Life insurance companies that had decided to cash in on the government’s focus on infrastructure, disinvestment in public sector companies and buoyancy in certain sectors by launching funds specific to these sectors for their Unit Linked Insurance plans (Ulips) are reaping rich dividends.
In just a few months since the launch, sectoral funds have caught the fancy of Ulip buyers with 40 to 60 per cent of new premium flowing into these funds.
Aviva, Bharti-Axa Life, Reliance Life and Tata-AIG have all launched infrastructure funds. In addition, Aviva has also launched a public sector companies fund while Reliance Life has launched an energy fund.
Unlike a traditional plan, a Ulip policy holder chooses the fund he wishes to invest his premium in.
Jyoti Vaswani, chief investment officer, Aviva Life said, “We had launched a public sector companies fund and an infrastructure fund in January. Around 55 to 60 per cent of the new premium since their launch is going into these two funds.”
“PSUs have the government support, capital, and cash on their books to grow. We are taking a long term view of these sectors,” said Vaswani.
On the same lines, Tata-AIG Life that had launched an infrastructure fund in January this year is seeing 40 per cent of its new business premium being invested in it.
Sarvana Kumar, chief investment officer, Tata-AIG Life said, “We feel that the infrastructure boom will continue for 10 to 15 years and want to play in this growth story. We have Rs 14 crore of assets under management in the infrastructure fund.”
Several companies, such as ICICI Prudential Life Insurance, Bajaj Allianz, HDFC Standard Life and Max New York Life said that a sectoral fund increases the concentration of the risk and they are not considering launching such funds.
“Unlike in a mutual fund where you can exit from a fund at any time, in a Ulip you have to stay invested for 7 to 8 years. So, instead of a sectoral fund, Ulip buyers should invest in a multi-cap diversified fund,” said an insurance official.