New business premium (for individual regular policies) collections for life insurers fell 31 per cent in February, one of the steepest fall in recent months.

The continued decline comes in the wake of more stringent norms imposed by the Insurance Regulatory and Development Authority (IRDA) on guaranteeing a minimum return on pension policies besides scaling down the amount of commission payable to the agents.

The public sector giant LIC saw an even more sizeable decline with its new business premium collections registering a 44 per cent drop compared with the same time last year.

LIC collected Rs 2,273 crore compared with Rs 4,092 crore in February last. Private players put together saw a 12 per cent decline, though a few players suffered much steeper fall in collections. What should be a source of concern to the industry is that such a decline has come during its peak season for fresh business. As a rule, the industry collects close to 40 per cent of its total new business premium in the January to March quarter of a year — the tax-saving season for investors.

Fewer pension plans

The industry launched fewer pension plans this year as the insurance companies were wary of the regulator's stipulation that the former spell out a minimum return to policyholders on such plans. New insurance regulations require players to guarantee a 4.5 per cent return for long durations under such plans. They accounted for 25-30 per cent of the business last year.

The introduction of new guidelines for ULIPs in September 2010, which required insurance companies to offer a minimum guarantee on pension plans, too has seen new business premium collections dwindle for private players. For 12 of the 22 private insurers, new business premium collections for February were down with Bajaj Allianz Life insurance's premium collection declining 53 per cent to Rs 190 crore.

For the first time since the insurance regulator put in place new guidelines for unit-linked insurance plans, LIC's premium collections have declined more than the private sector.

Among the private players SBI, Max New York and ING Vysya Life witnessed healthy growth in the band of 44 per cent, 39 per cent and 25 per cent respectively.

New traditional products

However, the positive development witnessed during the April 2010 - February 2011 period, is that insurers have started introducing traditional products where the risk of mortality alone is covered or additionally the policy promises a lump sum amount with a bonus amount thrown in.

With traditional products chipping in, year-to-date new business premium collection for regular policies witnessed a growth of 10 per cent to Rs 69,297 crore. LIC's growth of 16 per cent in new business premium has also helped.

Another factor that contributed to the better year-to-date figures is the higher ‘single premium' business collections.

In the normal times, private insurers are wary of selling the single premium products on account of lower profit margins. But with equity market turning volatile and minimum lock-in for the ULIPs being increased to five years, insurers have preferred to take the single premium route.

On a year to date basis, private players such as India First (BoB, Andhra Bank and Legal & General) witnessed healthy growth of 241 per cent to Rs 396 crore, followed by Shriram Life and HDFC Standard Life.

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