insurance strategies for 2013

Another major development was the Cabinet's approval for the Insurance Bill. The legislation raises the 26% foreign ownership limit in insurance companies to 49%. If passed by Parliament, it could lead to foreign participants pumping more funds and expertise into their companies.

The year also saw a surge in online purchases of insurance policies. Online term plans became a big hit with Internet-savvy buyers, especially young professionals aged 25-35 years, who found the channel convenient and cost-effective.

Insurance companies expect the trend to gather steam in 2013. "The online channel will see the next wave of innovation in insurance. More companies will launch online products, with competitive pricing, right advice, jargon- free documentation and simple purchase experience," says Gaurav Rajput, director, marketing, Aviva India.

However, 2012 also saw the return of mis-selling, the scourge of the insurance sector. After the capping of Ulip charges in 2010, sales of market-linked plans have dropped drastically. Instead, agents are focusing on traditional plans, where the commission is 35-50% of the premium in the initial years.

Irda is ready with new guidelines for traditional policies, which are likely to cap the charges and commissions of these plans. The regulator is also expected to formulate comprehensive guidelines for the health insurance sector.

"These could be game changers for this industry," says Manasije Mishra, CEO designate of Max Bupa Health Insurance.

The pension space saw a significant change with the increase in the charges of the NPS. The fund management charge was raised from 0.0009% to 0.25%. This may revive interest in the distributors of the pension scheme.

 

Strategy for 2013

Given the cost and other advantages, it is best to buy insurance online. "Time is not a constraint in online purchases. Customers have logged in at 2 a.m. to buy term insurance," says Yateesh Srivastava, chief marketing officer of Aegon Religare Life Insurance.

If you are buying through a broker, be on your guard against mis-selling, or worse, cheating and forgery. There was a disturbing rise in such cases in 2012.

Retirement products, which virtually vanished from the market after Irda insisted on imposing certain conditions, are back. HDFC Life was the first insurer to launch pension plans under the new guidelines.

However, the charges are considerably higher than those of the NPS. The government-managed scheme is by far the cheapest way to save for your retirement, though finding a distributor who is ready to sell the NPS is an uphill task.