A year after a new regulatory regime governing sale of unit linked insurance plans (ULIPs) came into force, investors are still wary about buying these plans.
Once preferred by insurance buyers when markets were booming, they now face lower customer patronage and lukewarm interest from agents, if numbers are any indication.
The Insurance Regulatory and Development Authority had made significant changes in ULIPs in September last year after a spat with the Securities and Exchange Board of India over the regulatory jurisdiction. A compulsory lock-in period ranging from three to five years and a cap on commissions for agents were some of the norms which were introduced for the first time. Since then, the proportion of unit-linked plans in the total business mix has been steadily declining.
Industry leader, Life Insurance Corporation of India has seen its business mix of ULIP sales drop to 30 per cent of its portfolio as of September 30. That proportion was as high as 72 per cent a year ago.
The situation is similar in the private insurance industry too. After the implementation of the new guidelines, the overall share of ULIPs has definitely come down, concedes Mr M N Rao, Managing Director and Chief Executive Officer of SBI Life Insurance Company.
“The business mix of ULIPs and traditional products is almost equal in the private life insurance segment now,” a senior IRDA official told Business Line here. Earlier, unit-linked plans had over 85 per cent share in the business mix.
Private players think volatile market conditions have hit ULIP sales. Investors are (now) more prone to invest in fixed income products like bank fixed deposits, fixed maturity plans etc whereas ULIPs as an asset class is out of favour, Mr T R Ramachandran, MD & CEO of Aviva Life Insurance, observed. While Mr Deepak Sood, MD and CEO of Future Generali Life Insurance Company, said his company was focussing more on traditional products to cope with the situation. Some such as Mr Rituraj Bhattacharya, Head of Product Development and Market Management, Bajaj Allianz Life, said that they are still in the process of training agents, many of whom are yet to understand the changes fully.
So what is the outlook for life insurance products at the half-way mark in the fiscal year? It may be recalled that the first five months saw a 22 per cent dip in overall sales. Industry leaders say that despite weak conditions, it is not the end for ULIPs.
Mr S. Roy Chowdhury, Executive Director (Marketing),LIC, said, “The craze for ULIPs has not gone and is very much there. The younger generation has appetite for short term single premium products. Despite the market conditions, we still have 76 per cent share in the first premium income and 79 per cent in composite policy sales.”
He added, “The first fortnight in September was good but we were expecting a better second fortnight. We think ULIP sales will improve from this month onwards since October-March period usually sees higher sales. And when markets are at a low, that is the best time to invest in ULIP products.”
(Inputs from G Naga Sridhar)