The last of the single-premium, high assured return products of the Life Insurance Corporation of India (LIC) -- New Bima Nivesh -- closed today.
This scheme, revised thrice earlier, promised a return of over eight per cent for a period of ten years while the 10-year government paper yield is around 7.18-7.20 per cent.
Over the last one month, life insurance companies have been withdrawing their guaranteed return plans following their inability to continue to offer high rates of assured returns in a falling interest rate scenario.
New Bima Nivesh, however, failed to garner much of a response from the investing public as compared to the massive mop up last year. While the latest figures are not available, senior LIC officials said the response to the scheme was not phenomenal like last year. Till August 31, New Bima Nivesh mopped up about Rs 900 crore in premium income since the beginning of the fiscal. LIC has sold over 98,000 single premium policies during the period.
In contrast to this, between December 1 and 15 last year when it closed the earlier avatar of Bima Nivesh, it sold over 44,000 policies and mopped up Rs 326.20 crore premium.
Majority of the sales of the New Bima Nivesh have taken place in Mumbai. Of the Rs 970 crore mopped up, Rs 295 crore was from the Western zone. According to officials, the collection from Mumbai alone in the last 15 days could exceed Rs 300 crore.
LIC will re-launch its scheme, christening it Bima Nivesh 2002 on September 18 (Wednesday), making this the fourth revision in the single premium plan over a period of 14 months. The revised scheme will offer a lower guaranteed return of Rs 60 per Rs 1,000 sum assured for both a five-year and 10-year cover, and the premium chargeable will rise by 6.5 per cent.
That means for a policyholder taking out a 10-year Rs 50,000 life policy, he would have paid a one-time premium of Rs 42,969. Under the new plan, he would pay a higher premium of Rs 45,939 for the same cover, which however, would give him lower guaranteed benefits.
LIC development officer Mumbai division Rampratap Pandey said: "When a plan is scheduled to be closed, it automatically creates interest among policyholders and the general public, especially in the current investment climate where opportunities are few, which offer a high rate of guaranteed return over a period of 10 years and also provide risk coverage."
LIC has been forced to re-align its guaranteed rate of return on assured schemes in keeping with the fall in yields on government paper, specially at the long end of the market. Bima Nivesh, which was offering a return of 8.4 to 9.5 per cent till December 16 last year, will from Wednesday offer 6.5-7 per cent for the five or 10-year term cover.
