Traditional plans replace Ulips

Insurers reduce dependence on Ulips after Irda’s new norms shrink margins.

After the rules of life insurance were rewritten, insurers have changed their business models. Unit-linked insurance plans (Ulips), after a long innings in the life insurance industry, have lost the match to traditional products.

Insurers altered the product mix after September when the Insurance Regulatory and Development Authority of India introduced a host of guidelines on Ulips, shrinking margins. They are now selling more traditional products – which include term plans, money-back, endowment and pension plans — than Ulips.
 

SHIFTING GROUND

• Reliance Life Insurance decreased its dependence on Ulips to 50% at the end of November
• During the same period last year, the insurer’s 85% premium came from Ulips
• Birla Sun Life Insurance, which earned over 92% premium by selling Ulips, has reduced this to 70%
• ING Life now gets 90% income from traditional products

Reliance Life Insurance reduced its dependence on Ulips to 50 per cent at the end of November. During the same period last year, the insurer’s 85 per cent premium came from Ulips while traditional products accounted for the rest.

“We have started balancing our portfolio from last year,” said Reliance Life’s President and Chief Executive Officer, Malay Ghosh.

Birla Sun Life Insurance (BSLI), which earned over 92 per cent premium by selling Ulips, has reduced this to 70 per cent. The insurer has launched a slew of traditional products.

“The company’s focus is to achieve a well–balanced product mix, which is evident in the current share of traditional products. The share of traditional products has moved from 8-10 per cent to over 30 per cent in the recent past,” said Birla Sun Life Chief Financial Officer Mayank Bhatwal.

Similarly, ING Life now gets 90 per cent income from traditional products.

“We are looking to diversify our product portfolio. It may take some time, but the ideal mix will be 50:50,” said IDBI Federal Life Insurance Managing Director and Chief Executive Officer G V Nageswara Rao.

HDFC Life, the third-largest private sector life insurance company, still believes in the Ulip story and says the product dominates the space.

The insurer’s Ulips to traditional products ratio was 85:15 ratio at the end of November 2010.

“We still believe Ulips are transparent and better than the traditional plans. The charges have been capped and will bring down profitability. But increase in volumes will bring it back to the operation levels by the first quarter of the next financial year,” said HDFC Life Managing Director and Chief Executive Officer Amitabh Chaudhary.