Page 46 - Insurance Times August 2020

But there are policies in the market such as Pro Health insurer for staying healthy and not making any claim on the
policy (Manipal Cigna), Max Bupa’s ReAssure plan and Star policy in a year) calculation. Lastly, the SI reinstated during
Health’s Family Health Optima plan (SI is restored three the policy year, if unutilised, will expire and cannot be
times a year), that offer ‘restore’ benefit multiple times. carried forward to next year or at the time of renewal of
Insurers also offer unlimited ‘restore’ benefits as a rider, like policy.
in Religare Health insurance’s Care plan and Activ Assure
Diamond plan (Aditya Birla Health). Remember that your reinstated SI can be utilised only
sequentially, that is, after exhausting the original SI,
Two, as a norm, the ‘restored’ SI will be available only for accumulated no-claim bonus (NCB) SI, additional or super
subsequent claims made by the policyholder. That is, the NCB (if any opted), and additional SI through booster benefit
‘restore’ benefit will not be applicable on the first claim in (if any opted).
the policy year. Also, most policies do not offer the
‘reinstated’ SI for the same illness for which you had made Our take
the claim in a policy year. However, some policies in the
market such as ReAssure (Max Bupa) and Optima Restore SI restoration benefit is offered by most health insurers as
(HDFC Ergo Health) do cover for the same illness part of the basic cover. While this benefit can compensate
subsequently. if you are under-insured, relying on reinstated SI to make
up for the gap is not advisable. Also, you need to understand
Three, your ‘restoration’ SI will not be considered for no the workings and applicability of this feature and choose a
claim bonus (a reward that policyholders receive from the SI, accordingly, based on your need. (Source : Business Line)

Insurers see spurt in surrender of policies

Even as the coronavirus pandemic continues to rage, policyholders are giving up their life cover at a rapid pace amid
pay cuts, job losses and general economic uncertainty, top executives at four life insurance firms said. In the June quarter,
the 13-persistency ratio, which measures how long a policyholder retains insurance, declined by an average of close to
10 percentage points from a year ago, the executives said on condition of anonymity. The decline means many customers
did not renew policies after paying the first year’s premium. In the same period, the average ticket size (premium) of
conventional life insurance products such as endowment, pension and money-back policies fell by 25-30%, three of the
four officials said, adding unit-linked insurance products (Ulips), the mainstay of many insurers, are witnessing significant
premature withdrawals.
“People who bought 20-30 year tenure life insurance policies are surrendering policies and withdrawing money, which
is tax-free. This, they are doing to keep as much cash as possible, and later start new policies or investment plans once
the pandemic is over and the situation improves," the first of the four people said. The increasing policy surrenders
come as another blow to insurers who are already battling low new premium collections. “In Ulips, the trend is more
worrisome. Ulips contribute 45-50% of premium income for private insurers. Policyholders are in a rush to redeem
investments and stop policies every time the equity market goes up," said the second person. “We, as an industry, are
expecting a rise in surrenders as customers now prefer to have immediate cash in hand. Many surrenders may be stuck
because insurance company branches are closed, but surrenders may rise in coming days," said Tarun Chugh, managing
director and CEO of Bajaj Allianz Life Insurance Co. Ltd. “Typically, in Ulips, surrenders are more rampant because the
surrender value goes up when the market and the NAV go up. In Ulips, one can withdraw the policy any time after five
years, even if the Ulip is booked for 10 years," said Chugh. He said in 2019-20, too, saw a decline in persistency, adding
that for Bajaj Allianz Life, the ratio for the June quarter was only slightly down to 76.6% from 77% a year ago.
For the life insurance industry as a whole, the average annual premium fell to Rs. 47,236 in the June quarter from Rs.
54,651 a year ago, as risk-averse customers sought to keep disposable cash and preferred pure protection products
rather than investment-oriented policies. For Bajaj Allianz, the average ticket size in the June quarter fell by 30% to Rs.
39,061 from Rs. 55,657 a year ago. “The industry’s growth is now being driven by protection and guarantee products,
which relatively have a lower ticket size as compared to Ulips. Equity Ulips remain a drag on growth on account of
cyclical weakness in Ulip sales due to weak capital markets. Ulips used to be a higher ticket size segment," said a
spokesperson at Bajaj Allianz Life. People have started borrowing against life policies as collateral more than before so
that they are able to continue to have cash all the time, life insurers said. In the June quarter, Bajaj Allianz gave out
2,077 loans worth Rs. 25.8 crore against life policies.

46 The Insurance Times, August 2020