The regulator’s stringent norms on unit linked insurance plans (Ulips) set to be effective from September 1, is going to be game changer in the country’s insurance industry.
The 22 players in the liberalised, $41 billion life insurance industry will be implementing the Insurance Regulatory & Development Authority’s (Irda) new norms. Historically, Ulips have contributed almost over 80% of the incremental premiums of the fast growing? life insurance industry over last few years .
Irda, which had emerged victorious in its turf over with the capital market regulator Sebi had drastically changed the way life insurers are cashing in on the popularity of Ulips to check its mis-selling.
Says Bajaj Allianz Life Insurance COO V Philip, ?New guidelines on Ulips will be the biggest game changer in the life insurance industry, which not only involves tweaking the current Ulips products but a major paradigm shift in the business model itself.?
Reliance Life has deferred its much awaited plans for initial public offer by almost a year.
?We have to now adjust the new norms and would wait for almost a year to know its impact on our operations so that we can revive our IPO plans,?? confirmed Sam Ghosh, managing director, Reliance Life.?
Amitabh Chaudhuri, MD & CEO, HDFC Standard that the company has to reduce its costs up to 30 to 40%, which may require rationalisation of branches and cutting down headcount so as to manage the things.
?We are looking at our break-even period in 2012, but it will be difficult to achieve now. Of course, there will be some impact on our profitability in the short-term or for first three-four months, but everything would be manageable in the long term,?? he said .
Rajesh Sud, MD & CEO, Max NY Life admitted that that though the company is looking for a break-even in 2012, still it can be delayed a bit further due to the new regime post Sept. ?We will have to go more for more investment in infrastructure sector. Profitability may be a concern in the short-term, still it can be manageable in the long term,?? he explained Currently, MYNL?s product mix of Ulip vs non-Ulip is at 75:25 which has to be reduced to 65:35 by selling more traditional products.
Says Malay Ghosh, president and executive director, Reliance Life Insurance, ?Rather than cutting costs, the company will be busy rationalising its products with the help of technology. Only 25% of our total clients under Ulips will migrate to traditional products. Also, our Ulip premium annually will go up to Rs 20,000 from Rs 5,000.?
Says Aegon Religare Life Insurance CEO Rajiv Jamkhedkar, ?We have filed for five new Ulip products, but we expect the approval to come immediately for our 2-3 products only. Rather than looking cutting our costs, we are expanding.?