Unit-Linked Insurance Plans (ULIPs), highly popular among life insurance buyers, are slowly losing favour.
The market share of ULIPs has come down significantly in the last 6-8 months giving space to traditional insurance plans, according to industry experts.
The loss of patronage for ULIPs is quite noticeable both among private life insurers and Life Insurance Corporation (LIC) of India.
“In general, the share of ULIPs in the private life insurance segment had dipped from 85 per cent before September last year to 65 per cent now,” Mr M. Suresh, Managing Director, Tata AIG Life Insurance, told
Apparently, the new regulatory regime effected by the Insurance Regulatory and Development Authority (IRDA) “did not augur well” neither for insurers nor for the buyers of insurance, said the MD of a leading private life insurance company.
IRDA norms
In September 2010, the IRDA had mandated a host of norms for ULIPs, including a compulsory lock-in period of five years and a tab on commissions for agents.
This resulted in withdrawal of over 270 ULIP products from the market and their reintroduction in line with new norms subsequently.
However, the business mix (of ULIPs and traditional products) has been changing in favour of traditional/pure life products since then.
“Obviously, people are coming back to conventional life insurance plans. The business mix in life insurance sector (including private and state insurer) is now at 55:45 between ULIPs and conventional products,” Mr A. K. Sahoo, Head of South Central Zone of LIC, said.
Why the shift
Some of the reasons behind increasing preference for traditional insurance were the clause of minimum lock-in period of five years in ULIPs, general scepticism about market volatility and health of economy, among others, he added.
When asked whether the IRDA is concerned over adverse impact of the ULIP norms, Mr J. Hari Narayan, Chairman, IRDA, said: “The norms introduced last year certainly dampened the growth. But a healthy growth is always preferable to unbridled, unhealthy growth. But the so-called effects of September 2010 norms have already been absorbed by the industry to some extent,” he said.
In 2010-11, the total premium collected by the life insurance industry was Rs 2,86,500 crore as against Rs 2,65,450 crore in the previous year, as per IRDA and Life Insurance Council data.