Indian insurance plans attract investors.
Apart from specifying a minimum tenor of five years -- from the three earlier -- for Ulip schemes, IRDA also placed a cap on charges and also set a guarantee on the policies.
With the changes, "India is the cheapest market in Asia for life insurance currently," said Anup Rau, executive vice-president and head of sales and distribution at HDFC Life, India's second largest private insurer with a customer base of more than three million.
"In Singapore, for instance, EoACAyulip' charges in the first year are about 80 per cent, whereas in India they can't be more than 30 per cent over five years.
"But the reforms since September 2010 have forced insurers to become more efficient. The commission structures have also got rationalised to a degree -- what the market sees now is a lot of the right [kind of] selling happening." But at the time of the changes coming into effect, demand had sort of caved in for EoACAyulip' schemes. The impact was particularly felt by privately owned insurance majors. According to Rau, in recent months the marketplace has once again begun to see some revival of interest.
"Indian customers have a great deal of choice now; when that happens you expect the market to automatically react positively and the volumes coming back," said Rau.
"The reason it hasn't happened so far is because pension funds are completely out of the window at this point in time on EoACAyulip' schemes.
"Pensions contributed 50-60 per cent of the top-line of most life insurance companies and that's where we got hurt.
"They are expected to come back later this year and it's vital."
But there is a catch -- IRDA requires that "ulip" schemes come with a minimum guarantee in place for investors. "The way I see it is if life insurers have to place guarantees, customers would be better off not buying that product," said Rau.
"Insurers will be forced to invest unnaturally to make sure the guarantees can be matched.
"For me, insurance is a long-term goal based on a systematic investment plan. So it's going to be agnostic as far as the markets are concerned unlike other asset classes where people tend to look short-term."
Clearly, India's insurance sector is still in a state of heightened flux.
Dubai HDFC Life has just moved into a new rep office in Dubai, its first international exposure. The base will primarily be used to service the requirements of its base of NRI policyholders here as well as grow its interests in some of the adjoining markets.
There is even a chance that the office could have an upgrade in its status. India's Insurance Regulatory and Development and Investment Authority (IRDA) is seeking feedback before the end of the year from India's insurance majors on the rationale for joint ventures and subsidiaries overseas.
"Our feedback will all depend on our Dubai experience," said Anup Rau of HDFC Life, a joint venture between India's HDFC and the UK's Standard Life.
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