Attrition amongst agents in the insurance industry.

The changed guidelines on ULIPs has resulted not only in the decrease in premium but also has led to a high attrition of the agents. ULIPs are market linked insurance products where the cash value varies according to changes in the market. The worst hits are those companies who don’t fall in the bancassurance sector. Since the strong agents channel is critical for these companies they are looking into all sorts of ways to contain it. According to the IRDA at least 10.45 lakh agents have left the business compared to 7 lakh who joined resulting in a net 35 percent dip.

This attrition can be a direct result of the changed ULIP guidelines. These days ULIPs are not as attractive and lucrative as it used to be. This change had also resulted in a huge drop of premium collected. Subsequently the commissions earned also decrease something which is prompting agents to leave the business. The commission for selling ULIPs has been slashed from 15% to 5% now. Apart from this fall in commission, the performance of ULIPs has also instigated agents to take a break from it. Earlier some huge proportion of mis selling had happened where agents asked naïve customers to pay premium for three years and get a double return on the fourth year. Now with the poor performance of the market, these agents are seeking refuge and trying to stay away.

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LIC comes out with its new Single Premium Product

Not many companies remain so active during a pessimistic phase in the market as Life Insurance Corporation of India (LIC). Apart from investing heavily during these turbulent times, it now plans to launch a new product especially suited for the volatile market. The new product would be a single premium policy and is expected to be released in the month of September.A single premium policy is one where a lump sum payment is made into the policy in return for a death benefit. With this the cash invested builds up rapidly as the policy becomes fully funded. The size of the death benefit depends on the amount invested and the age and health of the insured. However these are relatively expensive.

LIC’s latest single premium policy comes after a gap of two and a half years when it launched “Jeevan Aastha”. The success of “Jeevan Aastha” clearly laid down that people prefer paying single payments against periodic payments albeit the higher costs incurred. For the records, “Jeevan Aastha” raised Rs 10,235 crore in just 45 days with around 1.8 million policies sold. With this new product LIC plans to raise in excess of Rs 10,000 crore because of the inclusion of 5-10 tenure term.

However experts and Financial Planners are skeptical of such policies. A simple math would show that investing in FD and using little bits of returns and capitals would generate better results.

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India First targets high from new business

One insurance company which has been making news these days is the India First Life Insurance. Apart from the aggressive marketing campaign for the Money Back Plan, it also has lined up a many new products to be launched in this fiscal. The motley includes a group saving product, a product for the high net worth individuals and a pension plan (to be released after the regulatory guidelines for pensions are released by IRDA).

From all these expansion, the insurance company has set an eye on achieving Rs 1,200 crore from new premium from this fiscal. Chief Executive P Nandagopal showed optimism on achieving this target. So far they have successfully achieved the target of Rs 150 crore for the first quarter this July and things are already rolling to achieve their next goal

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Hike in premium for Air India.

The woes for Air India don’t seem to wean off this year. After suffering a series of operational issues, the insurance segment now brings bad news for the airline. AI is charged 15% more for its annual insurance premium effective from the October renewal. The premium this year would be Rs 160 crore as compared to Rs 136 crore paid last year.

The reasons cited are primarily due to the increase in the fleet size and the tragic Mangalore air –crash. Apart from this some stringent norms life upfront payment of claims as well as low margin is also considered as a reason. Apart from the higher premium, AI also lost much of its charm amongst insurers as evident from a drop of bids made this year. ICICI Lombard and New India led public sector insurers have made bids for the tender of AI this year. The insurance policy would cover Aviation hull, terror and war and the deductible insurance.

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M Ramadoss faces suspension

Government has decided to take the extreme punitive measures against New India Assurance chairman M Ramadoss by suspending him over the irregularities in distribution of credit insurance cover to Paramount Airways. The cover was granted in 2009 by Oriental Insurance Company which was then headed by Ramadoss. In his absence chairman of Chennai based United India Insurance, G Srinivasan, will take charge.

The issue which involves insurance covers totaling to Rs 400 crore is currently under the scanner of Central Bureau of Investigation. These credit covers were used for sourcing loans from public sector banks. Trouble began when Paramount Airways came under a bad phase and the banks lined up to seek repayments only to discover that their exposure was not only to Paramount Airways but also to Oriental Insurance.

Earlier government has shown similar ire by denying extension to TS Vijayan owning to the numerous complaints against. The suspension of Ramadoss serves as the second example

Syndicate Bank plans a tie-up with Aviva

Not too long ago, PNB and Metlife created news by entering into an agreement where PNB bought 30% stake in Metlife. However not many know that Aviva Life was also among the final list of companies where PNB had planned to invest. But this miss for Aviva would be short lived as news is brewing that Manipal based Syndicate Bank has set its eye on a 26% stake from Aviva Life.

Although many other life insurance players like Birla Sun Life, HDFC Life, Max New York Life are also included in the list for consideration, Aviva Life seems to be much better placed than these other companies. Aviva started its operations in India in 2002. Last fiscal it recorded a profit of Rs 29 crore. Currently Mohit Burman from Dabur Group holds 74% stake in Aviva and the rest is held by Aviva UK

Future Generalli India’s new Ad mantra

For those who do not switch channels during commercials, there is a high chance that you came across this new campaign from Future Generalli India called “Ab Nibhao Ristedari”. But unlike other advertisements, this one targets the insurance agents. It invites the insurance agents to come and join the growing family of Future Genralli India.
A common advertising trend shown by the insurance companies as well as banks is to target the cultural and sentimental ethos of the country. Taking cue from it, FG’s new ad shows how an insurance agent becomes a part of the families he comes across. An insurance agent is someone who builds the bridge between a company and individuals. Tapping this through an advertising campaign sure looks like a nice strategy.

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While the Financial Markets cry, LIC India Invests.

While the stock market reacts to the downgrading of US by S&P, Life Insurance Corporation of India seems to be in an investing spree. In the last three days, LIC India has doubled stock purchases. In the past too, LIC India has been the Government’s tool to take care of a reeling stock market.

Since global turndown brings in pessimistic assumptions, not many companies are keen on coming up with their IPOs. So LIC India has been investing in the secondary market in these days. Currently the country’s biggest investor has stakes in L&T, Axis Bank and Grasim. It has increased its stake in Aurobindo Pharma above 5% by acquiring over 1.67 lakh shares. LIC India has invested around Rs 330 crore in the last three days. Compared to this it invested only Rs 120 crore in the first four months of this fiscal.

While LIC’s move can be welcomed as a stabilizing agent for the stock market, it is after all playing with the common man’s money. Now the question remains: Should the government put a cap on this seemingly limitless power of investing of LIC India?


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