'Ulips to catch investor interest once economy picks steam'

The assets under management in Ulips till Sept 2013 stood at Rs 303,667 crore

Due to risk aversion and lack of proper knowledge about them among the buyers, the share of unit-linked insurance plan (Ulip) in life insurers' premium collections has fallen to 30 per cent now from as high as 70 per cent, according to the Life Insurance Council, a body of 24 life insurance players.

Rajesh Sud, CEO and managing director of Max Life Insurance, said whenever there is high growth in the economy where the equity markets do well, Ulips tend to attract good flows. “In the last two fiscal years, inflows into ULIPs saw continuous drop due to weak economy and risk aversion from buyers,” he said.

The assets under management (AUM) in Ulips till Sept 2013 stood at Rs 303,667 crore, down from Rs 325,281 crore registered in the fiscal 2012-13. The trend would continue unless buyers show risk taking approach, Sud added.

From Jan this year, public insurer Life Insurance Corporation Limited (LIC) has stopped selling them. However, private insurers have re-modelled Ulips in accordance with the new insurance guidelines laid down by the Insurance Regulatory and Development Authority.

Girish Kulkarni, MD and CEO of Star Union Dai-ichi, said Ulips despite offering a return on investment (RoI) of 19.5 per cent on a long term basis, underperformed on premium collections due to failure in marketing approach.   

The council today said the retail life insurance premium growth this fiscal would be flat with the renewal premiums at Rs 179,837 crore and new business premiums at Rs 107,358 crore. It said margins in life insurance remained low at 1.5% due to regulatory norms and high business expenses.

The AUM of the life insurance industry stood at Rs 19.40 lakh crore as on Dec 2013, with the share of LIC at 70%.