As of November, single-premium unit-linked plans, or Ulips, totted up more than half of the premiums collected by life insurers.
This, the industry’s regulator warns, is a very risky business model, disadvantageous to both policy holders and insurers.
J Hari Narayan, chairman of the Insurance Regulatory Development Authority (IRDA), said by its very nature, single-premium is highly risky. “You can’t grow insurance business on the basis of single-premium collections. The industry needs products that are fundamentally correct and have a long-term view.”
The ills of the segment, he alluded, are:
a. Single premium products won’t inculcate a disciplined savings habit among policy holders.
b. One-time payment may not allow them to take advantage of the changing market conditions
c.For insurers, it will be difficult for maintain customer persistency.
The regulator plans to look into this “but we haven’t decided how to go about it,” Hari Narayan said.
On bancassurance guidelines, he said IRDA is not planning any changes in the draft guidelines already in place on geographical zones, despite the industry’s clamour for it.
On November 23, IRDA had rolled out draft guidelines for bancassurance arrangements.
In that, IRDA said insures will have to operate only in regions specified by it.
Insurers are divided on this, specifically on zonal tie ups. They have given a representation through the Life Insurance Council in the second week of December expressing their concerns on the issue.
“If the zonal bifurcation from the bancassurance draft remains the same under the final guidelines, there could be complications in the initial months of operations. It will take at least 6 to 9 months for the industry to iron out that problem,” said K Sahay managing director and CEO at Star Union Dai-ichi Life Insurance Company.
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