Insurance Regulatory and Development Authority (IRDA) is worried about the growth of group single-premium policies.
Despite slow down in overall life insurance business, group single-premium insurance policy segment is witnessing growth. As per IRDA this trend is a problem and how we define groups need to be looked into.
In such policies, most of the time an insured is not aware about what he is being offered and he also receives poor service.
In 2011-12 Life Insurance Corporation of India (LIC) collected Rs 28,220 crore from group single-premium policies as against Rs 22,889 crore in FY’11. And private sector life insurers together collected Rs 5,023 crore from group single-premium policies in FY’12 up from Rs 3,467 crore in FY’11. Similar trend is visible in the first month of current fiscal i.e. April 2012 as well.
Main reason of this growth is low premium of such policies. Premium of such policies have come down due to stiff competition.
Another reason for this growth in group single-premium policies is increase in fund based business. This trend is expected to be continuing as many companies are outsourcing their fund-management to insurance companies.
This growth in group single premium policies may increase the top line of insurers but it will not have the positive impact on their bottom line due to the lower rates.