January, February and March are crucial months for the life insurance industry. The new business premium collection for January was 20% lower than December 2010 for individual single premium policies, while it was 10% lower for individual non-single premium policies
January, February and March are crucial months for the life insurance industry. It is surprising to note that new business premium (NBP) for January was 20% lower than the NBP of December 2010 for individual single premium policies. NBP for January was 10% lower than the NBP of December last year for individual non-single premium policies.
Insurance companies are coming out with new traditional plans due to business shifting away from ULIPs (Unit-linked Insurance Plans). However, this does not explain why NBP has dropped substantially. Even the behemoth Life Insurance Corporation (LIC) of India was not spared.
Insurer -
According to GV Nageswara Rao, managing director and chief executive officer, IDBI Federal Life Insurance, "The mix of ULIP to traditional policies is currently 60:40, earlier it was 80:20. The ticket size of traditional policies is smaller when compared to current ULIPs and that also leads to lower premium collection. January sales were disappointing, but we are optimistic about the balance of this fiscal year. March is the biggest month for insurance companies."
Dr P Nandagopal, managing director and chief executive officer, IndiaFirst Life Insurance, told Moneylife, "The tax pitch for selling insurance products is no longer completely applicable. Today, people are buying insurance spread over all months. There are more sales in JFM because lot of part-time agents work rigorously in these months. Our company has no agents till now and relies solely on bancassurance of Bank of Baroda and Andhra Bank."
He added, "There has been a slowdown in business after Insurance Regulatory and Development Authority (IRDA) regulations and insurers filing for new products. The industry may be coming out of traditional plans, but we are not giving any preference for traditional plans over ULIPs due to commissions. We have kept the same level of commission. Another reason for the slowdown is that the pension market has dwindled. We are waiting for new regulations for pension ULIP products. A 4.5% guaranteed pension ULIP is not in the best interest of the customer too."
It is possible that customers do not see any major benefits from the new IRDA guidelines on ULIPs post 1 September 2010. Moneylife had earlier written how the charges have increased for ULIPs instead of decreasing over the period of five or more years. (See: 'The New Old ULIPs' ).
According to the information Moneylife collected while talking with industry personnel, insurance companies that grew inorganically during the lucrative days of ULIPs closed down many branches and downsized a number of agents. Life insurance companies are on a cost-cutting spree.
Again, the agents who got into the ULIP selling business for securing high first year commissions have moved on to other careers.
The instant gratification of hefty commission in the first year is no longer present as the commissions are spread over the years and depend on renewal of policies. Insurance in India is sold and not bought. Insurance companies now lack good sales agents.
Here is an email text we recently received from a disgruntled insurance company agent (name withheld) who disclosed names of a couple of insurance companies: Please note, these comments do not apply for all insurance companies.
"Life Insurance companies are on an expense-management drive, I would like to share with you something which companies have done in the last six months to cut expenses.
- Closed down branch offices (so-called non performing branches to the tune of 10%).
- Removed the security staff in the existing branches after 8:00pm.
- Removed all the vending machines serving tea & coffee in all the branch offices. The head office has all the facilities.
- Done away with hand soap in the toilets of branch offices.
- Done away with bus facility to pick up & drop employees.
Employees are resigning due to loss of morale, employees spend more time in the office than their home and such steps are having a negative impact on their performance. Insurance business is tough, but January, February and March are our peak selling season and they are nowhere near their targets. The irrational exuberance which existed has vanished. It's an irony how will companies who are not sensitive to their employees would be sensitive to their customers."
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
I request you note a very important fact.the life insurance industry is not allowing to sell products of more than one life insurance company and also force the agents to collect at least 1,00,000 rupees of premium and / or 12 lives in a financial / calender year.
most of the agents, as per economic times report about 43 % fail to achive this target as many are working part time and hence thrown out of business and the insurance company under the execuse of not achiving the target eats away the rightful commission on the policies which they have sold till the date of suspension / termination of their agency.
also competition commission of india should take up the matter with IRDA , and direct them to allow the agents to sell all products of all insurance companies then only miselling will stop otherwise to collect the one lakh premium amount , one must sell ulip's and traditional plans,as term insurance policies are very difficult to sell in india and even if one sells 24 term policies for it is difficult to reach the one lakh premium amount as indians generally do not buy term plan , even if they buy , they buy for not more than 25 lakh due to mental blocks.
i am suspended from a very reputed life insurance company as i could not gather one lakh premium due to this reason as the term plan premium for even 30 lakhs sum assured does not come to 5000/-.
I VERY MUCH REQUEST MONEYLIFE TO TAKE UP THIS MATTER , LIKE MUTUAL FUNDS , AGENTS MUST BE ALLOWED TO SELL ALL INSURANCE COPANIES , ALL PRODUCTS BECAUSE I THINK PRESENT SET UP BENEFITS LIC THE MOST,THEIR LIFE BECOMES SARAL & BIMA ACCOUNT KEEPS RUNNING.
THANKS & REGARDS - MANISH D HATHI.