Edelweiss Tokio Life Insurance launched two term plans

Recent entrant in the life insurance Edelweiss Tokio Life today launched two cost effective term plans, Life-Protection and Income Replacement.

"A sudden unfortunate death of the bread winner of the family could jeopardise dreams and bring about a drastic change in the lifestyle of a family. Our protection and income replacement plans address this core need and provide a cost friendly solution of complete protection of your aspirations for your loved ones," Edelweiss Tokio Life Insurance Chief Executive Deepak Mittal said in a statement here.

The Edelweiss Tokio Life-Protection is a pure term plan that provides lump sum payment to the nominee in case of the unfortunate event of the death of the life assured.

The Income Replacement ensures that on death of the life assured the family still continues to receive regular monthly income till the end of the policy term.

The protection scheme offers protection for a maximum period of 30 years, and depending on the age cover it may be extended up to 70 years. The company is also promoting a healthy lifestyle and has lower rates for non-tobacco users.

The income replacement scheme offers inflation mitigating benefit by way of fixed 5 per cent increase in monthly income each year. It also rewards the non-consumption of tobacco.

The minimum sum assured for the protection plan is Rs 15 lakh, while the minimum monthly benefit for the income replacement plan is 15,000.

Both the products allow an entry age starting from 18 years up to 60 years with the maturity from 28 to 70 years.

Edelweiss Tokio Life is a joint venture between diversified financial services firm Edelweiss Capital and Tokio Marine Holdings, a global leader with over 130 years of experience in the insurance business.

Change in single-pay plans on cards: Irda

Single premium product, which has caught the fancy of the life insurance industry after the change in regulations around unit-linked insurance products, may be in for some reform.

"We need to think about the need of insurance as long-term business. Focus had shifted to three-pay or four-pay products and, even worse, to single-pay products. Industry based on single premium is not good," said Irda chairman J Hari Narayan.

"We need to re-emphasize insurance as a long-term business. The marketing and selling of products (like single premium) have de-emphasized the long-term nature of the business."

Single-pay products are insurance policies where policyholders need to pay premium only once while he or she is covered for the term of the policy. In 2011-12 so far, the total single premium, including group and individual, has gone up by 46% compared to 49% in 2010-11.

Pointing to the decline in business, Hari Narayan said that this is not a function of regulatory changes but because insurance companies have not build the kind of trust required. Internationally, however, he said that de-growth has been even sharper.

He said that 2012 is going to be worse than 2011. "Therefore, 2013 is going to be better. The best way to go forward is to start from absolute bottom. Future is going to be better than what the immediate past has been," he said.

The life insurance industry has seen a 17% fall in new business premium income in April-December 2011 compared with the same period last year.

He noted that there are difficulties in pension products. Such as lack of certain long-term instruments to hedge. Though insurance companies are allowed to invest in interest rate derivatives, it is only for a short period. Hari Narayan said that there are indications that we would like to develop derivatives market on debt front like RBI has come out with swap in corporate debt.

A high-level committee of regulators has suggested that all long-term products should be given tax incentives in order to underpin and strengthen the industry, he said.

No more loans against Ulips

The Insurance Regulatory and Development Authority (Irda) plans to ban loans by life insurance companies against unit-linked life insurance policies (Ulips). The insurance regulator is not approving any unit-linked plans with a clause of loans against policy.

“Irda has rejected our new unit-linked plan and has asked us to refile it after removing the loan facility clause,” said a senior official at a large private life insurance company on the condition of anonymity.

Confirming the development, Irda Chairman J Hari Narayan said, “Fundamentally, Ulips are risky products, given that they are linked with the stock market. In case the fund value drops dramatically due to negative price movement, the risk would come to the insurers. Hence, loans against such products are not advisable.”

Insurance officials said the move might further dent the sales of Ulips as the loan facility acted as an added feature. The facility first came into force after Irda raised the lock-in period for such plans by two years to five in September 2010.

LOANS AGAINST MARKET-LINKED PLANS RISKY

* Irda not approving any Ulips with loan facility

* Sept 2010 Loans against Ulips started

* 75% of the fund value could be the maximum loan amount

* Interest rate offered was benchmarked against the base rate of banks — currently around 10.75-11%

* Highest loan tenure could equal the policy tenure

* 90% of the fund value can be the maximum loan amount for traditional policies

“The loan facility was one of the selling points for these long-term insurance products. So, this would impact the sales of unit-linked plans,” said K Sahay, CEO, and Star Union Dai-ichi Life.

Earlier, when the lock-in period was three years, policyholders were allowed part-withdrawal after the period. With a lock-in period of five years, the loan facility was provided to meet customers' short-term fund requirements, said an official of a private life insurance company.

Another reason behind allowing loans was to prevent policyholders in need of short-term funds from surrendering the policy, added an actuary at a private life insurance company.

The loan amount against a unit-linked policy depends on the extent of the equity exposure in the portfolio. Generally, insurance companies provide up to 70-75 per cent of the fund value of a unit-linked policy as loan if more than 60 per cent of the fund is invested in debt instruments. However, the loan amount comes down to 50 per cent of the fund value where equity exposure accounts for more than 60 per cent of the total portfolio.

For traditional or endowment plans, companies extend loans up to 90 per cent of the fund value. The rate of interest varies from 9.5-12 per cent per annum, benchmarked against the base rates of public sector banks. The loan tenure can be as high as the policy term. "Traditional or endowment plans are safer products and we have no issues with a loan facility against these plans," the Irda chairman added.

Since September 2010, when stringent unit-linked guidelines came into force, insurance companies have focused more on traditional plans and the sale of Ulips, which till then constituted 80 per cent of the total volume, came down drastically. In the current financial year, the downward trend has continued, with a choppy equity market and high inflation adding to the problems. During April-November, premium collection by the life insurance industry was down almost 19 per cent to Rs 2,428.86 crore from Rs 76,989.88 crore reported in the year-ago period. Ulips accounted for only 20-25 per cent of the sales.

New business income for life insurance companies down 17%: IRDA

Sales of life insurance policies continue to decline even during the tax-saving season. According to the data released by the Insurance Regulatory and Development Authority, or Irda, new business premium income for life insurance has fallen by 17% to Rs 71,953 crore during April-December, 2011, from Rs 86,698 crore a year ago.

While private sector saw a drop of 20.34% in income from sales of new policies during the first nine months, state-run Life Insurance Corporation registered a 15.86% fall. Large private insurers like SBI Life and ICICI Prudential witnessed a drop of 19.82% and 33%, respectively.

Industry experts blame non-availability of pension products, curbs on guaranteed products and delay in product approvals for the drop in income from insurance. The only private sector insurer to register an increase in income was MetLife.

The company recently sold its stake to the second-largest public sector lender Punjab National Bank. It has done a business of Rs 150 crore through the bank. The company has applied to the insurance regulator for approval of the deal. The regulator is reviewing the proposal and is likely to announce the deal in a month.

The volatility in the market has also acted as a deterrent for the sales of policies, especially Ulips.

LIC launched Jeevan Ankur child plan

The country's largest insurer, Life Insurance Corporation (LIC), today launched a new product in the child plan space that aims to meet educational and other needs of children.

LIC Jeevan Ankur is specially designed to meet the educational and other needs of the child, LIC said.

It is the most suitable insurance plan for parents who have a child aged up to 17 years, for this plan ensures that their responsibilities are met under all circumstances, without depending on anyone else, it said.

The plan covers the risk on the life of the parent and the named child shall be the nominee under the plan, it said.

In the event of the unfortunate death of the parent during the policy term, the basic sum assured is payable immediately on in-force policies, LIC Senior Divisional Manager R K Jha said.

In addition, an income benefit equal to 10 per cent of the basic sum assured is payable to the nominee child from the policy anniversary coinciding with or immediately after the death till the end of policy term, it said.

This will ensure the continuity of the child's education without any additional burden, it said.

Not only this, it said, the nominee child will also get a lumpsum amount equal to the basic sum assured on the predefined maturity date of the policy along with loyalty additions, if any, to support higher education or a start in professional life.

Insurance companies tie up with banks to lure customers

One can't have the cake and eat it too, but public sector banks can do it, thanks to their solid brick and mortar business model and decades-long sticky customers who can be a perennial source of revenue for insurers.

Max New York Life, Sumitomo and Birla Sun Life are queuing up at the doors of Bangalore-based Syndicate Bank, offering a stake in their insurance ventures, and also hundreds of crores to own that stake, turning known business principles on their head.

Max New York is offering a 4% stake in the company and Rs 400 crore to Syndicate Bank to become a minority stakeholder that can open the doors for selling life cover to lakhs of the uninsured middle class in more than its 2,500 branches, said two people familiar with the offer. Sumitomo is dangling the carrot of Syndicate Bank not having to invest capital for seven years but keeping its stake stable, while the Japanese company keeps investing funds to grow the business, said people requesting anonymity.

"Whenever there is demand in the system and supply is limited, there is acute competition," said Rajesh Sud MD and CEO, Max New York Life. "The need for low-cost distribution has increased in the new regime."

Budding private insurers, who battle a Goliath called Life Insurance Corporation with an army of 15 lakh agents, are leaving no stone unturned to tap the vast emerging market where incomes are rising.

One popular way to reach out to new customers without investing on overheads is to tie up with banks which have lakhs of customers, who could be lured to buy insurance as well. HDFC Life, ICICI Prudential and SBI Life are among insurers who have effectively used the bank channel to grow.

"The key issue is that insurance companies cannot sustain without banks," said Ravi Trivedy, partner KPMG. "Banks bring with them ready infrastructure and customer base. This is the sweetest deal any bank can think of," he said.

The life insurance industry which was growing at 30-35% on an annual basis is struggling after regulatory changes slowed the sale of the so called Ulips. For private insurers, nearly a third of their new premium income came from the so called bancassurance where banks sell insurance policies to individuals.

If a deal happens between Syndicate Bank and any one of the insurers, it will be the second such instance where banks are paid to take a stake in an insurer, said the sources.

In September 2011, MetLife India, the Indian unit of the US insurance firm, paid around Rs 350 crore to PNB to own a 30% stake in the company, making the state-run lender a JV partner.

Age barrier for health policies may go

Regulator as well as insurers keen on such policies, but pricing may be a trouble.

The Insurance Regulatory and Development Authority (Irda) is looking to do away with the age limit for purchasing insurance policies. Even as the proposal is still at a nascent stage, the regulator is in the process of clearing products targeted at senior citizens.

By allowing policyholders to renew policies at any age, Irda has already taken the first step to make health policies ‘age free’. It had recently made it mandatory for policies to have a “life long” renewal clause. This means once a health insurance policy is issued, insurers would be obliged to continue renewing such policies during the policyholder’s lifetime. However, the entry age barrier remains.

Meanwhile, some general insurance companies have already started applying for an ‘age-free’ policy. For instance, Apollo Munich Insurance applied for such a policy a few months back and is awaiting approval.

L&T Insurance, on the other hand, has an interesting variant which permits lifetime renewal but mandates a co-payer after the age of 70. Even ICICI Lombard is looking at a lifetime renewal policy. “We will be coming out with a plan where policies issued once could be renewed throughout the lifetime of the policyholder. However, the final entry age for our health policies is 65 years,” said a senior official at ICICI Lombard GIC.

Other insurance companies are expected to follow suit or add necessary clauses in their existing portfolio of products. At present, the entry age for most existing health insurance plans is capped at 65 years.

When contacted, Irda chairman J Hari Narayan said there had been discussions about removing the entry age gap. “However, there are no concrete plans as of now,” he said.

But, the regulator is looking into these products carefully. Senior officials at Apollo Munich said though the first application was made a while back, Irda sent it back with queries. They have reapplied for the product and are awaiting a response.

For most insurers, pricing remains the main issue with policies. For a Rs 5-lakh cover for someone aged 75-80 years, the premium should not be more than 15 per cent of the cover. “But, since the loss ratio beyond 80 years is high and most people of that age suffer from some illness, the real challenge is underwriting such a product,” said a senior official at Apollo Munich Health Insurance.

As a result, the pricing for a Rs 5-lakh policy (for persons over 70 years) is expected to be around Rs 60,000-80,000 annually. In addition, there would be certain conditions, subject to the health of the individual. “For example, some existing chronic diseases might be excluded from the cover,” the official added. Another official of a standalone health insurance company said they would be filing a product without any entry age cap with the regulator soon, even as the premiums would be slightly higher.

According to industry estimates, the health insurance business constitutes more than 25 per cent of the general insurance industry. Over the last one year, premiums have risen 25 per cent. During April-September this financial year, the health insurance premium collection rose 21.3 per cent to Rs 6,721.53 crore from Rs 5,540.34 crore.