 "Ulips: Down but not out")
In September 2010, guidelines on unit-linked products (Ulips) were announced. Soon, however, these products were almost wiped out of the market.
About three-and-a-half years later, the picture isn’t very different.
Unit-linked plans are seen as unattractive for both distributors and customers, owing to lower commissions and the choppy equity market through the last few years. Against only 20 per cent of the total new premium collection in 2007-08, traditional plans today account for about 80 per cent of sales. One of the primary reasons for traditional products doing well is the higher commission structure. However, insurers say long-term Ulips are increasingly gaining favour.
Manoj Jain, chief executive of Shriram Life Insurance, said while 97-98 per cent of the company’s portfolio comprised traditional products, linked single-premium products were now in demand and, therefore, the company was focusing on this segment. “Though the stock markets might not be very attractive at the moment, single-premium Ulips are in favour. We have about 20 per cent of such products,” he said.
In September 2010, the Insurance Regulatory and Development Authority had capped the charges and commissions on Ulips, due to which the average commission for these, as percentage of premium collected, fell from about 10 per cent in 2009-10 to four per cent in 2011-12.
A senior life insurance executive said this was primarily due to the fact that there had been several cases of mis-selling reported in the case of Ulips, particularly related to the highest-net asset value (NAV) products. “With highest-NAV plans now been disallowed, other Ulip products are better in features, though these might not portray astronomical returns such as the former,” he said.
While stock markets haven’t been attractive in the short term, the longer-term horizon has been positive, say insurers. For a 20-30-year investment horizon, Ulips were now being preferred, as these weren’t just superior investment instruments, these also offered insurance cover, said the product head of a mid-sized private insurer. He added from April, the sector would see Ulips with longer tenures being brought into the market, not just in the insurance space, but in the 'pension sector, too.
Insurers with a bank partner (bancassurance) stand to gain. Rajeev Kumar, chief and appointed actuary, Bharti AXA Life Insurance, said now, customers were approaching the bank channel for Ulips, adding this channel was more suitable to sell insurance at this point. Experts said due to this, bank-promoted insurance companies could see a revival in the sales of these products.
Life Insurance Corporation of India (LIC) has preferred to stay away from Ulips. Earlier, Chairman S K Roy had said there was no rush to launch Ulips. The company had launched a Ulip in 2013, but it was withdrawn when the new product guidelines for life insurance were implemented.
For long-term investors, Ulips continue to be the best bet, say insurers. The product head of a private life insurer said if an individual was investing for a term of 15 years or more and had the risk appetite to invest in equity, Ulips were the best choice. With the new product guidelines linking commissions to the duration of the policy, insurers said the bias against Ulips might be reduced, as agents would be eager to distribute these products for better remuneration.
About three-and-a-half years later, the picture isn’t very different.
Unit-linked plans are seen as unattractive for both distributors and customers, owing to lower commissions and the choppy equity market through the last few years. Against only 20 per cent of the total new premium collection in 2007-08, traditional plans today account for about 80 per cent of sales. One of the primary reasons for traditional products doing well is the higher commission structure. However, insurers say long-term Ulips are increasingly gaining favour.
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Manoj Jain, chief executive of Shriram Life Insurance, said while 97-98 per cent of the company’s portfolio comprised traditional products, linked single-premium products were now in demand and, therefore, the company was focusing on this segment. “Though the stock markets might not be very attractive at the moment, single-premium Ulips are in favour. We have about 20 per cent of such products,” he said.
In September 2010, the Insurance Regulatory and Development Authority had capped the charges and commissions on Ulips, due to which the average commission for these, as percentage of premium collected, fell from about 10 per cent in 2009-10 to four per cent in 2011-12.
A senior life insurance executive said this was primarily due to the fact that there had been several cases of mis-selling reported in the case of Ulips, particularly related to the highest-net asset value (NAV) products. “With highest-NAV plans now been disallowed, other Ulip products are better in features, though these might not portray astronomical returns such as the former,” he said.
While stock markets haven’t been attractive in the short term, the longer-term horizon has been positive, say insurers. For a 20-30-year investment horizon, Ulips were now being preferred, as these weren’t just superior investment instruments, these also offered insurance cover, said the product head of a mid-sized private insurer. He added from April, the sector would see Ulips with longer tenures being brought into the market, not just in the insurance space, but in the 'pension sector, too.
Insurers with a bank partner (bancassurance) stand to gain. Rajeev Kumar, chief and appointed actuary, Bharti AXA Life Insurance, said now, customers were approaching the bank channel for Ulips, adding this channel was more suitable to sell insurance at this point. Experts said due to this, bank-promoted insurance companies could see a revival in the sales of these products.
Life Insurance Corporation of India (LIC) has preferred to stay away from Ulips. Earlier, Chairman S K Roy had said there was no rush to launch Ulips. The company had launched a Ulip in 2013, but it was withdrawn when the new product guidelines for life insurance were implemented.
For long-term investors, Ulips continue to be the best bet, say insurers. The product head of a private life insurer said if an individual was investing for a term of 15 years or more and had the risk appetite to invest in equity, Ulips were the best choice. With the new product guidelines linking commissions to the duration of the policy, insurers said the bias against Ulips might be reduced, as agents would be eager to distribute these products for better remuneration.