6 months too short for new product switchover: Max Life

Max Life Insurance Company Limited today said the six-month time line for switching over to products approved according to the new regulatory guidelines was too short and would serve no purpose in a business of long-term nature like life insurance.

CEO and managing director of the Gurgaon-based company, Rajesh Sud, said while the new product guidelines were good in the long-term as they sought to provide more protection to the policy holder, the manner in which the companies had been asked to shift to the new product design was very challenging.

Even as the industry is seeking more time to shift to the new set of life products, the Insurance Regulatory and Development Authority (Irda) on Monday reiterated it would be sticking to the June 30 and September 30 deadlines for group and individual products respectively.

All existing products will stand withdrawn by the expiry of these deadlines. The products approved according to the new guidelines will have to be offered by the life insurance companies thereafter.

"Even if we get early approvals, it is difficult to covert them at the agent level with all the relevant material to approach the potential policy holder in such a short time," Sud told reporters here.

While the insurance regulator had issued new guidelines for life products in February this year, Max Life had filed new products for approval a month ahead in anticipation of these guidelines. But the key point, however, is how quick it would get the approvals, according to Sud.

A total of over 400 products filed by the 24 insurers, including the public sector Life Insurance Corporation (LIC), have to be cleared by the regulator before these deadlines.

He also said it was wrong to assume that all the previous problems like misselling of products would be addressed just by changing the product design and sought a separate set of reforms to make the sector more transparent and customer-centric.

Sud replied in negative when asked if the first half of the current year would see a lull in booking of new premium business as people are expected to wait for a better product line to chose from. Incidentally, the first year premium collections of life insurance companies in April this year remained almost stagnant at Rs 4,964.84 crore as compared with Rs 4,937 crore in the same month last year.

Under the new guidelines, Irda has introduced three broad categories of products - traditional, variable and unit-linked insurance plans - with clear mandates in terms of benefits to the policy holders.

For instance, the new traditional products will have a higher death cover. For regular premium policies, the cover will be 10 times the annualised premium paid for those below 45 and seven times for others. The minimum death benefit in the case of traditional plan is at least the amount of sum assured and the additional benefits.