As the insurance cost increases, writing new policies would erode profitability, with provate life insurance companies are tweaking the business model to focus on renewal policy premiums rather than market share.
There was a tremendous focus on sales growth, with the secretary general of Life Insurance Council which is an industry body of life insurers. This has made realizing the focus on renewal policy which would be essential to attain the break-down.
There was a tremendous focus on sales growth, with the secretary general of Life Insurance Council which is an industry body of life insurers. This has made realizing the focus on renewal policy which would be essential to attain the break-down.
To sell a new insurer policy to expand the revenue which would involve the initial cost, known in the industry with business strains as the insurers would typically make the profits for renewal premiums with the policy which is due to renewal.
India has around 22 life insurance companies including state-run Life Insurance Corporation of India, which is the biggest in country. In June, the total renewal premiums for the industry grew to 17.5% to Rs 32,750 crore from Rs 27,870 crore according to data provided by Life Insurance Council.
The single premium business grew by around 13% to Rs 5,580 crore from the regular premiums which is declined by 8.4% to Rs 8.838 crore in the same quarter. The regular premium for money paid is the premium over the life of an insurance policy.
The focus on the profitability, persistence and renewal premium would be very important to attain break-even. Selling on long term policies would help achieve this which is the country’s largest private sector insurers.
The company’s total premiums rose to around 13% from 15,356 crore in the last fiscal with renewal policy premium income increasing to 61% from Rs 8,872. The business premiums fell to around 17% to Rs 6,592 crore within the same period.
The company’s expense ratio or ratio of operating expenses to the premiums dropped to 11.6% during the quarter ended June 14.5% earlier this year. The companies with lower operating expense ratio have the ability to offset negative variations of persistency a measure of policies which would remain valid.
The insurers have introduced front-loaded policies, which would charge a higher amount in first year, so that business would reduce into new business strain with lower risks.
So to increase the profitability the private life insurers are expanding their branches and channels over the past few years making the premium income generated by plans like ULIP. To expand profitability what one needs is to have expansion and distribution and not just renewal policy.
So this concludes that life insurers would focus more on profitability point seeing various means and opportunities.
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