Insurers will have to register over 40 percent of their unit-liked insurance product (Ulip) offerings before December 31 with the Insurance Regulatory and Development Authority (Irda) again to comply with the new norms on cost structure of insurance products.

Insurance companies' executives said the number would have been even bigger if the guidelines were not amended. The regulator is likely to bring mortality charges out of the overall ceiling on charges and remove individual cap on fund management cost. "Most pension products will comply with the norms. Since Ulips constitute the bulk of insurers' portfolio, either they will have to remove their existing products or re-file them," said Optima Insurance Brokers' Chief Executive officer Rahul Agarwal.

"Margins of insurance companies are already thin. Irda's objective is to cut down the commission of the intermediaries. If we keep out mortality charges, around 50-60 percent of the products will meet the changed norm," said Future Generali Chief Actuary GN Agrawal.

After removing mortality charge, which is used to calculate the risk premium, almost 60 percent of the existing Ulips will comply with the cost structure laid down by the regulator.

The premium allocation charge generally comes to around 60-70 percent of the first year premium, consisting of commission paid to the agents, policy administration charges at 10 percent, while fund management charges vary from one percent to 2.25 percent for the first year.

Insurers are likely to reduce the overall charges to 55-60 percent against the existing 80-85 percent. This will lead to changes in the cost structure.

Ulips are the main sustenance of insurance companies. It fetches over 90 percent of the new business premium. With over 30 crore life insurance policyholders, the impact will be significant.

According to Irda, the difference between the gross and net yield cannot exceed three percent for a 10-year policy and 2.25 percent for policies with tenure of over 10 years.

30/7/2009,

Government-owned insurance companies ” both life and non-life segments " continue to drive growth for the sector, while private insurers show negative growth, according to figures released by the Insurance Regulatory and Development Authority (Irda).

Life Insurance Corporation (LIC) collected over Rs 3,673.76 crore in June and Rs 9,028.68 crore in premiums up to June against Rs 7,424.56 crore in the same period last year, an increase of almost 20 percent.

In contrast, private life insurers saw poor performance in the first quarter of financial year 2009-10 with a negative growth of 20.13 percent in the new business premium collected over the same period last year.

Private life insurers collected up to June Rs 5,427.64 crore against Rs 6,795.64 crore in the same period last year.

The figures released by Irda for the first quarter of this financial year show that LIC continues to lead with 62 percent market share.

All major private life insurers saw a dip in their new business premium collection with SBI Life gathering Rs 1,072.72 crore in first quarter of financial year 2009-10 as against Rs 1,148.67 crore in the corresponding period last year.

Even ICICI Prudential Life saw a major dip of around 49 percent with a new business premium of Rs 807 crore in Q1 of financial year 10 as against Rs 1,590.27 crore in Q1 of financial year 09.

Bajaj Allianz Life, Reliance Life, Birla Sunlife, Max New York Life and HDFC Standard Life among others showed a decrease in premium collection.

A senior official from ICICI Prudential agreed that the company is not doing well and series of steps will be taken by the senior management to address the issue. Though he refused to elaborate on the measures the company will be taking to improve show in second quarter.

Total premium collected by general insurers increased by 4.57 percent with gross premium underwritten in April-June quarter was Rs 8,819.68 crore as against Rs 8,434 crore in the same period last year.

The private general insurers together registered a negative growth of 1.21 percent while public general insurers grew by a little over 7 percent as per the latest data released by Irda.

The total premium underwritten by private general insurers in May was Rs 3,584.64 crore in April-June quarter against Rs 3,541.78 crore in the same period last year.

The total premium underwritten by public general insurers in April-June 2009 was Rs 5,235.02 crore against Rs 4,892.22 crore in April-June 2008.

Bigger players such as ICICI Lombard, Tata AIG general insurance, Bajaj Allianz general insurance and Reliance General Insurance registered a negative growth.

ICICI Lombard registered over 20 percent dip in gross premium underwritten in June this year against the corresponding period last year. In June, gross written premium underwritten by ICICI Lombard was Rs 220.88 crore against Rs 276.28 crore in the same month last year.

There has been some shuffling in the ranking of private insurers this year. With PSU insurers driving growth for the sector the first quarter, SBI Life has overtaken ICICI Prudential as the new industry leader.

ICICI Prudential now holds the second position among private insurers followed by Bajaj Allianz Life and Reliance Life.