A marked rise in lapsation rate is not the only issue private life insurers are currently grappling with. These are losing out heavily in acquiring new customers who are making their preference clear for the public sector behemoth, the Life Insurance Corporation of India.
Data from Insurance Regulatory and Development Authority (Irda) show that the decline in new client acquisition for private players has been alarming enough. The share of retail policies is languishing too, which is down 11% in April-October from a year ago. For the 23 operators, the overall retail business was the real sucker, which declined to 18% from 30% during 2009-10 to 2012-13.
The shift is clearly visible: LIC has managed to underwrite more number of policies, which helped the insurer notch up a growth of 21% in retail business during the said period. The climb is only getting steeper for the private sector as every fourth policy holder is lapsing or surrendering the policy deliberately. A simple comparison helps – while the rate at the end of the year for all private insures stood at 38%, LIC seems to have a clear edge at just 9%. An insurance policy lapses when the policyholder fails to pay the premium.
Industry-wise, the sale of policies is on a downtrend, which slipped 2% in April-October from the year-ago period. For private players, the policy sale tumbled 15% whereas LIC racked up 1.5% growth during the same period. “Product approval delays and the sluggish investment climate have been impacting the industry for the past one year. Also, the traditional product market has not done well and agents are finding it difficult to sell those products,” said GN Agrawal, chief actuary, Future Generali Life. Private insurers blame forceful reduction of sale of individual single premium policies and agent dropout for their current state of affairs. The new business premium bunch shrank to `64,503.15 crore from `82,654.15 crore for this fiscal.
To keep the momentum going for topline, many of these players are interested in growing their group business portfolio. Besides, there’s also a clear shift in focus towards traditional products. But low guaranteed returns and absence of bonus declarations are acting as a deterrent of sorts.