In recent years, many industry practitioners would have predicted a reducing role for participating products in life insurance markets across the Asia Pacific region, due to falling interest rates, increasing consumer sophistication, and demand for unit-linked products. However, contrary to such predictions, India has seen a resurgence of participating business, primarily due to the regulatory changes that have adversely impacted the sale of unit linked products, and continuing high long-term interest rates.
Since participating products have not been an area of focus in many companies in the past, less attention has been given to the establishment of an appropriate framework for managing participating business. Given the increased demand of participating business being written as well as recent regulatory developments, companies will need to pay careful attention to all aspects of managing participating business in the future.
This article was first published in the October 2013 issue of The Actuary India.