Life Insurance plans to give ULIPs the miss

Barely six months after joining the unit-linked insurance product (ULIP) bandwagon, insurance behemoth Life Insurance Corporation of India (LIC) finds itself veering away from ULIPs towards more conventional products.

K Sridhar, managing director, said, "LIC will shift its product focus from ULIPs back to traditional insurance products to cover more and more people."

To commemorate its 50th anniversary celebrations in September, LIC has planned two new products, a whole-life endowment policy and a whole-life money back policy. It is awaiting the Insurance Regulatory and Development Authority's (IRDA) approval for the launch.

LIC has also filed for a reduction in premium of Jeevan Anmol, which, if approved, will become the cheapest term plan policy in the market. The insurer hopes to attract more rural customers with the reduction in premium.

LIC's new strategy is a paradigm shift from its earlier stance. In March 2005, LIC's then chairman R N Bhardwaj had said, "Our new plans will mostly be ULIP-based.

The advantage being investment risk is passed on to the policyholder and less solvency margin requirement." He also hinted at a group plan on a unit-linked platform to tap corporate demand.

ULIP sales accounted for 43 per cent of LIC's first premium income in April-June 2005 compared with 16 per cent for the corresponding period in 2004.

ULIPs accounted for Rs 1,430 crore of the total first premium income of Rs 3,322 crore in the Q1 this fiscal. Of the Rs 3,014 crore income from new business in Q1 2004-05, first premium income from ULIPs was Rs 512 crore.