Thaindian News

Chennai, Aug 31 (IANS) A new dawn or a sunset or a short eclipse? These are the questions life insurance officials will be pondering over when they enter their offices Wednesday, as the new guidelines of the Insurance Regulatory and Development Authority (IRDA) kick in.
The new norms govern unit linked insurance policies (ULIP) and pension policies and the Indian life insurers will be rebooting their businesses with just two or even one ULIP.

The authority has mandated that insurers recover their expenses over a period of five years, return a major portion of the premium if the policy is surrendered and has also capped the charges that the companies can levy on their ULIPs.

According to industry officials, the insurance regulator has approved around 50 new products for the sector and individual companies will be rebooting their business with just two or even a single ULIP.

“It is only a short term eclipse and not a new dawn or sunset,” Secretary General of Life Insurance Council S.B. Mathur told IANS.

From around 500 ULIPs in the market Dec 31, 2009, the number has come down to around 250 and from Sep 1 it will be around 50 owing to changes in the regulations.

Industry officials expect some life insurance promoters exiting the business as it will be more capital intensive.

“I expect the topline to go down this fiscal. I don’t forsee agents keeping quiet for long as their income will be affected,” an official told IANS on the condition of anonymity.

Mathur expects life insurers to demand changing the surplus sharing ratio from the current 90:10 to 80:20 or 85:15.

Under the current regulations, the surplus in traditional products will have to be shared between the shareholders and the policyholders in the ratio of 90:10.