Pension is big business

MUMBAI: Consider this: In 1999-2000, when Life Insurance Corporation of India (LIC) had a monopoly in the industry, it had collected premiums for pension plans to the tune of Rs 825 crore.

Eight years later, with the liberalisation of the insurance sector and 16 life insurers in the fray, premiums collected from pension plans for the life insurance industry have grown to a whopping Rs 2,22,268 crore — an increase of an astounding 2,599%.

This data (provisional for 2006-07) has been put together recently by the Life Insurance Council, a self regulatory body formed by the insurers in the country. The trend signals the emphasis insurance companies and customers are placing in planning for long term needs. It also makes a strong case for active participation of life insurance companies in the new pension policy, say industry players.

"It is clear that insurance companies are able to manage and secure long term funds like pension plans. With such huge growth in the numbers and existing infrastructure, products and skilled people, we would like to stress that life insurance companies can play a vital role in the new pension policy," says SV Mony, secretary general, Life Insurance Council.

When the sector opened up in 2000-01, the premiums accrued to pension plans grew 131% to Rs 1,906 crore with just the entry of six private sector players. If one looks at the numbers just from the time the sector was opened up, the growth is impressive as well. From 2000-01 till 2006-07, the premiums collected from pension plans have grown by 1,068%.

While data related to the initial years of liberalisation are not available, the total assets managed under pension plans has grown 1,062% from Rs 3,441 crore in 2005-06 to Rs 40,000 crore in 2006-2007. The ratio of assets under management for pension plans to the total assets of the industry has gone up from 0.6% in 2005-06 to 6.6% in 2006-7.

Most insurance companies, be it state-owned LIC or private sector players like ICICI Prudential, Bajaj Allianz Life, Aviva Life, HDFC Standard Life among others have begun focussing increasingly on pension products. Mony says with increasing awareness customers too are looking at long term solutions to meet their post retirement needs. Even the number of pension products available in the market has gone up from four in 1999-2000 to more than 10.

As per the new draft of the pension's policy drawn up by the Pensions Fund Regulatory and Development Authority, the plan is to move from a defined benefit programme to a defined contribution plan.

From: Times Of India