Life insurance firms eye 10-15% growth in 2011-12

Despite the proposals in the new Direct Taxes Code (DTC), which are expected to hit the industry, and flat growth in renewal premiums, life insurance companies are looking at growth of 10-15 per cent in the current financial year. The life insurance industry had recorded growth of eight per cent last year.

“Renewals were a challenge for us last year. Therefore, all companies would unanimously focus on renewal premiums,” M N Rao, managing director and chief executive officer, SBI Life Insurance, said, while speaking at a Life Insurance Council meet here today.

Life insurance companies say the difficult period, which followed announcement of new guidelines by the Insurance Regulatory and Development Authority (Irda) in September 2010, was now over. A balance between business from traditional and unit-linked policies is expected to emerge this year. On growth and profitability concerns of individual companies, various chief executives said the challenge of striking a balance between the two would continue for some companies, since each company had a different cycle.

Explaining the general trends in the life insurance business in 2010-11, M S Mathur, secretary general, Life Insurance Council, said the decline in the number of policies, the number of branches and employee count was largely on account of sweeping regulations that were introduced last year. “Yet, the business premium grew 15 per cent and we see a further upside this year,” he said.

In 2010-11, 48 million new business policies were registered, compared with 53 million crore in the previous year. New business premium grew 14.5 per cent to Rs 1,25,800 crore from Rs 1,09,894 crore in the previous year. Renewal premiums remained almost flat at Rs 1,60,700 crore, compared with Rs 1,55,556 crore, while total premiums rose eight per cent to Rs 2,86,500 crore from Rs 2,65,450 crore, according to Irda figures.

Sandeep Bakshi of ICICI Prudential Life Insurance said the industry had now settled to the new regime. Irda's restrictions on the cost of business had led to newer technology applications, including policies in demat form, which was a positive step, he said. The sector was fairly capitalised and there was no immediate compulsion for companies to raise funds through different instruments, though initial public offerings were considered by some for price discovery, he said.

Business from traditional products rose 25 per cent after the new guidelines were announced in September. However, growth in unit-linked products, the mainstay of private life insurance companies, stood at 65-75 per cent, compared with 85 per cent in the previous year. But in the last two months such products are witnessing a comeback, and the overall ratio of unit-lined products to traditional products was expected to settle at 70:30, said M Suresh, managing director, Tata AIG Life Insurance Company.

The Insurance Council said new DTC proposals were unattractive for customers, as well as the industry. With a maximum cap of Rs 50,000, as suggested in the new proposals, there is no window for life insurance premium.