‘ULIPs have potential for life insurers despite curbs’

MUMBAI - Unit linked insurance policies (ULIPs) designed and sold under the new norms that came into effect Sep 1 have a great potential for life insurers, said experts participating in a panel discussion here Monday on “Future of ULIP”.

The panellists, however, were not unanimous on which segment of the market ULIPs were suitable for.

The panel discussion was part of the two-day seminar on “Current Issues in Life Assurance” organised by the Institute of Actuaries of India (IAI).

The Insurance Regulatory and Development Authority (IRDA) brought out new norms governing ULIPs capping various charges levied by the insurers.

The new norms kicked in Sep 1 and in the process sucked out around 250 policies from the market.

The life insurance industry had to be content with selling around 75 new ULIPs approved by the IRDA since then. This has brought down new business for life insurers.

Richard Holloway, managing director (South East Asia & India) Milliman Private Limited, said: “ULIP is a popular product throughout the world that has stood the test of time meeting the needs of customers, giving them higher returns and offering transparency.”

He said life insurers complain that the new ULIP norms leave them with limited scope to compensate the distributors as commissions have to be reduced.

In addition, the companies will not be able to enjoy high surrender profits - profits earned when a policy holder surrenders his policy - owing to lower surrender penalties stipulated in the new norms.

“The industry said the focus should be on mis-selling in general and not capping of charges,” Holloway said.

Stating that ULIP has good potential, T.R. Ramachandran, chief executive officer & managing director of Aviva Life Insurance Company India Limited, said: “The product is not for middle or lower middle class segment. There cannot be a ULIP where the annual premium is around Rs.8,000.”

Such policyholders are buying the product just for claiming income tax exemption, he remarked.

Sanjiv Bajaj, managing director, Bajaj Capital Limited, said ULIPs had to be targeted at individuals as these offered them to accumulate wealth.