Life insurers step up non-Ulip play

Despite market sentiments improving, many life insurers see a larger role for traditional products.

Though unit- linked products (Ulips) will continue to remain the focus, insurers say the recent slowdown has taught them to reduce reliance on Ulips.

The over-reliance on Ulips hit insurers hard last fiscal, with premiums dipping to Rs 87,107.62 crore compared with Rs 92,988.71 crore in 2007-08. Over 70% of new premiums come from Ulips. Traditional products generally invest in safe, fixed income instruments like gilts, while Ulips are equity focused.

SBI Life Insurance, which has increased its share of non-Ulip premium to 40% from 30% a year back, is lining up more traditional products this fiscal. “The market slump we witnessed some time back is a lesson that it’s wise to have traditional products in the portfolio as well,” said an official.

The new business premium of the company rose by 12% over the previous year to reach Rs 5,386 crore in 2008-09.

Another insurer ING Life saw the percentage of its traditional products premiums increase to 45% in 2008-09 from 27% in 2007-08.

“We are looking to further increase revenues from traditional products as they are long term and safe. There is good demand for these products now,” said Amit Gupta, director - marketing & communication.

According to an analyst, public sector giant LIC is looking to gain market share by further tapping into the non-Ulip segment. Most private insurers have a Ulip focus which keeps competition slim for traditional products.

LIC launched two return-guaranteed products - Jeevan Aastha and Jeevan Varsha - in the second half of 2008-09. It mopped up over Rs 12,000 crore through the two policies.

Other insurers like Reliance Life and Kotak Mahindra Old Mutual Life Insurance also see a larger role for their traditional products as they expand into smaller towns and villages.

“Life insurers will rely on non-Ulips in their quest to tap into the hinterlands. People in the areas prefer traditional products as they do not understand the functioning of stock markets too much,” said P Saravanan, head, insurance business - Sharekhan.

Max New York Life also sees a slight increase in the share of non-Ulip premium in FY10.

“We want to meet the needs of all kinds of customers and have an overall balanced portfolio based on customer requirements. I expect the share of non-Ulips to increase to 30% from the current 25% this fiscal,” said A P S Bhalla, zone head — agency south, Max New York Life.

However there are others who say that they would totally rely on Ulips as the equity markets show signs of improvement.

This is particularly in the case of newer insurance companies as the quantum of premium in the case of traditional products is lower that Ulips.

According to industry insiders the average premium size for Ulips is around Rs 20,000, while it’s less than half of that for non-Ulips.

“Currently almost 100% of our premiums come from Ulips. We will continue our focus on Ulips as the pace of shift to non-Ulip will decline going ahead,” said Aneesh Srivastava, CIO - IDBI Fortis Life Insurance Co Ltd.