Private players observe a boost in single premium sales after the regulatory changes
Insurance industry witnesses a steep growth in single premium products as customers are reluctant to commit money, year upon year in paying premiums. In single-premium products, policyholders need to pay the premium only once during the policy term.
“The insurance industry is witnessing a trend towards selling of single premium products; in 2010-2011, we saw 8% growth in single premium business compared to 4% last year. This may be due to customers being unsure of keeping aside money for paying premium over many years,” said Vibha Padalkar, CFO, HDFC Life Insurance.
She also added that non-availability of non-single premium products in certain categories is also giving a boost to these products. The average ticket size of single premium products is higher and there is no risk of the policy getting lapsed. Minimum premium in a single-premium plan is usually Rs 15,000.
Commission paid to agents in single premium plans is 2%. Hence, earlier agents used to shy away from selling single premium plans. But after the regulatory changes announced by IRDA in September 2010, the gap between the commissions of single premium and regular-premium products or ULIP has significantly decreased, points out Malay Ghosh, Executive Director and President, Reliance Life Insurance.
“During the first half of the last financial year, 10% of our business was generated from single premium products. But after the regulatory changes, it has jumped to 18%-20%,” says Ghosh.
The share of individual single premium collection of private sector life insurance companies in term of total premium collection has witnessed a rapid growth. The total premium earned was Rs 8253.37 crore in 2010 -11 as against Rs 3137.92 crore the previous year.