Insurers wait for norms on pension products

Life insurers are waiting for revised guidelines from the Insurance Regulatory and Development Authority (Irda) before they can come out with regular unit-linked (Ulip) pension products.

Sales of pension products, which have been growth drivers for life insurers and were among highest selling products, have fallen in the absence of products on shelf for sale. Only LIC has regular Ulip pension product. Private insurance companies are selling traditional pension products, which are non-transparent and often have high charges.

Few private players such as HDFC Life, ICICI Prudential Life have launched single premium Ulip pension plan.

Since September 1, 2010, new guidelines from Irda came into effect, which mandated all Ulip pension products to offer a minimum guarantee of 4.5(%) per cent.

Despite these guidelines being in place for over 10 months, no private life insurance company has launched a product. Insurers say that they have not been able to calculate a profitable formula to design such a product.

“Offering guarantee on regular Ulip pension has create asset-liability mismatch. No one can guarantee minimum return of 4.5(%) per cent. What if the interest rate is low in debt products or equity is not giving good return. We are waiting for Irda to make changes in the guidelines,” said Sunil Sharma, head- actuary, ICICI Prudential Life Insurance.

“We are waiting for new guidelines on pension plans. It is an important product category. Irda has also understood that none of private players have come out with a product due to though guidelines. Changes are expected soon,” said a senior official of a private insurance company.

Irda is working on new guidelines and expected to come out with final version within a month.

As per the latest data, individual new business premium collected by life insurers stood at Rs 69297 crore during April-February compared with Rs 62914 crore a year ago.