 20% growth rate for the next five years in exports and imports," he suggested.

"We are now seeing serious numbers in terms of investment into the coal sector, so that part of relationship is at a very good dynamics and we have got the FTA negotiations," Mr Varghese said, adding it was now a question of time to see how far the two sides' relationship could go.


Ireland’s ratings downgraded to ‘junk’

Moody's has lowered the country's government bond ratings by one notch to a non-investment grade of 'Ba1' from 'Baa3'.

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