Private life insurers plan to diversify from Ulips

Private life insurers plan to diversify from Ulips

New Delhi: Private life insurers are planning to launch various new products such as whole-life and universal-life policies because demand has fallen for their mainstay unit-linked insurance plans (Ulips).

Although some 71% of new business premium came from Ulips in 2007-08, the share declined to 51% in the year ended 31 March, said S.B. Mathur, secretary general of industry body Life Insurance Council of India.

Ulips 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 its underlying assets.

The Bombay Stock Exchange’s Sensex Index fell 52% in 2008. It has recovered some ground since January, rising at least 55% year-to-date.

The country’s life insurance industry registered a 10% fall in new premium income in 2008-09 compared with the preceding fiscal, led by a decline in demand for Ulips. It was the first time since the insurance sector was opened up to private firms in 2001 that the industry closed a year with a fall in new premium income.

Private insurers have now started looking at policies such as whole-life and universal-life plans.

“We are planning to include whole-life policy in our portfolio, which are very popular in South Africa," said Gerhard Joubert, chief executive, north, east and west channel, Shriram Life Insurance Co. Ltd, a joint venture of South Africa-based Sanlam Life Insurance Ltd and the Shriram group. “Based on our experience in South Africa, we plan to bring more new insurance products in the Indian market."

A whole-life policy covers risks for the entire life of a customer, who is not entitled to any money during his or her own lifetime. There is no survival benefit unlike other insurance policies, and the money is paid only to the nominee of the beneficiary after a policyholder dies.

Several companies have also asked for the country’s insurance regulator’s permission to introduce universal-life insurance plans fitted to Indian conditions and market.

Universal-life insurance provides more flexibility than a whole-life cover by allowing a policyholder to make adjustments in premiums depending on circumstances. It also allows a policyholder to shift money between the insurance and savings components of the policy.

“Though companies are saying Ulips sales have picked up again, they want a more balanced portfolio now," Mathur said. “Therefore, they are trying to introduce new products."

“Currently, traditional products account for 3% of total new business premium collected. We expect it to be around 10-15% by the end of this fiscal," said T.R. Ramachandran, chief executive of Aviva Life Insurance Co. India Ltd.