Industry experts claim that the dip is mainly due to the reform in regulations: most of the agents are exiting from the industry.
Life insurance companies have reported a dip in first year premium from Rs. 86,000 crore in FY10 to Rs. 71,000 crore in FY11, according to the data released by IRDA. Private insurers reported a 20% dip in their business figures, while PSU insurers and LIC reported a loss of 15%.
Industry experts claim that the dip is mainly due to the reform in regulations: most of the agents are exiting from the industry. They are unable to adapt to the new regulation drafted by IRDA. Besides, they feel that insurance business is no more lucrative.
“We will take another six months to report profits. Life insurance companies are currently facing difficulties to adjust to the new product basket,” said CEO of a top Life Insurance firm.
Reliance Life’s individual premium dropped to Rs. 908.38 crore in FY11 from Rs. 1885.37 crore in FY10, while their group premium increased to only Rs. 165.18 crore from Rs. 118.5 crore in FY10. ICICI Prudential also reported almost a similar movement in the business graph: its individual premium decreased to Rs. 2009.1 crore in FY11 as compared to Rs. 3814.41 crore in FY10. Their group premium increased to only Rs. 1105.1 crore in FY11 from Rs. 836.24 crore in FY10.
Industry giant Life Insurance Corporation of India (LIC) also suffered losses in individual premiums, which fell to Rs. 25174.45 crore in FY11 from Rs. 37856.96 crore in FY10. Their group business increased to Rs. 26878.99 crore in FY11 from Rs. 23861.56 crore in FY10.
Along with premium, private insurance players have also reported a 30% dip in number of policies. “The policies have gone down because banks are offering lucrative returns for short term period. Therefore, most of the customers have shifted their money from insurance to FDs. Another hindrance is the distribution network which has gone through a deep reform,” said a top official from Reliance Life Insurance.