Page 17 - Insurance Times March 2024

crore in the year-ago period. Total This recommendation, if and when Top Life Insurance Cos
income surpassed Rs 2 lakh crore mark accepted by government and
to Rs 2,12,447 crore in Q3FY24 as consequent legal amendments are raise concerns on
against Rs 1,96,891 crore in the year- introduced, would pave the way for proposed rise in policy
ago period. LIC said an amount of Rs insurance agents to associate with
7,692.34 crore for the quarter ending multiple insurance companies. surrender values
December 31 to shareholder's Currently, under the Insurance Act Industry representatives said the
account due to changes made in its changes as proposed could deal a
accounting policy in September 2022 1938, an insurance agent can associate "killer blow" to the sector. Any
and due to this, the profit in this with one life, one non-life and one higher surrender value would lead
quarter is not comparable to the past health insurance company for to a fall in the persistency ratio -
quarters. In the December quarter of distribution of insurance products. which indicates the proportion of
last year, LIC transferred `5,669.79 An 'open architecture' for agents policyholders regularly paying
crore to the shareholder's account. would result in higher insurance premiums - that has been just
Net premium income grew 4.67 % to penetration while accelerating financial about 50% for more than five
Rs 1.17 lakh crore in Q3, from Rs 1.11 inclusion and lower distribution costs, years, they claimed.
lakh crore in the year-ago period. The the Parliamentary Panel said in a During the meeting with the
country's largest insurer announced an report titled 'Performance Review and regulator, they flagged the
interim dividend of Rs 4 per share. Regulation of Insurance Sector'. potential detrimental effects of
Value of new business grew to Rs It will also provide an equitable footing the proposed policy on persistency,
2,634 crore in December quarter as for the insurance agents vis-à-vis the the chief executive of a company
against Rs 1,801 crore in the year-ago insurance intermediaries, it added. said on the condition of anonymity.
quarter. Gross non-performing assets Also, customers would have access to "The proposed hike in surrender
registered a big improvement as it values could lead to higher
came down to 2.15% in Q3FY24 from more options at a competitive price. lapsation of insurance policies,
5.02% in Q3FY23. However, the Committee
recommended extensive industry thereby lower profitability," he
Siddhartha Mohanty, Chairperson, LIC, consultations on this matter to ensure said.
said, "The same is evident on the rise that policies provide a level-playing field The changes, suggested by the
in share of Non Par business on to all players and do not unduly regulator in the December 2023
Annualized Premium Equivalent (APE)
disadvantage incumbents. Additionally, draft product guidelines, seek to
basis to 14.04% of our total individual any changes should be implemented lower the surrender charges for
business for the first nine months of over a period of time to enable all policyholders.
FY24. The fact that this is participants to prepare for these major
accompanied by 200 bps increase in changes, the report added. The IRDAI wants to change how
the VNB margin levels to 16.6% is an surrender charges are calculated
indicator that our strategic Insurance regulator IRDAI had, in the for traditional insurance plans.
interventions are delivering in the year 2022, widened the open Under the proposal, charges will
manner that we envisaged." architecture for bancassurance by only apply up to a certain limit of
allowing a bank to distribute products the premium paid each year.
'Open architecture' concept of 9 insurers (earlier 3) in each of life, Anything beyond that limit will be
general and health segments. refunded to the customer.
mooted for insurance For instance, if someone pays Rs.
agents Life insurers ask IRDAI to 1 lakh annually for three years
Standing Committee on Finance charge surrender value on with a Rs. 25,000 yearly limit,
headed by BJP MP Jayant Sinha has surrender charges will only apply
recommended the introduction of an accumulated premia to Rs. 75,000 (Rs. 25,000x3).
'open architecture' concept for Life insurance companies have asked Any amount exceeding this will be
insurance agents so as to facilitate a Insurance Regulatory and returned to the customer,
larger outreach of insurance products Development Authority of India (IRDAI) potentially increasing guaranteed
and a stronger distribution to charge surrender value on the surrender values.
infrastructure in the country. accumulated policy value of customers

16 March 2024 The Insurance Times