High surrenders continue to trouble life insurers- Business News
facebooktwitter

High surrenders continue to trouble life insurers

According to the report released by Irda, insurers paid Rs 1,06,982 cr to policyholders on account of surrenders in 2013-14, up by 2% compared to the previous year.

  • January 16, 2015  
  • |  
  • UPDATED   11:07 IST
High surrenders continue to trouble life insurers
Photo: Reuters

Surrender payouts continue to be a serious issue for the life insurance industry.

According to the latest annual report released by Insurance Regulatory and Development Authority (Irda), life insurers paid Rs 1,06,982 crore to policyholders on account of surrenders and withdrawals in 2013-14, up by 2% compared to the previous year.  

As percentage to total payout their share has, however, reduced to 49% from 55% a year ago, which experts say is a positive trend for the industry.  

Girish Kulkarni, managing director and chief executive officer, Star Union Dai-ichi Life Insurance, says, "This is one of the serious issues for the industry. It needs to be tackled by launching a massive campaign about insurance and making people understand how important it is to continue with their life insurance policies."  

Ideally death claims should constitute a major portion of total payouts made by life insurers. Currently, death claims, maturity and annuity payout together constitute about 51% of the total outgo, which experts say should increase significantly.

LIC accounted for Rs 59,627 crore (44%) and private sector Rs 47,356 crore (46%) of total surrenders.

The report states that 65% of surrenders were on account of Ulips in LIC as against 73.27% in 2012-2013.

Similarly, in case of private players Ulips accounted for 94.50% at Rs 44,752 crore as against 96% at Rs 47,178 crore in 2012-13.

Ulip side withdrawals are mostly related to market movements. Surrenders happening on non-Ulip side could be a bigger concern for the industry, say experts.

The report does not state reasons for high surrenders and withdrawals. According to experts one of the main reasons could be misselling by agents. Sometimes buyers also do not understand policy features before buying a policy.

Life insurance industry collected total premium of Rs 3.14 trillion in 2013-2014, recording a growth of 9%. While private players reported a decline of 1.35% in premium income, LIC posted a growth of 13.48%.