Adding another chapter in Indian Life Insurance Industry

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With the recent changes in ULIP guidelines, Insurance Regulatory and Development Authority has suddenly put a break to the wild sale of ULIPs by life insurance companies and added a new chapter in the Life Insurance Industry history. Ever since of ULIPs were introduced in Indian market, they were the favorite of the companies and companies were only focusing upon them. They were launching most of the new products in ULIP category. This was mainly because of the high margin in ULIP business. Now as the guidelines have changed, those margins have shrunk and life insurance companies are being forced to relook their product portfolios.

ULIPs lacked transparency and were grossly mis sold. Their charges were higher and agents were paid high commissions to promote their sales. IRDA capped their charges and September 2010 onwards, these products are fair valued and well placed but as margins have gone down, companies are looking for alternatives to boost sales and overall margins. IRDA’s change in guidelines and debate after that led to the apprehension among investors and their sales were dropped.

Now insurance companies are launching traditional Non-ULIP products like Term Plan, Money back plan and Pension plan, etc. ULIPs have lost their attractiveness to the traditional plans which were traditionally ignored in the last decade. Earlier, ULIPs were contributing more than 85 per cent of the total new business premium collection of the companies but now they have gone down to as low as 50 per cent.  As per the data available on internet, most of the leading private insurers in India have decreased their dependency on the ULIP products.

Though, companies are quite confident that sales of ULIP will again pick and volumes will make them profitable. But as stock market is also quite volatile, it may still take some more time before investors again start taking a look at these ULIPs.  It is going to be a challenge for life insurance companies to reshape their business model and attract customers again. Investors are now more cautious about their investment decisions and looking for more options. Mutual offer a better bet than ULIPs and traditional plans, so regaining old volumes may remain a challenge for the life insurers.

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About akhilendra

Hi, I’m Akhilendra and I write about Product management, Business Analysis, Data Science, IT & Web. Join me on Twitter, Facebook & Linkedin


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