2010 was a defining year for the insurance industry. The ULIP controversy, SEBI versus IRDA fight, and dispute over cashless insurance scheme created enough ripples in insurance industry. Additionally IPO and merger and acquisition attracted the attention of regulators.
Changes in insurance products and plans in 2010
By the end of 2010, IRDA made far reaching changes in ULIP plans. ULIPs have become more stable and better as IRDA has capped the charges, extended the minimum period, assured a minimum returns on investment, set a minimum health cover, and defined the sum assured.
There is also discussion on giving banks more autonomy by implementing an open architecture so that banks can act as an agent for insurance products from different insurance providers. The decision has not been taken yet.
Cashless schemes got the beating from the insurance companies and they refused to honour cashless hospitalization because of high charges. IRDA has refused to intervene in this dispute.
Trend in 2011
The changes made in 2010 and other discussions initiated will set the trend of insurance industry in 2011 and beyond.
The changes in ULIP structure will make it more popular in 2011. However, there is concern that insurance providers will discourage selling ULIPs and they may revert back to traditional plans.
There will be emphasis on traditional plans such as whole life insurance, endowment plan, and money back plan. The term insurance may get cheaper as the premium is inversely proportional to the life expectancy.
Additionally we will see banks increasing their focus on insurance related business. Till now, banks have been allowed to sell insurance from one provider only. The banking sector may open up and act as agent for multiple insurance providers. Customers will have another channel to buy insurance from.
Your approach: Term insurance should be in your plan. ULIP has become more attractive and hence it will be a good idea to take ULIP for long term. You should take insurance from a stable insurance provider as this sector will see stupendous growth and new players entering the market.
Due to rising medical costs and claims, the costs of insurance will go up.
There will be huge competition in health insurance area because of new players, both domestic and overseas, coming to the fore. However, the rates will not go down in the long run. There may be few insurance companies offering health insurance at cheaper rates but that will only be to attract customers. Beware of such schemes where the premium is ridiculously low.
There has also been discussion to introduce new health insurance products for luxury treatment aimed at high income group. Expect clear segmentation of customers in medical insurance industry.
Health cover by companies will shrink further as the cost of providing health cover is going up. We may see employers asking for sharing medical costs with employees. The deductibles from employee can go up.
Your Approach: Take health insurance because of coverage and not because of the low insurance premium. These low premiums will not sustain in long run and the insurance company will increase the premium in 1-2 years. Dependence on employer insurance may not be a good idea. You should check the insurance coverage provided by employer and decide accordingly.
This hasn’t yet penetrated the Indian market. However, banks are slowly realising the importance of home insurance. This makes sense for both banks and home loan borrowers. Banks have planned to make home insurance compulsory before they approve the home loan. We will see tremendous change in home insurance plans.
Your Approach: It is a good idea to insure your home but see the details and clauses of insurance. Take it only if you think it really insures your home against any eventuality.
Auto insurance will see more players into picture. There will be demand for comprehensive insurance package because of increased number of vehicles on the road.
Your Approach: You should focus on getting a comprehensive auto insurance package. If you are a careful driver, you may increase the deductible to lower the premium.
We can expect few insurance companies to go IPO in 2011. IPO will make insurance providers more transparent in their numbers and will help the customers in selecting insurance providers.
The insurance industry will also see increased interest in India by insurance providers around the world. We should expect customized insurance for specific needs of people.