Life insurers may alter product mix

Likely to change tack to reduce impact of revised norms

- AATHIRA VARIER

The life insurance industry, which planned to increase its share of nonparticipating (non-par) products in the overall product mix, after its declining share in FY24, is likely to change its strategy to reduce the impact of the revised surrender value norms.

A change in surrender value norms is likely to dampen the growth of non-par products and boost product designing and innovation in the life insurance industry. Non-par product offers guaranteed benefits to a customer according to predetermined choices.

"The industry can reduce the impact of revised surrender value norms using multiple ways. As a result of the norms, the share of non-par products is likely to reduce or result in more production of combo products. The changes can also boost product innovation in the industry," said an insurance official.

In FY24, the product mix of life insurance companies had shifted towards unit linked insurance plans (Ulips) due to buoyant equity markets. This shift affected the value of new business (VNB) margin of the life insurers due to lower product margin of the segment.