After nearly two years, Life Insurance Corporation of India (LIC) – the largest insurer in the country – will launch a unit-linked insurance plan (Ulip). The intention is to take advantage of the bullishness in the stock market.
Sources familiar with the developments said this would also help the insurer attain its target of Rs 45,000 crore of new premium income collection in 2012-13 and increase its market share.
Ulips, which used to be a darling of investors, took a beating following stiff norms set by the insurance regulator in September 2010, mandating a minimum mortality cover and increase in the lock-in period from three years to five years. As a result, Ulip premiums, which accounted for 90 per cent of the first-year premium of life insurance companies, saw their share fall to less than 30 per cent. As in March-end, the share of Ulips in LIC’s new premium was 20 per cent, down from over 70 per cent in the pre-2010 period.
| HIGH TIME Share of Ulips in the market, via-a-vis traditional products (%) | |
| 2007 | 80 |
| 2008 | 85 |
| 2009 | 80-85 |
| 2010* | 60 |
| 2011 | 25-35 |
| 2012# | 20-25 |
| *The Ulip guidelines came into force in September 2010. Therefore, the figures were higher (around 75 to 80%) in the initial part of the year; #Till October 2012 Source: Industry | |
In addition, LIC will also launch a pension product shortly. The insurer expects approvals for both the products from the Insurance Regulatory and Development Authority (Irda) shortly.
“We have filed two products, one in the Ulip segment and the other in pension, with the regulator. These will make a real impact in the market. With these products, we are hopeful of showing a very good growth and crossing our budget, leading to an increase in our market share,” said a senior LIC official. At present, LIC commands a market share of 75 per cent in premiums and 81 per cent in terms of number of policies sold.
LIC’s last Ulip — Samridhi Plus, a guaranteed NAV plan — was launched in February last year.
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Private insurers view this development as a positive for the industry. The chief executive of a Mumbai-based life insurance firm said that if LIC goes aggressive on Ulips and launches new products, it will benefit the industry as a whole. “LIC has the distribution and reach which we do not have. LIC, with its huge agency network will be able to reach thousands of customers and explain the pros of the Ulip plans. Also, since customers have higher respect for LIC as a company, they would be able to re-accept Ulips as good products for long-term investment purpose,” he said.
Another senior executive of a private life insurer said that with LIC campaigning for its Ulip plan, customers will be able to open up to the Ulip category as a whole.
He explained these efforts by LIC would be able to bring Ulips back to prominence in the market.
"They (LIC) would be a strong competitor, no doubt. But, they will help get back the faith on Ulips in the market, which includes our customers, too," he added.
D K Mehrotra, chairman, LIC had told Business Standard earlier that the ideal product mix for LIC would be 65:35 for traditional and Ulips, respectively. "Ulip has its own advantages, it gives you fast returns. So, if there is a space for Ulip, we will be present there,” he had said.
On the pension product front as well, LIC is the sole player till now. In January this year, Irda had said that pension products will have to guarantee an assured benefit in the form of a non-zero rate of return that would be disclosed upfront. The new regulations in January had led to slower approvals of pension products, as a result of which there has been a dearth of products in the market.