• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Suresh Parthasarathy

With the equity markets declining, retail investors may have cut back on their direct equity investments.

But have they reduced subscriptions to Unit Linked Insurance Plans (ULIPs) – the market-related products from insurance companies?

It has, going by the 5 per cent decline in overall sales so far this year.

However, while the public sector major LIC has witnessed a slowdown in off take of ULIPs, private insurance players claim that they have managed to sell more ULIPs than they did last year. Some private players have still managed to achieve a 100 per cent plus growth in overall premium income (considering new as well as renewal premium). New business premium income is said to be growing at anywhere between 10 and 65 per cent.

In stark contrast, LIC witnessed a 29 per cent decline in new business this year. SBI Life Insurance for instance, has collected total premium of Rs 2,910 crore for the six months from April- September 2008, a growth of 110 per cent over the corresponding period last year.

“Our company is still having the positive growth on a year on year basis in respect of ULIP collections. For the first half of this fiscal, the growth was around 65 per cent. The total premium collected inclusive of renewals, stands around at Rs 1,650 crore against Rs 1000 crore for the same period last year,” explains Mr Anuj Agarwal, CFO, and SBI Life Insurance.

ICICI Prudential Life Insurance has also registered a growth of 56 per cent for the half year ended September 2008, garnering total premium (new business plus renewal) of Rs 6,726 crore as against Rs 4,311 crore during the corresponding period last year.

The new business premium stood at Rs 2,650 and increased by 22 per cent as compared to same period last year. Renewal premium, one of the key indicators of sustainable flows, showed strong growth of 90 per cent and stood at Rs 3,423 crore.

HDFC Standard Life reported an equally strong growth in premia. According to Mr Sanjay Tripathy, Executive Vice President and Head-Marketing for the company, new business premium growth for the company is 58 per cent for the period of April- September 2008. “We are currently growing above the industry growth rate”, he says.

Given that equity mutual funds saw a 54 per cent decline in mop-ups in April-September this year, why are retail investors continuing to invest in ULIPs? Distributors point out that unlike the case of a mutual fund, the costs of surrendering a policy are quite high in the case of ULIP.

Fear of losing the first year’s premium, often prompts policy holders to continue with renewal premia irrespective of the market conditions.

Policyholders also often do not use the facility to redirect the renewal premium from the equity to debt options within the ULIPs.

According to industry sources, close to Rs 26000-28,000 crore was invested in equity markets by insurance companies till September.

More Stories on : Stock Markets | Life Insurance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line