After a fairly long time, there has been some restructuring in the insurance sector on the product front. The move, triggered by the spat between the capital market regulator Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India (IRDA), is likely to have a far-reaching impact on the sector as a whole. The first such impact was felt with the introduction of the unit-linked insurance plan (ULIP) a decade ago. ULIPs ended up repositioning insurance as an investment product to an extent that the consumer almost forgot the true responsibility of insurance.
Insurance companies prompted the consumer to think short-term with his long-term portfolio. The tenure for ULIPs have been coming down over the years with some companies even offering three-year paying term products for a long-term need like insurance. While in a rising market environment, the performance was not disappointing; the trouble came when prices came crashing down. The steady rise in the cost of products made matters worse as the focus of many companies was acquisition of business rather than retention.
The insurance regulator has decided to cleanse the system with its new proposals. While the customer has been made to think long with his insurance product, it sadly deprives him of flexibility, which was the hallmark in the earlier decade. For instance, any failure to pay up the premium will be detrimental to the policyholder as the policy will be terminated instantly and paid back with maturity. In the previous regime, the policyholder had the advantage of clearing old dues and still keeping the life cover going.
Insurance companies prompted the consumer to think short-term with his long-term portfolio. The tenure for ULIPs have been coming down over the years with some companies even offering three-year paying term products for a long-term need like insurance. While in a rising market environment, the performance was not disappointing; the trouble came when prices came crashing down. The steady rise in the cost of products made matters worse as the focus of many companies was acquisition of business rather than retention.
The insurance regulator has decided to cleanse the system with its new proposals. While the customer has been made to think long with his insurance product, it sadly deprives him of flexibility, which was the hallmark in the earlier decade. For instance, any failure to pay up the premium will be detrimental to the policyholder as the policy will be terminated instantly and paid back with maturity. In the previous regime, the policyholder had the advantage of clearing old dues and still keeping the life cover going.
Source : ET
No comments:
Post a Comment