Come September, a prospective customer of any of the life insurers will have no option but buy an expensive Ulip as the life insurers, who will be implementing the new set of stringent regulations laid down by the Insurance Regulatory & Development Authority, have decided exit cheaper Ulips.
Insurers told FE they have to exit Ulips of smaller size to control operational expenses and would target more high net worth customers for selling the product.
Said Rajesh Relan, CEO & MD, Metlife Insurance, the minimum annual premium on Ulips for his company will go up to Rs 30,000-36000 from the existing Rs 3,000 after the new regulations get implemented.
?We are currently selling Ulips for an annual premium as small as Rs 3000.?
Metlife had to reduce its costs by winding up branches and not going aggressively for headhunting.
However, new policyholders will be in a position to earn more as the investible corpus out of the premium will be higher because of low charges.
Madhivanan Balakrishnan, executive vice-president, ICICI Prudential Life Insurance, conformed that from September 1, the minimum annual premium for his company will go up to Rs 15,000-20,000 per annum, as compared to existing Rs 10,000-12,000.
?I believe the long-term savings instrument like traditional products will be more suitable for the small-ticket customers, whereas Ulips will become attractive for the high-end customers. Cost reduction will be an issue before us and we are trying to cope up with it with the launch of more innovative and technology-based products like iProtect,” he said.
?We should be ready to lose our small-size customers as the minimum premium price of Ulip products are set to go up to Rs 20,000 crore and above. Right now, we are accepting Ulips with a minimum annual premium of Rs 6,000-12,000. Ulips with less than Rs 20,000 will not be viable for the insurers,” said Kshitij Jain, MD & CEO, ING Vysya Life.
Single-premium Ulips will be more in demand now. Rather than acquisition, it will be retention of customers which will gain more significance.
The life insurance industry will get more capital-intensive and the break-even period will become longer. Margins will come under pressure.
?We will have to be more careful on cost strategy. Also, we will need much higher quality of product portfolio. Moreover, we will have to go for better product mix as the traditional products will get more attention now,” Jain explained.
Amitabh Chaudhry, managing director & CEO, HDFC Standard Life Insurance, said the company has already started filing new rejigged products.
?I think the insurers will have to cut costs and maintain the sales momentum. Now, the insurers will have to look at selling a mix of both, traditional and Ulips products. Initially, it might be a difficult proposition, but the things are likely to be ironed out in due course.?
