Mumbai: As part of its plans to double its business here over the next five years, the India unit of Fidelity International, one of the world’s largest asset managers, is considering launching a fund with features of life insurance term plans, a top official said on Tuesday.
FIL Fund Management Pvt. Ltd, which has around Rs9,375 crore of assets under management (AUM), wants to increase it to $5 billion (Rs24,400 crore), said Robert Higginbotham, president, Fidelity International’s European, Middle East and Indian businesses in an interview. “(The) biggest ingredient (of the expansion strategy) would be the number of products,” he said.
One broad range of products Fidelity is considering launching is mutual funds with add-on features of term insurance schemes. This will be modelled on products known as self-invested personal plans that Fidelity currently sells in Germany and the UK.
In India, these products will compete directly with unit-linked insurance plans, or Ulips, which provide life cover and invest part of the premium in stocks and bonds.
In most cases, the sum assured in the policy varies according to the value of the underlying assets.
According to the Life Insurance Council, an umbrella body of insurance firms, the insurance market in India as of March was Rs2.2 trillion (both new business and renewals), while the mutual fund industry is around Rs5.82 trillion, or about 3% of total Indian household savings.
However, mutual fund firms claim that Ulips take away business by taking advantage of technicalities. Life insurance firms do not have a standard method to calculate charges included in Ulips.
Mutual fund companies, however, cannot charge more than 2.5% of AUMs in fees. Also, the capital markets regulator Securities and Exchange Board of India earlier this year scrapped entry fee for mutual funds.
Launching these mutual-fund-plus-insurance products would take some doing, said an expert.
“Right now, it’s impossible,” said Dhirendra Kumar, head of Value Research India Pvt. Ltd, a mutual fund tracker. “There is no entry load now and expenses are capped. You can’t get worthwhile insurance for this amount.”
Teena Jain in New Delhi contributed to this story.