Insurance customers may turn to debt funds and balanced funds in the Unit-Linked Insurance Product (Ulip) space as stock markets have remained volatile. Insurance sector officials said that while customers are less apprehensive about short term volatility, some fund switches could be made.
Companies are also educating customers to not worry about daily ups and downs in stock market indices. Vighnesh Shahane, CEO, IDBI Federal Life Insurance said that they make special efforts to communicate to our customers that ULIPs are a long-term product and they should not be worried about the fleeting market volatilities. "In fact, we have a dedicated investment help desk that promptly resolves any of the customer queries regarding fund values or market conditions," he added.
While he said that they haven't really received demands from customers for capital guarantee products in the Ulips space, he added that with changing market conditions customers do make fund switches to safer debt funds and vice versa when capital markets improve.
For customers who are averse to risks, a host of traditional products are on offer. Vishakaha, MD & CEO, IndiaFirst Life Insurance said that they have seen a shift in product mix towards traditional policies, in the recent past, which she said has been contributed in part by the launch of the IndiaFirst Guaranteed Retirement Plan.
"We are not seeing any apprehension amongst the customers. I believe Indian customers have matured in their outlook towards insurance policies. The focus has shifted from a short term outlook to a medium and long term return horizon,"she added.
Stock markets have seen a turbulent period in the past few weeks with both Sensex and Nifty seeing a drop.
However, large-scale shifts have not been seen. Sujoy Manna, AVP-Products, HDFC Life explained that if the markets move down further, there could be a demand for capital guarantee products. However, he added that big shifts have not yet been seen.
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Ulips now have a five-year lock-in period after regulations changed in September 2010. This was to ensure that customers stay invested for a longer term and in turn get better returns. Sanjay Tiwari, EVP Products, Exide Life Insurance said that Ulips are positioned as long term investment products with an upside from equities.
"While customers do look for Capital guarantees this limits the opportunity to benefit from the markets, therefore it is prudent these customers invest in traditional plans, which have the option of guarantees. Capital Guarantee fits the needs of a very different customer set and its demand is always there,"added Tiwari.
Further, the company is also educating customers to not panic. Shyamsunder Bhat, CIO, Exide Life Insurance explained that they continuously educate our customers to view the benefits from a long term perspective and short term volatility should not deter them from staying invested.
"We position our ULIPs with Smart Transfer Options and automatic rebalancing investment strategies, which seek to address such changes in market indices,"he said.
S&P BSE Sensex slumped 807.07 points to close at 22,95.83 and the Nifty50 cracked 239.35 points to end at 6,976.35, their lowest levels since May 9, 2014.