IRDA clashes with industry over single premium policies

Excerpts from India Business Hour on CNBC-TV18 Watch the full show »

There's a battle brewing between insurance regulator IRDA and life insurance companies, and this one is over single premium policies, reports CNBC-TV18's Mitra Joshi and Payaswini Upadhyay.
 
Insurance regulator IRDA is going slow when it comes to approving single premium policies - policies where the policy holder makes a one-time premium payment. It believes these policies do not help the industry in the long term. On the other hand, industry body Life Council says these bring more people into the life insurance net.

"There are strong logical reasons for people to be taking single premium policies. For example, there are people who are in a job which gives seasonal income or periodical income once in two-three years and these people will like to take single premium policies," explained SB Mathur, secretary general of Life Insurance Council.

The truth is that single premium policies have found quite a few takers. In 2011, individual single premium policies contributed 16% of total premium collected by the industry while group single premium accounted for 30%. That's a whopping Rs 33,200 crore.

But IRDA argues that these policies see no customer servicing once the premium is paid and wants insurance companies to launch schemes that require regular premium payments over at least five years.

The industry, meanwhile, says these products are an agent's favourite, and should not be done away with.

According to senior vice president of strategy and product at HDFC Life, it is easier to tell a customer to pay once and forget about it. "If single premium is done away with, what you will find is an industry which is finding it difficult for agents and distributors to be able to generate volumes. You will find another avenue blocked in terms of convenience of selling," he said.

It all boils down to this - IRDA wants greater investor protection but the industry sees this as a threat to its distributor and agent workforce.

Watch the accompanying video for more details..