ULIPs wilt as stock market withers

The once-fancied unit-linked insurance plans (ULIPs) have no takers now as investors shun products with exposure to stock markets, reports Devraj Uchil.

The once-fancied unit-linked insurance plans (ULIPs) have no takers now as investors shun products with exposure to stock markets. The volatility and the slump in stock markets and loss of investor confidence have taken their toll on these products while the traditional life insurance products have gained at their expense.

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“The sentiment now is not in favour of ULIP,” said Uday Sankar Roy, Managing Director and CEO of SBI Life Insurance said. “The traditional policy gives you fixed guarantee, but has its limitations. They could not be sold during the ULIP era," he said adding, “but now the ULIP interest has diminished among investors. The number of fresh takers for ULIP is negligible."

“There is a conscious decision on our part to reduce exposure to ULIPs,” said Thomas Mathew, Managing Director of Life Insurance Corporation of India.

“One trend worth mentioning is that investor preference is being skewed towards guaranteed products given the volatility and uncertainty that the retail investors have seen over the last year,” Vikram Kotak, chief investment officer at Birla Sun Life Insurance.

Jayant Khosla, chief executive officer of Future Genarali India Life Insurance said, “While ULIP has taken a beating, we have seen 50 per cent increase in traditional plans due to fall in markets. The good thing is that saving percentage is still at 36-37 per cent among people and youth are continuing to invest.”

However, the earlier market-boom linked phase was good for premium revenues.

The new business premium income for 20 private life insurance companies declined 23 per cent year-on-year in January 2009. During April 2008-January 2009, premium income grew 18 per cent as against 94 per cent a year ago.