Pvt insurers seek level playing field with LIC

Urge Irda for a 3-5 yrs horizon to adopt revised norms on Ulips.

Private sector life insurance companies have sought a level playing field with government-owned Life Insurance Corporation of India (LIC), and have urged the insurance regulator for a three-five years horizon to adopt the revised regulatory architecture.

“One of the most disturbing trends, post the new regulations, is that LIC accounted for 71 per cent of the new business income in the life insurance sector, during the first 10 months of the financial year. It is in contrast to the trend in the last two-three years, when private sector players increased their share to around 50 percent of the new business income,” said P Nandagopal, managing director and CEO, IndiaFirst Life, during the Business Standard Insurance Round Table in Mumbai yesterday.

The Insurance Regulatory and Development Authority (Irda) had implemented new guidelines on unit-linked insurance plans (Ulips) from September, which capped the agent’s commission and mandated a minimum guarantee on pension products. The move was aimed at ensuring greater protection to policyholders and higher level of product disclosure.

First-year premium collections by life insurance companies increased 25.8 per cent to Rs 94,820 crore in the April-January period of the current financial year, mainly led by a surge in premium collection of LIC. The largest insurer’s premium income for April-January rose 36.9 per cent to Rs 67,135 crore, whereas private insurers posted a marginal 5.8 per cent increase to Rs 27,864 crore. During the same period last year, total first-year premium collected by the industry stood at Rs 75,347 crore.

“The new premium income of private insurance sector declined 40 per cent after September, which is not a good sign, whatever the growth may have been during the first 10 years. The new regulations have ensured that the industry is forced to sell more traditional products. And, since LIC has been selling traditional products, it has gained at the expense of private players,” said Amitabh Chaudhry, managing director and CEO, HDFC Standard Life.

“The main purpose of every regulation is customer protection. To this, there is no dispute and everybody is in the same pitch. When the main objective is the same, should we not have a level playing field between the private sector and the public sector, between the traditional plans and Ulips, between different distribution channels of the bank?” asked Nandagopal.

Keeping in mind the expected changes in the insurance industry, private players have sought a map for the next three-five years, so that companies can respond to changes quickly. “We would like to see a detailed map for the next three-five years, so that we can take the general industry forward. It would help us plan our business,” said Bhargav Dasgupta, CEO & managing director, ICICI Lombard General Insurance Company.

“As far as the upcoming challenges are concerned, the implementation of International Financial Reporting Services accounting norms will affect the industry, and also the Direct Taxes Code in its present form will be decremental to the industry’s growth,” said Gaurav Garg, managing director and CEO, Tata AIG General Insurance Company.

Industry would benefit if we have a map from the regulator as to what is expected in the next four-five years. We would be in a position to change our operating model and respond accordingly, Chaudhry added.