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Wednesday, August 18, 2010

Single premium products drive growth for insurers
Publication: www.mydigitalfc.com, Edition: Internet, Journalist: Shruti Verma

Single premium products drive growth for insurers

Shruti Verma

Single premium plans have been the driving growth of the life insurance industry. The industry has reported many
more collections on these policies than regular premium schemes. Unlike in the past, when only Life Insurance
Corporation of India (LIC) was focusing on single premium products, private insurers have also increased their
exposure to these schemes.

Total premium collected from single premium policies in April-June quarter this year stood at Rs 8,455 crore
compared with Rs 2,830 crore in the same period previous year, an increase of almost 198 per cent. During the
April-June quarter, LIC’s collection from single premium plans was Rs 7,862 crore, while private players collected
Rs 592 crore.

Single premium plans require one-time investment and the premium is a much higher compared with products that
require paying smaller premiums over several years.

Insurers say after interaction with customers they have found out they are more willing to buy one-time payment
plans, instead of going for several periodic payments. “Customers are more comfortable with single-payment
policies which have no future commitments,” said an LIC official.

Companies such as SBI Life Insurance, Bajaj Allianz Life insurance, Kotak Mahindra Life Insurance, Bharti Axa
Life Insurance and Shriram Life Insurance have reported significant increase in collections on this head.

Paresh Parasnis, executive director and chief operating officer of HDFC Standard Life, said, “We have been offering
single-premium plans since inception, both on traditional and unit-linked (Ulip) platforms. These products have
been offered as part of our wide-ranging product suite and for customers who opt for one-time investment/premium
payment. We have seen decent growth in single-premium policies.”

However, as single premium plans require one-time payment, they have higher premium. Minimum premium in a
single-premium plan is usually Rs 10,000.
 Rajeev Kumar, head of products and pricing at Bharti Axa Life Insurance, said, “We have seen some growth in
single-premium policies. The minimum premium in single premium plans is higher than a regular premium product.
Thus, this product is largely restricted to the upper mass market and the rich segment. With a steady increase in the
number of households in this segment over the years, we have seen more customers opting for single-premium
products.”

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