Insurers rush to launch schemes

Ulips still top list of product filings with Irda.

At a time when sales growth is falling, insurance companies are rushing to launch new products in the fourth quarter, which accounts for around 40 per cent of the annual sales.

According to the sources in the Insurance Regulatory and Development Authority (Irda), insurance companies have filed nearly 45 products in the past one week, out of which 40 are unit-linked plans (Ulips), while the remaining are assured return products.

While there is an increase of product launches in recent months, insurance companies have been floating around 10 products a month.

According to Irda guidelines, insurers have to seek prior regulatory approval for product launches. Insurers can launch products in case approval does not come within 30 days.

Typically, domestic investors flock to invest during the fourth quarter due to the tax benefits offered on life insurance policies and health covers. The sales in March alone account for nearly a quarter of the annual premium collected from new policies.

Life Insurance Corporation of India’s (LIC) Jeevan Aastha, a close-ended guaranteed return product, has collected around Rs 9,000 crore in a month.

Similarly, IDBI Fortis has come up with Bondassurance and Aviva India with India Bond. The money collected from these products is invested in bonds, government securities or even parked in bank fixed deposits.

The bias towards Ulips is surprising as insurers have been opting to offer assured return schemes due to the volatility in the stock markets. A section within the industry, however, is of the opinion that this may not be a bad time to invest in equity-oriented Ulips since stock market indices have dropped by more than 50 per cent over the last 12 months.

“The industry’s preference is to shift to assured-return products. At this point of time, it will prove to be better from the marketing perspective,” said IDBI Fortis Managing Director and Chief Executive Officer G V Nageswara Rao.

But with the interest rates on fixed deposit and yields on bonds rising, assured returns may find fewer takers. In addition, the regulator is sceptical about the returns being promised by the insurers.

Irda is working to bring in more transparency in Ulips that are offering assured returns. For instance, it plans to ask insurers to provide more details of asset-liability position and also mention the yield assured to the policyholder after the termination of a policy.

For the last two-three years, Ulips accounted for over three quarters of the total life insurance sales with most policyholders opting to invest 90 per cent or more in equities.

But with the stock markets falling, Ulip sales have dropped pulling down the growth rate of the life insurance industry.