Hyderabad/Mumbai: Insurance companies are sticking to Ulips despite the downtrend in the equity markets, going by the recent product approvals given by the Insurance Regulatory Development Authority (Irda). Of the 22 products cleared over the last fortnight, eight are new Ulips. Another nine are existing ULIPs that have been re-designed with changes in the fund structure. Insurers whose products have been cleared include Bajaj Allianz Life Insurance, ICICI Prudential Life, Life Insurance Corporation, MetLife India Insurance and SBI Life Insurance, among others.
“Despite the turbulence in the market, fresh business premium of insurers has grown by around 4% to Rs 34,599 crore up to the end of September this year as against Rs 33,159 crore in the same period last year. We do not see churn in Ulips”, said IRDA Chairman J Hari Narayan.
Ulips are savings instruments that offer flexibility to the policyholder in terms of investment and also a life cover. A part of the premium is invested in equities or government bonds, depending on the choice of the policyholder. “Many policyholders are continuing to buy Ulips as they see it as a long-term investment vehicle,” said R Kannan, member, Irda.
According to data released by Irda, growth was driven by the private sector in the first half of this fiscal. New business premium in this segment was up 49% at Rs 15,507 crore up to the end of September this year. But market leader LIC, with a market share of 55%, saw its new business drop by 16% during the period under review. Among private players ICICI Prudential, SBI Life and Bajaj Allianz continued to be the top three, with market share of 10.01%, 6.9% and 5.8%, respectively.
Insurers reckon investors would buy Ulips when markets are headed southwards as they see this as a long-term investment that could fetch higher returns later. Many private insurers garner a large chunk of their business premium from Ulip sales.
Speaking to ET, Kamesh Goyal, managing director, Bajaj Allianz Life Insurance, said that the company has launched a conventional product, a health product and a new Ulip this year. “Even within Ulip, we offer several fund options besides equity where investments go into bonds and cash related investments,” he said. The company also plans to launch a single-premium insurance plan with capital guarantee.
Investments in Ulips are akin to a mutual fund, and returns are reflected in the increase in the value of the unit, mirrored by the net asset value declared by the company. The investment risk in Ulips is borne entirely by the policyholder.
NAVs have eroded in the stock market crash. There are concerns that the erosion could make the life insurance business unstable for companies in the medium and long term. Irda is hence looking at options such as prescribing a minimum share of business from traditional policies in the overall the overall portfolio of insurers or even fixing a ceiling on the equity exposure of an investor to ensure stability in the business of life insurers.
