Life insurers to determine Ulip returns

Life insurance companies have agreed to give the unit-linked policy buyers a generic benefit illustration indicating annual returns between 6 and 10 per cent. This will ensure that insurance agents do not lure customers into buying Ulips by promising astronomical returns.

"At the time of sales, the agent will provide a generic benefit illustration to the customer. This will contain a hypothetical example, explaining the details of the Ulip policy and likely returns in the range of 6 to 10 per cent. A illustration specific to the policy will be sent with the policy document. Both have been brought into the ambit of the code adopted by insurers," said S V Mony, secretary general, Life Insurance Council at a Round Table titled "Life Insurance Industry in India, Present and Future."

Life Insurance Council is a self-regulatory body with representatives of all life insurance companies.

Sharing statistics compiled for the life insurance industry, Mony said, "The share of life insurance in household financial savings has improved to 14.6 per cent in FY 07 from 11.2 per cent in FY 00. Life insurance has been an important economic driver, encouraging savings for capital formation. The infrastructure investment in FY06 was Rs 49,636 crore. The total life insurance investments in equity were about Rs 1,50,000 crore as on March 31 2007.

Speaking about direct employment in the life insurance sector, Mony said there are 1,85,000 employees and 20 lakh agents as on 31st March 2007. The total life insurance premium has increased from Rs 786 billion in 2005 to Rs 1,518 crore in 2007 and is expected to reach Rs 3,750 billion in 2011. The capital strength has increased from Rs 1,000 crore in the year 2000 to Rs 9,500 crore in FY 07.

The total premium (new plus renewal, including pensions) for 2006-07 was Rs 1,53,000 crore, out of which the pension premium was Rs 22,268 crore.

The challenges for the life insurance industry include managing growth, matching manpower needs, customer service quality and market practices, Mony added.