Pune::
The insurance regulator IRDAI has asked the life insurers to maintain their 13th month persistency ratio of policies at 90 per cent.
In insurance industry , policy retention is known as “persistency" and “persistency ratio" measures how long customers stay with their policies, by looking at the number of policy renewals year after year. The ratio is measured both by the policy number and premium collected.
`The persistency ratio of life insurance policies is not upto our expectation.Currently, the 13th month persistency is at 71 per cent and it is not a healthy trend in the Indian life insurance industry.We also want life insurers’ 61st persistency ratio of their policies shouldn’t fall below 65 per cent(currently below 50 per cent),’’ said S Khuntia, chairman, IRDAI, while delivering his keynote address at the 22nd Annual C D Deshmukh Memorial Seminar, organised by Pune based National Insurance Academy.
Khuntia informed that in a bid to expand the distribution channels without pushing up the costs, the insurance regulator is now talking to the petroleum ministry to evaluate the use of petrol pumps and cooking gas agencies to sell insurance policies.
“We are also in the process of unveiling a standard annuity policy to be sold by the life insurers so that people can avail pension much easily after retirement,’’ said Khuntia adding that life insurers should add wellness features in the life insurance policies to provide extra service to the policy holders.
Khuntia suggeted that the life insurers should go for Intial Public Offerings(IPOs),the way the Life Insurance Corporation(LIC) is getting listed shortly,to become more transparent in their functioning.,
Life insurers should think about forming groups among customers to provide them some special services.For example a life insurer can form among its diabetic policy holders and regularly provide health and wellness tips to them,'' he suggested.
Khuntia suggested that life insurers should recruit more woman agents so that they can sell life insurance policies to the women members of a family.There are 23 lakh agents in the life insurance sector-out of which 6 lakh are women.
Highlighting the achievements of the life insurance industry during last 20 years he said total premium collection, which was close to Rs 35,000 crore in 2001, has gone up to Rs 5.72 trillion in 2019-20 —a CAGR of 16.5 per cent.
The sum assured has also grown and is now 28 times the premium collection, indicating premiums are low while the sum assured is high.
The AUM has gone up 20 times in the last 20 years, with a CAGR of 17 per cent.
“However, the protection gap is high at 83 per cent in India, which we need to reduce,” the chairman said.
He also focussed on the need to control the insurance frauds by pooling of information among the industry and creating a database for reference and analysis of data by using the AI and Big Data.
Addressing the event, M R Kumar, Chairman,Life Insurance Corporation(LIC), said Covid 19 has stress-tested the business continuity and operational procedures of life insurers in the background of ongoing social restrictions and health and safety concern.
“Covid 19 made life insurers to rethink and redesign distribution channels operations, business processes and marketing operations.Significant changes in business model and processes have been seen as a result of the pandemic which would have otherwise taken years to materialize.The effects of the pandemic may last longer, but this is the defining moment for life insurance in India,'' he said.
The recent fall in bank interest rates have made also annuity and participating policies popular. ULIP policies are giving an opportunity to market savvy customers to reap higher benefits in the new normal said Kumar.
Life Insurance business expected is to grow by 12 to 15 per cent in the coming years and life insurers will play a crucial role in creating huge employment through agency channel under the “New Normal''.
The industry has added 106035 agents to the force by end of November
The most significant change that Corona crisis and new normal has brought is the change in mindset of people towards insurance. The havoc created by Covid-19 has resulted in the bolstering of demand for insurance products, be it in protection, health, guaranteed return segment or others. The awareness about insurance has gone up considerably, explained Kumar….
The penetration of life insurance stood at 2.82 per cent in FY2019, which marginally increased from the level of 2.74 per cent in FY2018.
“It is time I think that for India we start building our own metrics of evaluating the penetration of life Insurance, without going by the metrics used worldwide .We need to think differently on this issue,'' he said.
Participating in one of the panel discussions, NS Kanan, MD & CEO,ICICI Pru Life Insurance suggested that the government should hike foreign direct investment(FDI) for insurers
.“It can be raised from 49 per cent to 74 per cent if not to 100 percent.There are a lot of small insurers who would be wanting capital fior business purposes and it is time that government should hike the FDI limit in the insurnace industry. In India, mutual fund industry and non-banking finance companies are allowed 100 FDI while banks can have up to74 per cent of FDI. Why insurance industry can't have FDI highr limit at 74 per cent,'' he questined