Page 19 - The Insurance Times November 2024

hands with 2-3 banks to expand its policies will see a fall in returns on both immediate changes, the effect on
business in low-cost bancassurance bonus-paying, or participating (par), participating policies, which offer
distribution networks and hopes to and non-participating (non-par) bonuses, will be reflected in the next
generate Rs 300 crore in new premium products, as insurers prepare to couple of years. Bonus rates are
business by exploring multiple offline implement new guaranteed surrender expected to drop over the long term,
distribution channels, reports Sarthak value rules starting October 1. according to industry experts.
Ganguly. While the new regulations will allow "The spread between G-Sec

As part of this strategy, Bandhan Life policyholders to get a guaranteed (government bond) rates from the
announced its partnership with surrender value from the first year 10th to 30th year varies, and this poses
Bandhan Bank to distribute its life even if they have paid only one annual risks in providing policyholders with G-
insurance products. premium - it was after the second year Sec credit as surrender value. Over
previously - the returns will be lower time, this could decrease bonus rates
Bandhan Life MD & CEO Satishwar B
for those holding policies longer: a 0.3- for par policies along with nonpar,"
said, "In the first year of operations,
0.5 percentage-point fall in returns for said an executive of a listed life
we expect to generate Rs 300 crore in
new premium business. Our current non-par policyholders and a lower insurance company. "There could be a
assets under management stand at Rs bonus payout in case of par policies. 30-50 basis point (0.3-0.5 percentage
4,500 crore." The insurance regulator has point) reduction in non-par rates,
prescribed enhanced special surrender which will be seen immediately."
Bandhan Life Insurance has announced
value where the surrender value will Though government bond rates have
a partnership with Bandhan Bank to
be payable earliest in the first year, fallen from 7.10% to 6.8% in the last
distribute life insurance products
even if the policy is surrendered during four months, insurers have so far
through its 1,700 branches. Initially, the first year after paying the first
around 550 branches will offer two new annual premium. maintained the internal rate of return
products tailored for Bandhan Bank (IRR) on their products. However, the
customers. The company expects to While non-par products will see new rules will likely push companies to
generate Rs 300 crore in new premium
business within the first year and plans
further expansion. Private Life Insurers Consider New Commission
Model
ICICI Prudential Life Tops Following recent revisions to surrender value norms, private sector life

with 99.35% Claim insurers are preparing to adjust commission structures for distributor
channels, based on persistency metrics.
Settlement Ratio
Top executives from leading life insurance firms are set to meet next week
ICICI Prudential Life Insurance, a with the Life Insurance Council, an industry association, to establish a uniform
leading private sector life insurer, has commission framework, according to people familiar with the matter. Their
declared its claim settlement ratio of objective is to maintain consistency in commission payments across the
99.35 per cent for the June quarter of industry and mitigate disruption for distributors.
FY25, which was the highest among all
public and private life insurance Options under consideration include clawbacks, commission deferrals, and
companies in the country. The average outright reductions. For large corporate agents - such as banks and non-
turnaround time taken by ICICI Pru Life banking financial companies - insurers are leaning toward clawbacks, while
for individual agents, a mix of commission deferral and reductions based on
to settle a death claim was 1.2 days in
the same period. The company settled persistency is likely, according to industry insiders. This overhaul, expected
to unfold over the next two to three months, is being negotiated between
2,911 claims in Q1 FY25.
private insurers and distributors.
Life Insurance Policy "We are in various stages of operationalizing the commercial changes with
our partners. We have adopted tailored solutions, including commission
Returns to Decline Due to deferrals, reduction of clawback depending on persistency track record, and

New Surrender Rules partner preferences," said Vibha Padalkar, MD & CEO, HDFC Life Insurance,
in an analyst call, following the company's Q2 result announcement.
Holders of traditional life insurance

The Insurance Times November 2024 17