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New Delhi: After a sharp drop in the growth of life insurance policies that invest their corpus in stock markets, private sector insurers are looking to target specific demographic groups such as teachers and doctors to stimulate growth.

Mirroring the decline in stock markets, premium collection of life insurers has fallen in October by as much as 37% to Rs5,087 crore, compared with September.

Innovative approach: (left) T.R. Ramachandran, chief executive officer of Aviva Life Insurance Co. India Ltd; and Kapil Mehta, director and chief executive of DLF Pramerica Life Insurance Co. Ltd. Ramesh Pathania / Mint

Considering that 80-90% of the policies private sector insurers sell are unit-linked insurance policies—that they invest in stock markets—annual premium collection is expected to go down further this fiscal that ends in March.

Typically, some 50% of the new business for private sector insurers comes in the last quarter of every fiscal when individuals are looking for tax-saving instruments.

Between April and October this year, fresh business in the sector grew by less than 3%, compared with at least 6% a year earlier, Irda data show. “We plan to have a segmented approach to differentiate ourselves in the market," said Kapil Mehta, director and chief executive of DLF Pramerica Life Insurance Co. Ltd, the latest entrant in life insurance. “It can be similar to a model adopted by Gibraltar Life Insurance, which is a Tokyo-based company." The Gibraltar Life Insurance Co. Ltd is known for successfully distributing life insurance policies to teachers across Japan.

With liquidity drying up in the market, R. Krishnamurthy, managing director with global insurance consultancy Watson Wyatt Worldwide, agrees that sales targeted at specific demographic groups will be the trend in the near future.

“Given tough competition in the market, insurers are considering to adopt different models. Designing insurance policies for a particular segment such as rural population, doctors or government employees is a way forward," he said.

Similarly, T.R. Ramachandran, chief executive of Aviva Life Insurance Co. India Ltd, plans to branch off into microinsurance as a separate business unit. “Social sector or microinsurance sector is an exciting possibility. Like many microfinance institutions have shown us the way, it is possible to have stand-alone business that stands on its own and makes economic sense rather than just be a rural sector obligation. So, microsaving will be the area we will focus on in next year," he said.

According to Ramachandran, the company is looking to specialize in two-three demographic areas. “We are expected to continue in annuities, retirement and pension products, which is a huge need in the country. And we have a bunch of initiatives to help young parents plan their child’s marriage, education. You will see three-four innovative products from the company in around 60-90 days," he said in a recent interview.

So far, no life insurer, except LIC, SBI Life Insurance Co. Ltd and Shriram Life Insurance Co. Ltd, has posted profits. The break-even period for life insurers, because of the rapid expansion in the market, has stretched to around 12 years from the seven years they assumed when the industry was liberalized in 2000. High growth rates for life insurers mean more expenses because a big chunk of the premium in the first year goes towards writing off distribution costs such as an agent’s commission.

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