Private insurers shift focus to regular premium products

Single-premium insurance products, which constitute the bulk of private life insurance companies’ business, are slowly making way for regular premium business. Customers are also shifting to monthly and annual premium products, private insurance firms said.

According to the sales and distribution head of a private life insurer, after the new product guidelines came into effect in January this year, many single-premium products have also been withdrawn from the market. “Now many companies are going ahead and selling single-premium products aggressively, because lower commissions have kept distributors away.”

In single-premium products, the premium is paid upfront as a lump-sum amount.

According to insurers, while single-premium products are beneficial from a business perspective because insurers do not have to keep approaching customers for renewal premiums, there is a lack of appetite for these products.

“Salaried people, especially, are not comfortable in making a large sum of payment; they prefer paying the insurance premium at regular intervals. Hence, not all life insurers have filed single-premium products with the regulator (Insurance Regulatory Authority of India or Irda) for approval,” said the chief executive officer of a mid-size insurance firm.

Data from Irda showed there was a two per cent drop in overall premiums collected under single premiums from individual and group category. Insurers collected Rs 11,093 crore for all categories of single premium in the April-June 2014 period.

Insurance executives said that Life Insurance Corporation of India will play a large role in this space going forward, while private players might not be as dominant in the single-premium space.