The life insurance sector, which has seen a dip in new business premium in past 12-15 months, is expected to see a rise in premium collection for the three-months ended December 31. This is because insurers are anticipating an increase in sales, since new product guidelines will only be implemented from January 1, 2014.
There are a lot of anxious customers who have approached insurers expressing intend to buy a life cover before the deadline for re-filing comes to an end. However, insurers are ensuring that customers are aware that the new guidelines will make their products more transparent.
The insurers have already started noticing the trend. The new premium for September 2013 for large insurers have been exceptionally better than the other months, this could be due to the fact that insurers had marketed their products to be sold before the earlier October 1, 2013 deadline.
The Insurance Regulatory and Development Authority (IRDA) had brought out a new set of guidelines for life insurance products in February 2013. While the minimum death benefit and the surrender value has been altered for traditional product customers who stay invested in a policy for a longer period, in the case of Unit-Linked Insurance Plan (ULIPs), insurers will have to intimate customers about changes in the yield of ULIP every month.
While the original deadline for phasing out old products was September 30, 2013, the IRDA extended it till December 31, 2013 so that life insurers had adequate time for transition to the new regime. However, the IRDA has clarified that sale of highest Net Asset Value (NAV) guaranteed products and Index-Linked Insurance Products have to be stopped from October 1, 2013.
Experts say that products with such a high NAV guarantee and Index-linked products have a small customer base, which has the risk-appetite to purchase these. Though the IRDA has stopped the sale of these products, some savvy customers wanted to buy these. Hence, insurers saw a larger proportion of sale coming from these products in the September quarter, unlike other periods. In normal circumstances, these constitute 3-4% of the new premiums of industry. However, in the last one to two months, it has gone up to 7-10%.
The new guidelines to be implemented from January 1, 2014, will make products more transparent. Each life insurance policy will have a benefit illustration from first January 2014, providing details of all returns and benefits provided by the insurance plan, which till now was mandatory only for ULIPs.