Market volatility nudges customer preference away from ULIPs in Q4FY25

Amid increased volatility in equity markets, customer preference is likely to have moved away from Unit Linked Insurance Plans (ULIPs) in the last quarter of FY25.

 

For SBI Life Insurance and ICICI Prudential Life Insurance, the share of ULIPs in the product mix has reduced in the January-March quarter of FY25 (Q4FY25) from the year-ago period, while the share of traditional products increased.

 

ULIP is an insurance product which offers both the benefits of investment and insurance to fulfil long-term goals. The premiums for ULIPs are divided towards life insurance coverage and the remaining part for investment in market-linked funds which could potentially generate returns.

 

The benchmark Nifty50 index fell almost 17 per cent amid sell-off by foreign investors, weak corporate earnings and global uncertainties due to the US tariffs, after surging to record highs of around 26,277 at the end of September. The Nifty has now rebounded around 10 per cent from the lows but still continues to be roughly 7 per cent below the lifetime highs.

 

As the equity market turned volatile in the second half of the financial year, life insurers who had a larger exposure to the sale of unit-linked plans diversified into alternate product offerings.

 

In its post-earnings analyst call, ICICI Prudential Life Insurance’s management explained that at the beginning of FY25, market sentiments had shifted towards ULIPs, however, as the markets turned volatile in the last quarter of FY25, customer preference shifted away from ULIP products.

 

It is also selling alternate ULIP products that go beyond ULIP as an investment product and are “isolated from market vagaries”. These products have a higher sum assured, good rider choices and a strong nominee proposition, and these now comprise 10-12 per cent of the overall ULIP business of the life insurer.

 

Although the share of ULIPs in the overall product mix of SBI Life Insurance, the largest private life insurer, was nearly 64 per cent in FY25, it dropped below 60 per cent in Q4FY25 owing to increased focus on traditional products and volatility in the equity markets, which also led to a lower contribution of ULIPs in total sales.

 

Over the last few years, there has been an increase in the share of ULIPs for life insurers. SBI Life’s share of ULIPs has increased to 64 per cent from around 55 per cent in FY23. For ICICI Prudential Life Insurance, the share grew to 48 per cent in FY25 from around 36 per cent. In the case of HDFC Life Insurance, the share has nearly doubled to 34 per cent in FY25 from 16 per cent in FY23.

 

“Our efforts played out in the last quarter, and the share of ULIPs came down much below 60 per cent in Q4FY25. This was accompanied by good growth in our traditional products. We launched four products in the traditional segment. Increased focus on traditional products and volatility in the equity markets played a role in lowering the contribution of ULIPs in total sales,” Amit Jhingran, managing director and chief executive officer, SBI Life Insurance, told Business Standard.

 

The insurer also plans to maintain the ULIP contribution at around 65 per cent and 35 per cent for traditional products in FY26.

 

Having said that, HDFC Life Insurance — which has a relatively lower share of ULIP products compared to the other two listed private life insurers — saw an increase in demand for these low-margin insurance products along with an improvement in persistency.