After more than four years during which the financial sector expanded, the tide turned in 2008. Several sectors woke up to the reality of contracting demand and falling prices. But the insurance industry by and large remained insulated from these negative developments. It continued to register growth, although at a sluggish pace compared with previous years. During April to November, the life insurance industry grew at 1.4 per cent and the general insurance industry by 9.7 per cent. Now both these sectors are modifying their strategies to maintain growth momentum.

Life insurance

Riding on the back of bullish stock markets, which resulted in skyrocketing sales of unit-linked policies , the life insurance industry grew at 50-60 per cent rate during the last few years. However, things have changed now.

From market-linked to guaranteed returns. Investor confidence has taken a beating during the last one year as customers witnessed the flip side of market-linked products. “The thrust will be to get customers to shake off their inertia and invest. Companies will try and move customers from unit-linked to conventional products,” says S.B. Mathur, Secretary General, Life Insurance Council.

Customers are now looking at guaranteed returns or additions and principal protection. “2009 will see products that are either debt oriented, or guaranteed-return products, or capital-addition guaranteed products. New products will provide a floor and limit downside risks,” says Sunil Kakar, chief financial officer, Max New York Life Insurance.

Safety first. Against the backdrop of the current market turmoil, there is a clear shift from a returns-oriented approach to capital protection. Earlier, people looked for annual returns of 15-20 per cent, but now they are more concerned about the safety of their capital. With the markets continuing to be range bound, and interest rates expected to fall, life insurers are expected to bring in products with balanced fund options and automatic asset allocation funds.

... contd.