After a series of regulatory changes, the life insurance industry is facing multiple challenges. It had reported degrowth in the last financial year and is not showing any improvement even this fiscal. After over a decade of opening the private sector in life insurance, per capita premium in India is stagnating at $56 as compared to the global average of $364.
While the spate of regulatory changes since 2010 were aimed at customer protection and increasing transparency in pricing and operations, they gave the industry very little time to adjust, leading to a lot of uncertainity. The insurance pension market, which accounted for about 34% of individual pension premium to new business premium in 2007-08 has slumped to 1.8% in 2011-12 as most pension products have disappeared from the market because of the new norms which stipulate some implicit guarantees.
The total premium collection in FY12, according to Life Insurance Council, has dropped 3% to R2,83,315 crore as compared to R2,91,605 crore in 2010-11. The total new buisness premium collected by the industry in FY12 was R1,13,678 crore as compared to R1,25,618 crore in FY11, a drop of around 10%.
There is a perceptible shift in the life insurance market as the sales of unit-linked insurance plan products witnessed a drop in sales and customers moved towards traditional products. Linked new business saw a significant drop of 67% year-on-year to R17,455 crore in FY12 as compared to R52,739 crore in FY11. Non-linked new business premium showed a 32% year-on-year growth to R96,224 crore as on March 2012 as compare with R72,878 crore in March 2011.
A recent CII-Ernst & Young report says that most companies will now look to reassess their entire business models from product, pricing, risk management, acquiring rural customers and claims and fraud management.
?The industry is also likely to witness consolidation as and when the regulator finalises the guidelines for mergers and acquisitions,? the report underlined.
