ULIPs have prospective for life insurers despite curbs'

Unit linked insurance policies (ULIPs) designed and sold under the new norms that came into effect Sep 1 have a great prospective for life insurers, said experts participating in a board discussion here Monday on "Future of ULIP".

The panellists, however, were not common on which segment of the market ULIPs were suitable for.

The board discussion was part of the 2-day seminar on "Current Issues in Life Assurance" organized by the Institute of Actuaries of India (IAI).

The Insurance Regulatory and Development Authority (IRDA) brought out new norms governing ULIPs capping different charges levied by the insurers.

The new norms kicked in Sep 1 and in the process sucked out around 250 policies from the market.

The life insurance industry had to be content with selling around 75 new ULIPs approved by the IRDA since then. This has brought down new business for life insurers.

Richard Holloway , managing director (South East Asia & India) Milliman Private Limited, said: " ULIP is a popular product throughout the world that has stood the test of time meeting the needs of customers, giving them higher returns and offering transparency."

He said life insurers complain that the new ULIP norms leave them with limited scope to reimburse the distributors as commissions have to be reduced.

In addition, the companies will not be able to enjoy high surrender profits - profits earned when a policy holder surrenders his policy - owing to lower surrender penalties stipulated in the new norms.

"The industry said the focus should be on mis-selling in general and not capping of charges," Holloway said.

Stating that ULIP has good potential, T.R. Ramachandran, chief executive officer & managing director of Aviva Life Insurance Company India Limited, said: "The product is not for middle or lower middle class segment. There cannot be a ULIP where the annual premium is around Rs.8, 000."

Such policyholders are buying the product just for claiming income tax exemption, he remarked.

Sanjiv Bajaj, managing director, Bajaj Capital Limited, said ULIPs had to be targeted at individuals as these offered them to accumulate wealth.

SBI Saral Maha Anand | Ulip launched

SBI Life Insurance has launched a low-premium Ulip - Saral Maha Anand.

About the Product:
• The minimum annual premium is Rs 15,000 and the maximum yearly premium is capped at Rs 29,000.
• The sum assured component ranges from 10-20 times of the annual premium and is restricted to a maximum of Rs 7.5 lakh.
• SBI Life Maha Anand is meant for investors in the age group of 18-55 years. The maturity age is up to 65 years.
• Like most other Ulips , policyholders can opt for a yearly, half-yearly, quarterly or monthly payments.
• The product offers customers four investment options depending on their risk profiles: Index, Equity, Balanced and Bond fund.
• It also offers partial withdrawal of up to 15% of the fund value after completion of five years. Investors can use this window to meet emergency liquidity needs.

Charges:
• Premium allocation charge is 6.25% of the premium amount for the first year and it goes down to 3.75% between the second and fifth year, and from thereon, further to 3% until the 10th year of the policy.
• The policy administration charges are Rs 33.33 per month.
• The fund management charges are 1.25% for the index fund and balanced fund, 1.35% for the equity fund and 1% for the bond fund.
Financial advisors say that the cost structure of this regular Ulip is still high despite the flexibility of low premium. Hence, if an investor wants to make the most out of this product, s/he has to invest for the maximum possible term and invest a higher amount to earn decent returns.

Pros:
The low premiums could interest those who are unable to afford the huge premiums payouts in most other Ulips.

Cons:
Though it’s a low-premium product, the charges are not significantly lower than those of the company’s other Ulips.

New ULIP by ING Life Insurance

ING Life Insurance has also launched a new Unit Linked Insurance Product christened ING Prospering Life. This ULIP promises to fulfill wealth accumulation and protection needs of its owners.

This new ULIP comes with a host of customer benefits:
•IT includes 5 fund options to choose from
•Automatic Asset allocation
•Unlimited switches with partial withdrawals free of charge.
•The product offers an annualized premium ranging between Rs 48,000 and Rs 96,000
•Competitive priced against other long term investment options
•The sum assured is an amount 10 times the annual premium at inception for those below the age of 45 & 7 times the annual premium at inception for those above the age of 45.
•The minimum top up premium is Rs 5000.

LIC crosses Rs 1,000 crore score under new ULIP Plans

Country's largest insurer, Life Insurance Corporation (LIC), today said it has crossed the Rs 1,000 crore-mark from its two new unit-linked plans, which were launched after the latest guidelines of the sectoral regulator IRDA took effect last month.

"Life Insurance Corporation of India has crossed the Rs 1,000 crore marks under the new ULIP plans, Pension Plus and Endowment Plus. The total premium income under these two plans as at October 18, 2010 was an awesome Rs 1,282 crore approximately," LIC said in a statement.

The new plans were introduced last month. Pension Plus was launched on September 2 and about Rs 150 crore of premiums have been collected under it from more than 30,000 policies.

Endowment Plus plan was launched on September 20 and it was LIC's 16th linked product. Over Rs 1,000 crore has been garnered from Endowment Plus alone from over 2 lakh policies, in merely 29 days.

As per new guidelines, effective September 1, Insurance Regulatory and Development Authority (IRDA), the commission paid to distributors and expenses charged by insurers will no longer be front-loaded. Instead, they will be distributed over the lock-in period of the schemes, which has been raised to five years from three years earlier.

Currently, ULIP products account for over 50 per cent of the total premium collected by the life insurance companies.

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The new and improved ULIPs are here to stay

IT is after a long time that all the insurance companies have started offering unit-linked insurance plans (Ulips) that meet the new guidelines of the Insurance Regulatory and Development Authority (Irda).
All the players, namely –
• Future Generali
• Kotak Life Insurance
• SBI Life Insurance
• Reliance Life Insurance
• HDFC Standard Life
• LIC and soon
Have launched and continue to launch their products in line with the new norms that came into effect.
Irda has cleared 51 of the 68 unit-linked products that were filed with it. Each insurer has to come out with a minimum of two products.

New ULIP norms – What it means?

Nearly three-quarters of the 1.6 million private life insurers have had trouble in business. Insurers are taking steps to cut costs in the wake of a dramatic reduction in charges of unit-linked insurance policies (or Ulips) by the insurance regulator, IRDA. The new norms, may push 1.2 million agents out of work, took effect from 1 September.
Ulips are: A hybrid product that combines insurance and equity investment.
They account for at least 80% of new business premiums for life insurers. The size of the agency channel, which sells policies of 23 life insurers, has grown from 900,000 to about three million since 2000. Until recently, agents were aggressively pushing sales of Ulips, earning commissions of up to 40%!
The state-run, Life Insurance Corp. of India (or LIC), alone manages at least 1.3 million agents. There are about 310 million policies in force, including traditional life insurance policies.
The insurance regulator has capped various charges including surrender charges. Till 31st August, companies were able to levy up to 100% as surrender charges from a customer if a policy was discontinued.
The regulator has also ordered insurers to offer a minimum guaranteed return of 4.5% on the fund value in linked pension plans. Earlier, there was no such norm and the value of the funds invested entirely depended on the yield of the instruments where the premium was allocated.
The new norms will benefit policyholders but will bring down average agent commissions in Ulips from 15-17% to 7-9%. The reduction in the first-year agent commissions will help curb rampant mis-selling, insurance firms will be required to underwrite more losses, infuse more capital and cut costs to sustain Ulip sales.
LIC may not need to resort to cost-cutting measures due to its highly profitable business, but private sector insurers are planning drastic cost-cutting measures to sustain their businesses in the new regime.
What measures companies can take?
• Cutting the agency channel is one of several cost-cutting measures.
• The firms plan to cross-sell products through branches of associate companies instead of opening new branches,
• Cut commission of agents retained
• Redesign new products with variable premium.
• The companies are also focusing on alternative distribution channels such as subancassurance, where the expenses are lower. According to industry estimates, the cost of sales through bank branches or bancassurance can be as low as 20% of the value of the policies sold.
• To save costs, private players are also focusing on training facilities to improve agents’ productivity.
• Some bank-owned life insurers are planning to sell insurance policies through the branches of their mutual fund subsidiaries.
Statistical analysis:
According to a recent study, existing distribution channels are almost entirely focused on Ulips. Nearly 85% of new business premium comes from sales of Ulips but the cost of sales through agency channels is very high—between 50% and 100%.
The study said the cost should be brought down to 25-30%. It also revealed that nearly 60% of the agents work part-time.
India’s life insurance industry has grown some eightfold in the past ten years, collecting a total premium income of Rs2.61 trillion in 2009-10, or which nearly Rs1.1 trillion came from Ulips. At least 310 million life policies are in force now.
The regulator has so far cleared 51 of 68 new Ulips filed by insurers. There were 230 Ulips in the market till August.

Reliance Life Insurance launched highest NAV advantage ULIP

Reliance Life Insurance Company (RLIC), part of Reliance Capital promoted by Anil Ambani , Tuesday announced the launch of a new unit linked insurance plan (ULIP).

The Reliance Life Insurance Highest NAV Advantage Plan offers guarantee on maturity with the highest Net Asset Value (NAV) per unit achieved throughout the entire 15-year policy term.

"Our new unit-linked plan fulfils the diverse needs of customers across different segments while addressing their need for long-term wealth-creation and increased life protection," said Malay Ghosh, executive director and president, RLIC.

This is the first ULIP launched by Reliance Life after the insurance regulator, Insurance Regulatory and Development Authority, came out with revised guidelines a few months ago.

The plan pays the beneficiary twice the sum assured plus total fund value in the event of accidental death for the base cover portion. The unique plan also offers the benefit of up to 100(%) per cent equity exposure throughout the policy period.

The plan, which is available for customers in the age group of 7-65 years, also provides liquidity through partial withdrawals after 5th policy anniversary and loan after the completion of second policy year and top-up option to the policyholder.

It is available under two minimum payment options. The regular option allows customers to pay Rs.20, 000 annually, half yearly, monthly and quarterly. In the single premium option, the customer pays a minimum of Rs.50, 000 only once at the beginning of the policy tenure.

SBI Life Insurance launches new ULIP product Saral Maha Anand

SBI Life Insurance has launched a new unit-linked insurance plan (ULIP) called Saral Maha Anand.

This is the third ULIP product launched by the insurer since the introduction of the new ULIP norms by the insurance sector regulator, IRDA, last September.

The two products launched by SBI Life are
1.Smart Performer and
2.Unit plus Super.

Saral Maha Anand, its new ULIP product:
• Is available at an affordable yearly premium starting from Rs 15,000 onwards and
• The product has been designed to cater to investment and protection needs of the middle-and-low-income segments.
• The product is exempted from medical-examination.

To quote SBI Life Insurance's managing director & CEO, MN Rao,
"The product offers simplicity and affordability so that a larger section of society can participate and benefit by systematically investing over a long-term horizon."

ULIPs turn costly for investors yet GOOD Investment

Unit-linked insurance plans have become just a bit expensive post 1st September 2010 retail investors. This is because of structural change brought about by the Insurance Regulatory Development Authority's (IRDA) new norms.
Most of the newly launched products offer only an annual premium mode (unlike the monthly payment option earlier) and moreover, the minimum premium payable for such policies now start at Rs 15,000 — an increase of Rs 5,000 from the past.
The few insurance companies that offer the ‘monthly premium' option have now raised the minimum commitment to Rs 2,000 — turning into a premium of Rs 24,000 a year. The new ULIPs launched by insurers such as ICICI Pru Life, HDFC Standard Life, Max New York Life, LIC and Kotak set their annual premium in the range of Rs 15,000-20,000, and Canara HSBC OBC Insurance and Birla Sun Life, have a starting premium of Rs 25,000/annum.
The monthly mode offered by SBI Life and Birla Sun Life comes at a higher premium of Rs 2,000-2,500 a month, taking the annual premium outgo to Rs 24,000 and Rs 30,000, respectively. One of objectives of the new IRDA regulation was to enhance retail participation and make ULIPs more transparent and cost-effective.
Insurance companies believe that under the revised norms, marketing ULIP will be profitable, only if policyholders continue to pay premium over the policy's 10-year or longer term. Investors are more likely to keep their policies in force if premium are collected on an annual basis, compared with a shorter time-frame.
Insurance company personnel said that the charges an insurer can levy are capped through minimum return criteria laid down by the IRDA, which makes it difficult for the insurance company to absorb customer acquisition costs at a lower premium.

Norms could cap charges on top of ULPs, Irda

The Insurance Regulatory & Development Authority (Irda) is planning to cap the charges on universal life policies, or ULPs. These have almost replaced unit-linked insurance plans (Ulips) in terms of new business. Ulips, which used to account for around 80(%) per cent of the segment, lost their shine after the regulator brought in tough norms from September 1.

“We are planning to cap the charges on ULPs, which are parallel to Ulips and have a component of traditional plans. We have received complaints from different sections of the industry claiming that some companies are selling them as Ulips and overcharging policyholders. We want to plug all loopholes,” said a senior Irda official.

Guidelines on ULPs will be in place by next week, the Irda official added. J Hari Narayan, chairman of Irda, had conveyed last week that every product would be experienced for fairness and robustness and only then would they be permitted on the market.
According to present guidelines, commissions on a single premium are capped at 2(%) per cent. On pension products, they are capped at 7.5(%) per cent, while on any other insurance product they can go up to 40(%) per cent.
After the September 1 changes to Ulips, commissions to agents declined to 7-9(%) per cent from 12-15(%) per cent. The industry expects volumes to pick up, as the new norms improve policyholders’ confidence.
So far, there have been no separate guidelines for ULPs, which are complex, hybrid products. For example, unlike Ulips, there is no unitisation of funds. But other features are similar to Ulips. For instance, after the deduction of mortality charges, the remaining portion of the premium amount is invested in bonds and equities.
ULPs are unique in the sense that policyholders have the flexibility to change the premium, sum assured and the term of the policy during the tenure.
“Irda has not cleared any ULPs in the last 3-4 months. The product is under Irda’s scanner. Agents are pushing them to earn a high commission,” said Sanjiv Pujari, an actuary appointed by SBI Life.
Another executive expects the regulator to come down hard on this product. “There have been complaints about ULPs being sold under the guise of Ulips,” he said.
But there are some who defend ULPs. “There is no need for separate guidelines for universal life. This is not a very difficult product. We don’t disclose the net asset value like Ulips, but the expenses are explained upfront,” said a chief executive officer of a life insurance company.
He added that insurance companies have been selling the products before Ulips were launched in India and have been following the traditional guidelines.
The mutual fund industry, after shifting to a zero-load structure last year, complained that agents and brokers pushed only Ulips because of the high commissions. Soon after, Irda capped the overall charges on these products. To avoid such a situation, the regulator has decided to address the issue proactively.
Also, a committee headed by D Swarup, former chairman of the Pension Fund Regulatory & Development Authority, had recommended shifting to a no-load structure, where a buyer does not pay a commission on any financial product.

Unit-linked insurance plans roll expensive for investors

Unit-linked insurance plans have become just that bit more difficult to access for retail investors.
This follows the recent changes made to the premium configuration of policies launched by some insurance companies. Since September 1, the date when ULIPs were believed to comply with the Insurance Regulatory Development Authority's new norms on such policies, most of the recently launched products offer only an annual premium mode (unlike the monthly payment option earlier) and moreover, the minimum premium payable for such policies now start at Rs 15,000 — an increase of Rs 5,000 from the past.
Even the few insurance companies that offer the ‘monthly premium' option have now raised the minimum commitment to Rs 2,000 — translating into a premium of Rs 24,000 a year. The new ULIPs launched by insurers such as ICICI Pru Life, HDFC Standard Life, Max New York Life, LIC and Kotak set their annual premium in the series of Rs 15,000-20,000, and Canara HSBC OBC Insurance and Birla Sun Life, have a starting premium of Rs 25,000/annum.
The monthly method offered by SBI Life and Birla Sun Life comes at a higher premium of Rs 2,000-2,500 a month, taking the annual premium outgo to Rs 24,000 and Rs 30,000, respectively. One of objectives of the new IRDA regulation was to enhance retail sharing and make ULIPs more transparent and cost-effective.
Insurance companies reason that under the revised norms, they will finds ULIP marketing money-making, only if policyholders continue to pay premium over the policy's 10-year or longer term. Investors are more likely to keep their policies in force if premium are collected on an annual basis, compared with a shorter time-frame.
According to an industry insider, the regulator's insistence that policyholders must not suffer more than 3(%) percentage points as fees out of the gross returns posted by the insurance company, is already a constraint on the latter's ability to defray the customer acquisition cost ( marketing expenses). The additional stipulation that cancellation charges (for premature termination) can not exceed 4(%) per cent of the premium paid, means that initial acquisition costs can be defrayed in full only if the size of the annual premium collected from the policyholders up to that point of time are larger than earlier. Hence, the industry's emphasis on a larger ticket size for the annual premium.
A top official of an insurance company said that the charges an insurer can levy are capped through minimum return criteria laid down by the IRDA. This makes it difficult for the insurance company to attract customer acquisition costs at a lower premium.

ULIP review: Bajaj Allianz Life Insurance

Single-premium unit-linked insurance products are accepted among investors due to the convenience and less fears. However, the new Ulip period has seen very few such products.

The Wealth Insurance Plan from Bajaj Allianz Insurance Company is one among the few new products. This is a single-premium whole life unit-linked insurance policy. It is a vanilla product, with the maturity age fixed at 75 years.

The insurance plan offers an inclusive basket of investment options (funds), with varied proportion of equity and debt, for one to choose from as per the risk and return appetite. For instance, the equity growth, pure stock and accelerator mid-cap options are equity-based, whereas liquid and bond funds are debt-based.

Those looking for a balanced portfolio can opt for the asset allocation fund. This plan also offers an index fund option for those who want returns that mirror the stock market.

ING Life Launched Uttam Jeevan and Uttam Jeevan SP

ING Life India has launched two new customer-centric unit linked insurance products - ING Uttam Jeevan and its single premium variant, ING Uttam Jeevan SP, are in accordance with the new IRDA guidelines.

Both the products have been designed to fulfill customers need for investment and protection. These are simple products, which will appeal to all customers, especially those who are new to ULIP. They are easy to understand and buy.

Features:
• The minimum annual premium for Uttam Jeevan is Rs 24,000, while that of Uttam Jeevan SP is Rs 48,000.
• As they are non-medical insurance products, they are hassle free and easy to buy.
• The products enable a higher allocation of premium for investments, thus getting better returns.
• The product offers customers an automatic increase of 5 % in the base sum assured year-on-year, thus keeping up with the increased financial responsibility with age of the customer. It also has in-built accidental death benefit. The death benefit is Sum Assured + Fund Value.
• The products offer flexibility to customers with charge free withdrawals as well as top ups.
• In case the policy lapses, customers can reinstate the policy within 45 days from the date of lapse free of charge.
• Customers also have the benefit of increasing their contribution by way of Top-Up, with a minimum top-up premium of Rs. 2,000.
• Four free switches are allowed every policy year, helping customer to manage their investments well.

New Ulip launched by ICICI Prudential Life Insurance

ICICI Prudential Life launched its third unit-linked insurance product (ULIP) named ICICI Pru LifeLink Wealth SP, which is also in accordance to the new Insurance Regulation and Development Authority (IRDA) regime.

ICICI Prudential Life's CEO and Managing Director Sandeep Bakhshi said, "ICICI Pru LifeLink Wealth SP is a single premium product that will save customers the hassle of remembering premium payment dates or policies getting discontinued because of non-payment within a stipulated time".

About the product:
• Minimum premium is set at Rs 40,000,
• Provides customers the flexibility of choosing between 125 % and 500 % of the premium.
• Assures a loyalty benefit of up to 2.5 % of the fund-value at the end of every fifth policy year, which will start from the tenth policy year.
• In addition to this, ICICI Pru LifeLink Wealth SP also gives tax benefits on the premium paid and Change in Portfolio Strategy (CIPS), which means the customer is given an opportunity to choose from two unique portfolio strategies.
• For passive customers, the product has Trigger portfolio strategy, which gives them the opportunity to automatically capitalize and protect gains made from equity investment based on market movement.

Old strategy good for new ULIPs as well

Unit-linked Insurance Plans (Ulips) are back. Insurance companies are busy presentation new versions of the products which had earned a bad name for the whole industry in their earlier avatar due to rampant mis-selling. According to financial experts, the new Ulips, which meet the latest strategy issued by the Insurance Regulatory and Development Authority (Irda), are definitely more transparent and investor-friendly.

For example, the charges are now consistently spread across the tenure of the policy, there is a longer lock-in period and surrender charges are capped. But is the new version a better product now or is it just old wine in a new bottle? “The new guidelines lay great stress on promoting Ulips, primarily as insurance products. The insurance component in the new Ulip will be significantly higher than earlier. Further, higher initial allocation could result in better returns,” says G Murlidhar, chief operating officer, Kotak Life Insurance.

Evenly spread allocation charges, or the insurer’s fee for managing a policyholder’s money, through the policy term will allow the customer to see a gradual build-up of his funds over time, encouraging him to pay premiums regularly and staying invested for the entire period of the policy, he adds.

New ulip launched in accordance with the IRDA guidelines | Kotak Wealth Insurance

Kotak Life Insurance launched Kotak Wealth Insurance – a new unit-linked insurance plan which is in accordance to the new guidelines proposed by IRDA.

Kotak Wealth Insurance is a complete package that provides investment growth along with comprehensive triple benefits in the event of death. Its power-packed range of eight fund options allows customers to balance their risk profile with the tenure their investments.

New ulip launched in accordance with the IRDA guidelines | Kotak Secure Invest Insurance

Kotak Life Insurance launched Kotak Secure Invest Insurance – a new unit-linked insurance plan which is in accordance to the new guidelines proposed by IRDA.

Kotak Secure Invest Insurance is an equity exposure insurance plan and is backed by capital guarantees with in-built investment advice of the guarantee fund. It also helps the customer gain from market participation through the guarantee fund that aims at stable capital appreciation while limiting the downside risk in falling market conditions.

Higher Returns Assured – New Ulip | HDFC Standard Life Insurance

HDFC Standard Life - private life insurance player - launched a new ULIP - HDFC Standard Life Crest - which assures higher returns.

HDFC Standard Life Crest has
• a 30-day free look-in period against the usual 15 days so that investors understand the new ULIP (Unit Linked Insurance Products) better, in compliance to with the IRDA regulations which came into effect.

From now onwards all HDFC Standard Life insurance plans will carry a 30-day free look in period. This is for the convenience of an investor in case he/she feel that the product purchased is not very suitable to his/her requirement. The investor will be given a choice to switch over to an alternative product offered from the company within a year although at a nominal additional cost.

Investors can expect better Ulip products and services

Several new unit-linked insurance plans (Ulips) have started hitting the market after the Insurance Regulatory and Development Authority’s (IrDA) new strategy on Ulips came into effect from September 1. So what has changed?

Existing Ulip customers have nothing to worry as the regulations will only apply prospectively and will not affect them in any way.

Cap on charges between gross and net yields throughout the policy term that will be mostly evenly spread, and increase of lock-in period from 3 to 5 years will enable the customer to reap higher returns.

The new guidelines restrict the penalty that an insurer can levy on premature surrender. This cap on surrender penalty will ensure greater liquidity for the customer and reduce his loss even if he surrenders early.

Enhanced customer disclosures will improve transparency and drastically decrease mis-selling. Companies on their own accord can also be projected to add check layers beyond those mandated by the regulator to weed out mis-sales.

Insurance companies will invest more in better equipping intermediaries both in terms of knowledge and advisory capability.

Further, mandatory Need Based Selling, whereby insurance agents will be required to assess the customer’s exact insurance needs based on his financial and filial profile may also soon become an integral part of the sale process.

Customers can look forward to far better product and service experience. Greater customer affinity is likely towards life insurance in general and Ulips in particular and more customers can be expected to ride out the entire policy term.

As for companies, most of the old Ulips will be off-the-shelf and they will introduce a swing of products to adhere to the new guidelines. However, margins may come under pressure. Emphasis will now be on higher business volumes, increasing average ticket size and bettering persistency levels. Insurers will qualitatively enhance the customer value proposition by introducing simpler, more transparent products, better service and support during the policy term and, improving the overall quality of engagement.

Current levels of lapsation and surrender may consequently reduce. Insurers may also look at innovative platforms to rationalise cost and enhance appeal. The product mix will also change. From the current Ulip-heavy portfolio, insurers will strive to achieve greater balance between traditional plans and Ulips. However, insurance firms which had planned to list may revisit their plans, since valuations may get affected now.

New Ulip norms starting 1st Sept, policyholders to advantage

Starting Wednesday, policyholders will get a much fairer deal if they invest in unit-linked insurance plans (Ulips).

The new rules of the Insurance Regulatory and Development Authority (Irda) take result from September 1. Ulips, which contributed 80(%) per cent of the total premium collected by private companies, will see an impressive change. Irda has capped the difference between net and gross yields during the policy term. Insurers will have to offer a minimum approved return even if a policyholder withdraws from the fund before maturity. For the 5^th year, the cap is fixed at 4(%) per cent.

WHAT’S IN STORE?
Move: The difference between net and gross yields capped during the policy term.	Effect: The policyholders will get higher returns on their Ulip investments.
Move: The lock-in period will increase from three years to five years.	Effect: If anyone withdraws in the first year, he will get back the amount after deduction of charges only after the 5th year.
Move: Surrender charges have been capped at a level much lower than what exists at present	Effect: It will ensure that only acquisition expenses are recovered in the event of the discontinuance of the policy.

From tomorrow, the lock-in period will increase from 3 years to 5 years. If a policyholder wants to remove in the 1^st year, he will get back the amount invested after deduction of various charges only after the 5^th year.

To ensure only gaining expenses are recovered in the event of the discontinuance of the policy, surrender charges have been capped at a level much lower than what exists at present. The industry had been benefiting from higher lapses. Funds collected from policyholders under lapsed policies are sent to a part fund and the money is given the the policholder after the company deducts all charges. The charges are as high as 100(%) per cent in some companies.

“We have always maintained that insurance is a long-term contract. Any pre-termination of policy is not good for all stakeholders,” said S B Mathur, secretary general, Life Insurance Council.

“Products are going to be more gorgeous now. We expect greater customer interest, as charges will be uniform as well as lower,” said G V Nageswara Rao, managing director and chief executive officer, IDBI Federal Life Insurance.

Rao added the customer could now expect higher returns, as the amount of funds invested was likely to go up.

Along with these changes, the regulator has set minimum disclosure guidelines for insurers.

“Now agents cannot take policyholders for a ride. They (policyholders) can now see the financial position of the company over the website and do not need to depend on agents,” added Mathur.

On the flip side, though overcharging and misspelling will come down, insurers say product innovation and customisation will be affected. Also, traditional plans will suit those in the lower ticket size segment.

ING Life banking on traditional products vis-a-vis ULIPs

Private life insurer ING Life India today said it would continue to focus on selling traditional products vis-a-vis Unit Linked Insurance Plans (Ulips).
“Traditional life insurance plans are helpful to all the stake holders, including the insured, insurer and the financial advisor,” ING Life India, executive vice-president (central and east), Syed Sarfaraz told the media here.
He informed the company already maintained a ‘healthy’ product mix with the traditional life insurance accounting for 60(%) per cent of the portfolio, while the balance coming under Ulips.
Ulips provides for life insurance, where the policy value varies according to the value of the primary assets at that time. It offers life insurance as well as an investment like mutual fund. While, the part of premium goes towards the sum assured, the balance is invested in instruments such as equity.
Recently, sector watchdog Insurance Regulatory and Development Authority (Irda) had tightened the norms for Ulips by raising lock-in-period from 3 to 5 years to provide risk safety. This has made Ulips long term financial instruments.
These guidelines followed the public spat between Irda and Securities and Exchange Board of India (Sebi) for jurisdiction over Ulips, which Sebi had claimed were equity products.
Based on traditional platform, the product guarantees the maturity value as decided by the parent, additional guarantee of death benefit to policyholder, guarantee of policy continuing in case of death of parent and guaranteed coverage for child after maturity.

Irda permission revelation in Ulip advertisements

To improve transparency in unit-linked insurance products (Ulips) and protect the interest of policyholders, the Insurance Regulatory and Development Authority (IrDA) has asked life insurers to release the underlying circumstances and elements while advertising products.
“A review of the advertisements, particularly those relating to unit-linked life insurance products, reveal the necessity to improve the content and presentation in fulfillment with the provisions of the above referred regulation and guidelines,” said IrDA.
The regulator said when an insurance advertisement is highlighting the benefit of guarantees; it obviously needs to disclose the underlying environment under which the guarantee operates, including cost of guarantee and charges.
Further, Irda said if the underlying conditions are very complex, the text, wording on guarantee must be accompanied by the phrase “Conditions Apply” in a font that is at least 50(%) per cent of the font size used to highlight the guarantee.
The advertisement will also have to clearly state the availability of underlying elements of ‘life insurance coverage’ to help identify the product as an insurance product.
It has warned against brand names of products that use terms or phrases that convey a fictional sense of security.

Returns on Ulip pension plans put to increase

As Irda refuses to move on guaranteed returns.

The Insurance Regulatory and Development Authority (Irda) has fixed to its guns on returns from unit linked pension plans. Despite several representations from the industry, the monitor has decided that insurers will have to provide guaranteed returns of 4.5(%) per cent on gross premiums until March 11, 2011.

After that, returns will be linked to the overturn repo rate or the rate at which banks deposit their extra funds with the Reserve Bank of India for a day. Investors will get half a percentage point more than the standard reverse repo rate at the end of each quarter. In a note to insurance companies, the regulator said returns will be in the range of 3(%) per cent to 6(%) per cent.
This move will result in increased returns for investors after the new rules come into result from September 1.
On group pension plans, the guaranteed return will be applicable to individual contributions made to group pension products, if the agreement has been in force for 5 years continuously. After failing to reduce the rate of return earlier, insurers had in a meeting held a fortnight back with the regulator, requested that the 4.5(%) per cent should be paid on the net premium. But Irda rejected this request.
Insurers are as expected unhappy. “Managing this return on gross premium will make the product costlier by 2(%) per cent. We wanted return to be subjected to net premium,” said an actuary of a large insurance company.
In another significant explanation to its June 28 circular, Irda has asked insurance companies to come to a formula while charging the premium allocation and premium management charges during the first 5 years of the policy contract. “The charges could change from year-to-year in a logically, orderly manner so that the difference between the maximum and the minimum charges shall not vary by more than 1.5 times,” Irda said. For instance, if the charge in the 5th year is say, 10(%) per cent, the first year’s charge cannot exceed 15(%) per cent.
In another clarification, Irda said the top-up premiums on unit-linked insurance plans (Ulips) will not be based on the entry age, but on the age at which the top-up premium is paid. “The top-up premium will also have a lock-in period of 5 years. Policyholders will not be allowed to top-up the premium during the last 5 years of the term. The contractual premium payable by the policyholder cannot be altered during the policy term,” IrDA has said.

CUP OF JOY

# Guaranteed return on unit linked pension plans to be in the range of 3-6 per cent

# Returns will be 50 bps above the average of reverse repo rate at the end of each quarter

# Charges to be evenly distributed in the first five years of the policy term

# Charges could change in evenly manner, should not vary more than 1.5 per cent

# Life cover on top-up premium to be based at the age of payment and not at the entry age
For example, if a person wants to top-up his premium under the present norms, his premium will go into the investible corpus. Under the revised norms, he will not be allowed to pay a top-up premium in the initial 5 years. After that, when he pays a top-up premium on the existing policy, he will be provided a life cover based on his existing age, not the entry age. This implies that the mortality rate would come into play and the policyholder will have to pay a higher amount.
While loans have been allowed against policies, insurers can now charge interest.

Birla Sun Life Insurance rides Ulips to timepiece profit

Increased focus on unit linked life insurance plans has helped Birla Sun Life Insurance Company book net profit for the first point in 10 years for the quarter ended June 2010.

This happens at a time when the unit-linked insurance products (Ulips) face many dogmatic hurdles.

For the April-June quarter, the company posted a net profit of Rs 9 crore beside net loss of Rs 111 crore in equivalent period previous financial years.

“The company is working on reinforcing the Ulip as a long term protection cum savings product,” the company said in its release.

The Bachat (Endowment) plan launched in May this year is garnering positive reply from investors, the release said.

The company has more than 85(%) per cent of the their portfolio in Ulips, while traditional plans amount to a sub-15(%) per cent.

While the new business premium saw 7(%) per cent increase, the renewal premium helped the revenue growth with a 27(%) per cent increase. The new business premium grew to Rs 473 crore and the renewal grew to Rs 669 crore for the financial year ended March 2010.

The company recorded a growth of 18(%) per cent in total premium income at Rs 1,143 crore. Assets under management (AUM) of the company scaled up by 44(%) per cent to Rs 16,841 crore.

The company’s value of new business margin (NBM) grew from 20.3(%) per cent last year to 22.5(%) per cent this financial year. The company made the public admission of its fixed value of Rs 3,816 crore as on March 2010, up 25(%) per cent year on year.

Embedded value is the future value of the present business (in-force policies) of the life insurance company.

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Changes to ULIPs with the aim of should create you smile

Just under two weeks ago, the ministry of finance had located the ball in the Insurance Regulatory Development Authority’s (IRDA’s) hand, creation IRDA the sole regulator for unit linked insurance plans (ULIPs).

In a circular issued on June 28, 2010, the regulator notified a number of changes to the configuration and framework of ULIPs that are usually helpful to customers, but with some care.

These changes, that will be successful in all ULIP sales from September 1 this year, plan to address the issues that were being highlighted by critics and customers alike. Here we take a look at them
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Future Generali Life launch new ULIP

Future Generali Life Insurance, a joint venture between Future group of India and Generali Group of Italy, has come out with a unit linked insurance plan (ULIP) ‘Future Generali NAV Assure’. The plan seeks to provide maximum opportunity for growth while protecting the investments next to adverse market circumstances in financially unstable times. Addressing presspersons here on Wednesday after launching the product, Balram Sarma, Chief Operating Officer, said the scheme guarantees highest NAV (net asset value) recorded on every day basis during the first seven years of the policy or NAV at maturity date, whichever is superior.
The ULIP would protect the investment proceeds and the customer could invest without waiting to time the markets whether they are cheerful or bearish. It is available for customers in the age group of 8-60 years.
The insurance plan allows flexibility to its customers to pay premiums with 4 options to select from being single, 3, 5 and 7 years. It comes with a fixed policy term of 10 years and the minimum annual premium is Rs. 39,960.
The NAV guarantee is applicable only on maturity provided the policy is in force. The premium allocation charges sort from 1-8(%) per cent depending on the premium group and the premium paying term.
According to Mr. Balram Sarma, Future Generali was working through 91 branches across 83 locations with over 44,000 licensed advisors.

Domestic ULIPs with limit on yearly fees

Last week, there was a rise in of stories in the media about how IRDA is about to unleash a wave of reforms upon ULIPs. It seems the insurance regulator has swiftly discovered a number of basic problems in ULIPs and it has decided to attach them. Of course, these intentions have only been expressed off-the-record to choose journalists.
The thrust of these ‘reforms’ seems to be to prevent ULIP investors from exiting early. Instead of 3 years, they’ll have to stay for at least 5 years to exit partially, and up to 10 years to exit completely. It seems that 7 or 8 years after ULIPs became a major product category; IRDA has exposed that when investors exit early they lose a huge chunk of their money.
I can only wonder how the regulator missed something that was common knowledge to everyone else in the financial group of people for so long.
Interestingly, some reports last week mentioned another improvement that could transform ULIPs into a truly beneficial type of investment. This would be the application of all charges and expenses uniformly through the life of the investment. If an insurance company is allowed to charge 3(%) per cent total expenses over a 10-year ULIP, it must stay within that limit every year, instead of averaging the amount over the full term.
Such an improvement would likely align the sellers’ interest with the buyers’. At one stroke, it would clear away almost all the negatives in ULIPs. I fully expect that this particular reform won’t actually happen. But if it does, no investment analyst would be uncertain to recommend ULIPs.
Of course, any of these reforms, if and when they happen, will only pertain to fresh investments in ULIPs launched after the rules are changed. Existing ULIP investors will continue to pay a heavy price because IRDA has only woken up now. Of course, it has actually not woken up yet — it has only told a few journalists (off the record) that it’s planning to wake up real soon now.

Life insurers’ premium up 63% among Ulip chain

Despite the controversy nearby the regulation of unit-linked insurance policies (Ulips), new business premium of life insurance companies grew 63(%) per cent to Rs 8,218 crore in May 2010, compared with Rs 5,050 crore in the same month last year.

Public sector insurer Life Insurance Corporation (LIC) registered 82(%) per cent jump in new business premium, growing from Rs 3,241 crore in May 2009 to Rs 5,907 crore in 2010.

Private life insurers saw new premium grow from Rs 1,809 crore in May 2009 to Rs 2,311 crore in 2010, a growth of 28(%) per cent.

The controversy over the regulation of Ulips happening after the Securities and Exchange Board of India (Sebi) in April barred 14 life insurance companies from selling Ulips, calling them investment products and asking insurers to seek approval from it before introduction such products.

Following the controversy, most companies kept the launch of new unit-linked products on hold.

However, now that the government has complete it clear that Ulips will continue to be keeping pace by the Insurance Regulatory and Development Authority (Irda), the industry hopes to launch new Ulips soon.

Among private life insurers, ICICI Prudential collected new premium of Rs 460 crore in May 2010 compared with Rs 346 crore a year ago, a jump of 36(%) per cent.

SBI Life garnered Rs 442 crore new business premiums during the same month, posting a 37(%) per cent increase over last year’s.

Meanwhile, gross premium underwritten by general insurance companies grow 20(%) per cent to Rs 2,994 crore in May 2010 compared with Rs 2,490 crore in the earlier year.

Four nationalized general insurance companies accounted for Rs 1,796 crore of the total gross premiums, while private non-life insurers collected Rs 1,197 crore during the month.

To be taxed Ulips investment products

The Finance Ministry has said the unit-linked insurance products (Ulips) are investment products and are therefore possible to be taxed after performance of the Direct Taxes Code (DTC). "Ulips are basically investment products and wanted to be taxed.

The final sight, however, will be taken at the time of the formulation of the code", the finance ministry sources said here today. At present, no tax is levy on the returns on Ulips, an equity-linked insurance implement, the regulation of which has become a bone of contention between the insurance regulator Irda and market watchdog Sebi.

Ulips are hybrid investment-cum-insurance products and report for over 50(%) per cent of the total insurance business in the country. When contacted, Life Insurance Council secretary General SB Mathur said, "We have maintained that Ulips are not pure investment products.

But calling them pure investment product is not right. We will approach the income department in due course.

“As per the revised DTC, which will replace the 50-year-old Income Tax Act, only six particular instruments will qualify for the EEE (exempt-exempt-exempt) taxation. Under the EEE mode, tax exemption is provided at all the levels of the instrument-- at the time of investment, at accumulation and at the time of withdrawal.

The DTC is expected to be ready from next April. The six instruments which will qualify for exemption are government provident fund, public provident fund, recognized provident fund, pension funds regulated by Pension Fund Regulatory and Development Authority (PFRDA), pure life insurance products and annuity plan.

As Ulips are investment products, the Finance Ministry official said, it could not be classify as pure life insurance product. The insurance watchdog Irda is locked in a turf war with Sebi over regulation of Ulips.

The difficulty came to the fore after Irda advised 14 life insurance companies to ignore the April 9 Sebi''s order banning Ulip schemes. The row impelled the Finance Ministry to interfere in the matter and mediate an agreement under which both the regulators agreed to seek a legally compulsory order on Ulip jurisdiction.

Following this, Sebi moved the Supreme Court to transfer all cases pertaining to the Ulip issue to the apex court following which notices were sent to the Centre, Irda and 14 insurers. The top court will hear the matter on July 8.

ULIPs may misplace flavour without spice of tax advantage

Unit-linked insurance policies (ULIPs), which constitute the bulk of the business for insurance companies, may end to be a popular investment product if the revised conversation paper on the Direct Taxes Code (DTC) is implemented in its present form.
This is because the revised conversation paper has recommended that only approved pure life insurance products and annuity schemes are subject to EEE (Exempt Exempt Exempt) technique of tax treatment.
“Approved pure life insurance products and annuity schemes will also be topic to EEE method of tax treatment”, the revised paper said.
This implies that the final pay-out from unit-linked plans could be taxed, said officials from the insurance industry.
The DTC had proposed tax deduction on the final pay-out of insurance policies, while exempting the policy premium at the time of role and the interest on it. Life insurance companies had asked that the present system of tax exemption for maturity proceeds be continued. They had made a representation to the Government that the EEE method of addition should continue as against the Exempt Exempt Tax (EET) method proposed.
It seems that while the government has decided on exempting term and whole life policies, it has decided to keep unit-inked products under the EET category.
Insurers fear that this move will spoil ULIP sales. ULIPs comprise almost 80-90(%) per cent of the private life insurers' business and around 65(%) per cent for Life Insurance Corporation of India.
“It is a relief that at least death claim benefits have now been exempted from tax. But it seems that ULIPs have been retained under the EET rule. We will have to go back to the government again with our representation”, said Mr Kamalji Sahay, Chief Executive Officer, Star Union Dai-ichi Life Insurance Company.
The Life Insurance Council is expected to make a representation to the Government for counting ULIPs under the EEE category.
Insurers are also happy that annuities, which were taxed under the existing system, have been exempt from tax.
Currently, up to one-third of the maturity amount when withdrawn is treated as tax-free. However, the remaining two-third amount was taxed as per the individual's tax slab.

ULIP row will be resolved shortly: FM

Finance minister Pranab Mukherjee on Tuesday said the row between insurance regulator IRDA and stock market regulator Sebi about unit-linked insurance products (ULIPs) will be resolve very shortly.

Mukherjee added that even as the life insurance industry has made some development to arrive at out to semi-urban and rural areas, ''the general insurance still requirements to work harder.''

On ULIP, FM said he was alert of the recent issues in the life insurance industry, particularly these products.

He said. ''We will resolve this subject soon. I understand the IRDA has taken some very positive steps in respect of regulations of ULIPs which are in the importance of both the insurance industry as also the policyholders,''

SC listen to ULIP case in July; may not fix on jurisdiction problem

The Supreme Court will hear the case pertaining to the line over manage of ULIPs between market regulator SEBI and insurance regulator IRDA next month but may not choose on the controversy over who would regulate these market-linked insurance products.

"The Supreme Court is in vacation. The transfer appeal is likely to be taken up in July," IRDA chairman J Hari Narayan told PTI today when asked about the growth on resolving its dispute with SEBI over controlling unit-linked insurance products (ULIPs).

Significantly, the IRDA chief is not sure whether the apex court will decide on the issue of control of ULIPs as it is not directly raised in the transfer appeal filed by SEBI before the apex court.

"The issue of jurisdiction is not directly mentioned in the petitions. It is only indirectly mentioned," said Narayan, who was in the Capital and met finance secretary Ashok Chawla.

Earlier, SEBI had filed a petition in the Supreme Court in quest of transferring all the ULIP-related cases from various high courts to the apex court. In this regard, the apex court had issued notices to the Centre, IRDA and 14 life insurers.

SEBI and IRDA have been locking horns over who has the power to control ULIPs, which are equity and bond-linked insurance products. The dispute snowballed into a major controversy after SEBI on April 9 banned 14 life insurers, as well as those belonging to SBI Life and Reliance Life of the Anil Ambani Group, from raising any fresh money from ULIPs unless they are registered with the market watchdog.

Responding to the SEBI directive, IRDA asked insurance companies to ignore the order of the market regulator and continue with business as usual.

Amid conflicting orders, the finance ministry brokered peace between the two regulators and asked them to equally seek a legally binding order from an appropriate court. It also asked the regulators to maintain status quo till a binging judicial order is secured.

Following the government directive of status quo, SEBI allowed insurers to raise money from existing ULIPs, but prevented them from issuing fresh ULIPs after April 9.

On jointly seeking a legally compulsory mandate with SEBI, Narayan said, "we are all for it, but the SEBI counsel told them that it is not a civil matter, civil procedure does not apply."

According to sources, IRDA wanted a joint application under Section 90 of the civil procedure code, but SEBI did not agree. Under Section 90 if any person agrees in writing to state a case for the opinion of the court, then the court shall try and determine the same in the manner agreed.

Aegon Religare appetite for increase

Aegon Religare Life Insurance Company is targeting a three-fold increase in premium income from latest businesses in 2010-11 from Rs 166 crore previous years and is planning to use Rs 450-470 crore on growth.
“We are targeting a premium income of Rs 500 crore from new businesses in the current fiscal year,” said Rajiv Jamkhedkar, managing director and chief executive officer of Aegon Religare Life Insurance.
The company, which started operations in middle-2008, hopes to break even in 8 years that is by 2016-17.
According to Jamkhedkar, expansion will be affected if the dispute between the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority (Irda) over Ulips is not determined soon.
The debate over Ulips started last month when Sebi banned 14 private insurers from advertising these insurance plans launched after April 9 without obtaining a certificate of registration from it.
The market regulator, however, allowed them to sell Ulips launched before April 9 till extra notice.
The insurance regulator made things more difficult for life insurers after it barred them from selling Ulips with a lock-in of less than 5 years and put a cap on the surrender charges.
Life insurers will have to change a few terms and conditions of their existing Ulips to sell them to new customers from July 1.

Ulip string can hit business: Religare

Private insurance player Aegon Religare Life Insurance at present said if the turf war between the capital markets regulator Sebi and insurance regulator Irda over Ulips is not resolved at the first it will impact the industry.
"If the issue is not resolved in the next couple of months then it will crash the business," Aegon Religare managing director and chief executive Rajiv Jamkhedkar said, adding however, so far there is no impact on the unit-linked insurance products (Ulips) business and the companies do not have any need for new Ulips now.
On April 9, Sebi had banned 14 life insurance companies, as well as Aegon Religare, from raising funds through Ulips, which invest the premium money in equity and debt markets. But Irda asked insurance companies to overlook the ban and do business as usual as Ulips are an insurance issue and not that of securities market. Sebi reacted to this with a fresh order banning new Ulips.
This forced the finance ministry to interfere which asked the regulators to seek a legally compulsory opinion on the matter, following which the regulators moved the Supreme Court, which will hear the case in July.
Ulips constitute more than half of the total business of the life insurance industry. At the end of the last fiscal, Ulips comprised around 75(%) per cent of the total business of Aegon Religare which can be reduced to 65(%) per cent by the end of this financial as there will be increase in traditional products.
Jamkhedkar said the company will infuse up to Rs 470 crore to build up its branch network and hire over 15,000 in the current financial including 13,000 agents to support its expansion plans.

Ulip: Various regulators may not be strong, says Irda chief

Insurance Regulatory & Development Authority (Irda) Chairman J Hari Narayan on Friday approved the difference of opinion with the capital market regulator on variable unit-linked insurance plans (Ulips) and called for intelligibility on aspects that can result in regulatory overlap.
“There is difference of opinion between our understanding of what Sebi (Securities and Exchange Board of India) forward is and what Sebi believes its own remit is,” Hari Narayan said in his first public comments on the argument. Sebi Chairman CB Bhave did not comment.
Asked to comment on the issue at the Business Standard Insurance Round Table here, Hari Narayan said having various regulators for the same issue might not be healthy for the system. He said all the regulators were working to make sure customer satisfaction, investor protection and financial strength. The issue of regulating Ulips became controversial in January after Sebi issued notices to life insurance companies saying the structure of these products was similar to mutual funds and that these were in the nature of collective investment schemes, which come under its purview.
Irda, which also received a letter from Sebi, shot back saying the regulatory architecture was clearly defined and it was authorised to regulate ULIP under the law. Subsequently, Irda and Sebi officials have held two rounds of discussions but are yet to reach an agreement.
Hari Narayan said. “In Indian regulatory architecture, what different regulators will do is well defined by law. In India, we have enacted for ourselves a system where each one of these is separate. The scope of regulatory overlap in our view is limited because they (regulators) act very carefully within the limits,”
“We do believe that in things of this nature, a greater clarity will be helpful and prevent multiple regulators on a given field. I think having multiple regulators won’t be healthy for either the customer or the industry,” said the insurance regulator.
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ICICI Pru unveils latest Ulip product

ICICI Prudential Life Insurance has launched ICICI Pru Ace, which is one of the cheapest unit-linked insurance policies available in the market. The product does not have a premium allocation charge, which gets deducted from the premium in case of other Ulips.

A zero premium allocation charge means that ICICI Pru Life Ace will invest a larger portion of premium in the market. The new Ulip charges a policy administration charge of Rs. 60 per month, apart from the humanity charges. It has a fund management charge ranging between 0.75 percent and 1.35 percent of the fund value. The Ulip offers two investment options: Fixed allocation and trigger portfolio strategy, in which a 15(%) percent downhill or uphill movement will trigger the portfolio allocation.


To promote investors to stick through the term, the ULIP also offers fidelity additions after the 10th year, which will be disbursed every five years. The loyalty additions would be equal to 2.5(%) percent of the fund value. Another beautiful feature is that the insurer will contribute two percent of the premium to your installment after the sixth year. Investors need to pay a minimum regular premium of Rs. 18,000 and the term is 10-30 years.

Ulips row: Life insurers respond to Sebi notice

Some of the major life insurance companies have replied to the market regulator Sebi's show-cause notice issued to them on the Ulips issue while others are in the method of submitting their replies, officials from different companies have said.

Sebi had issued show-cause notices to a host of life insurers asking them to give details as to why they had not taken its permission before launching Ulips-- unit-linked insurance products, the return of which are linked to stock market situation as part of the premium is invested in stock markets.
Officials from companies such as Max New York Life, Bharti AXA Insurance and HDFC Standard Life Insurance amongst others said they have responded to the Sebi notice.
Bajaj Allianz Life Insurance is also understood to have submitted its reply, a source said, adding other insurance companies are likely to submit their replies very soon.
While none would disclose details, the life insurers are understood to have taken a stand that Ulips come under the purview of Irda, the industry regulator, and hence, they do not need Sebi permission for their launch.
Sebi, in its notice, had argued that the configuration of Ulips is similar to that of mutual funds and in the nature of collective investment schemes and hence, falls under its purview.
Ulips are those insurance products where a part of the premium goes towards providing life-cover and the funds are mainly invested in stocks.

Irda hits reverse at Sebi on Ulips

The Insurance Regulatory and Development Authority (Irda) has said the Securities and Exchange Board of India’s (Sebi) take in to insurance companies on unit-linked insurance plans (Ulips) sold by them was “misconceived on abstract, legal and structural grounds”.
Irda’s letter to the market regulator comes after the latter’s show cause notice to insurance companies last month, asking why they had not taken Sebi’s approval to sell Ulips.
In a letter to Sebi Chairman C B Bhave last week, Irda’s Deputy Director (Life) Sudipta Bhattachaya pointed out that the regulatory set up in India, which had legal backing, was clearly demarcated.
In its letter, the insurance regulator said the road map for regulation of Ulips by Irda was “well laid down, and settled,” and there was “no merit” in the conflict that insurers must obtain a certificate of registration from the Sebi for selling these products.
Following the Sebi show cause notice on January 15, life insurers had approached Irda. “While there is a factor of market exposure, the insurance component is much higher. The rules are reasonably clear and investor interest is clearly protected,” said the CEO of one of the largest Life Insurance Companies. For some private players, Ulips account for close to 90 per cent of new business.
Application of mutual fund rules to Ulips would mean that companies will not be able to pass on the commission to customers, since entry loads have been banned for mutual funds. In addition, the investment and accounting rules are different for Ulips and mutual funds.
Sources close to the development said Irda’s letter has pointed out the legal requirements that limited Sebi’s jurisdiction to securities and securities related transaction.” What constitutes a security has been defined in the Securities Contract (Regulations) Act, 1956 and insurance contracts are not regulated under these securities laws,” it said.
Further, Irda said that structurally, Ulips are distinct from mutual funds and pointed out that the minimum capital requirement for an insurance company was Rs 100 crore and also maintain around 3 per cent as solvency capital. In contrast, an asset management company “is required to manage thousands of crores of assets with just Rs 10 crore”.
“Certain similarities in the features of various products issued in the financial world would not necessarily imply regulatory overlap,” Irda added.
Asked to comment, a senior Sebi official said: “ULIPs are mix investment products with Insurance cover and since it involves management of funds, Sebi has a role in protecting the interests of investors... Ulips are fit for regulation under Sebi’s mutual fund regulations.”

Kotak Life Insurance launches Three new ULIPs

Kotak Mahindra Old Mutual Life Insurance Limited (Kotak Life Insurance) has launched three new ULIPs – Kotak Super Advantage, Kotak Guaranteed Pension Builder and Kotak Platinum Edge.

Kotak Super Advantage is a plan that addresses the financial needs of investors while building long-term savings for their future.

Kotak Super Advantage Plan invests 100% of premiums from second year gone and provides guaranteed returns of up to 280% per cent of the first year premium on maturity. Further attractive the return is addition of 3% per cent of average Fund Value of the last three policy years on maturity.

Kotak Guaranteed Pension Builder is a Retirement Plan that enables systematic savings for retirement. The plan offers Capital Guarantee, a feature that allows equity disclosure while minimizing the associated risk as the total premium paid by the investor is guaranteed at maturity.

Kotak Guaranteed Pension Builder plan offers safety of Pension Guarantee Fund, a fund that invests in equity or debt depending upon the market condition and delivers returns. Limited period payment option in this plan allows suitable payment periods of 3 and 5 years with longer policy terms.

Kotak Platinum Edge is a power-packed plan that enables investors to customize the plan as per their requirements.

Kotak Platinum Edge plan allows the investor to choose the level of protection they require. Limited premium payment option and a choice of nine funds allow the desired flexibility and convenience.
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LIC looks to wash up Rs 18,000 cr from new Ulip plan

The country’s largest life insurer, Life Insurance Corporation of India (LIC), is aiming to collect Rs 18,000 crore through its new close-ended unit linked insurance plan (Ulip) — its highest target since it launched the Jeevan Astha scheme in December 2008.

Hoping to cash in on the demand for tax-saving options ahead of the close of the financial year, LIC has launched Wealth Plus, an ULIP guaranteeing returns equal to the highest net asset value (NAV) during seven years, while the policy term is eight years. It is available in two premium payment options — a term of three years and single premium.
“This product is available for a limited period and we will close it after the target is met,” said LIC Managing Director DK Mehrotra.
The life insurer had set itself a motivated target of Rs 25,000 crore for its close-ended scheme Jeevan Astha launched last year. However, collections fell short of opportunity, as LIC only managed to collect Rs 10,000 crore.
Insurance companies do around 40 per cent of their total annual business in the last three months of a financial year. “We were waiting for the stock market to correct. Keeping in view the unpredictability in the market, we have launched this product which guarantees the highest NAV of seven years,” added Mehrotra.
Life Insurance Companies have revised their existing product structures and lowered charges from January 1, as mandated by the insurance regulator. They have also come up with NAV-guaranteed products in the current financial year.
“With LIC coming up with such a product, many insurance companies will see a refuse in the estimated new business,” said a senior executive of a life insurance company.
Wealth Plus is a close-ended product with minimum age of entry being 10 years and the maximum 65 years. While the policy term is eight years, the premium paying term of the policy is three years. While the minimum premium is Rs 20,000, there is no cap on the maximum premium. Premium allocation charge for single premium up to Rs 4 lakh is 5 per cent, and above Rs 4 lakh, it is 4.5 per cent. For regular premium, allocation charges are 12 per cent for premium from Rs 20,000 to Rs 2 lakh, and thereafter it is 2.5 per cent. The fund management charge is 1 per cent, which is capped at 1.25 per cent by the regulator.
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LIC of India -Vizag eyes 37 growths in new premium income

The Visakhapatnam distribution of Life Insurance Corporation of India (LIC) expects a 37 growth in new premium set in the current financial year as compared with last financial.
The division collected Rs 290 crore new premiums in 2007-08 and this year it is aiming for Rs 400 crore. Up to January, it collected Rs 240 crore. “We are convinced of mobilizing another Rs 160 crore during February and March,” D Nageswara Rao, senior divisional manager, LIC Visakhapatnam, told media persons here on Tuesday.
He said, LIC on Tuesday introduced its new ULIP Plan — Wealth Plus in Vizag zone. “We expect the new policy to take Rs 60 crore new premium by the end of March,”
During the last financial year, the Vizag division collected Rs 1,300 crore new premiums and is targeting Rs 1,600 crore this year. Till January, this amount stands at Rs 1,000 crore, he added.
The corporation generates only 3(%) per cent of its total business through another channels, which it aims to make it to 10(%) per cent by 2012.
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LIC of India launches 'Wealth Plus' plan

Looking to the demands of guaranteed benefits and unit linked policies depends on share market LIC has decided to begin 'Wealth Plus' close-ended plan. Zonal Manager GB Pandey informed media that this plan has guaranteed fund value. Other features of the plan are -
The plan would open on February 9 for a maximum period of three months. It is a ULIP with term for 8 years provided that life covers also. At the end of policy term and the policy is in full power, payment of fund value will be made based on the highest NAV over the first 7 years of the policy or the NAV as applicable at the end of the policy terms whichever is higher.
Guarantee will be applicable only for payment to be made at the end of the policy terms - 8 years. There will be a complete life cover for 2 years after finishing point of policy term. Premium payment under this plan is limited to single or 3 years. With this plan accident benefit facility is also available. In case of death of policy holder during policy term and the policy is in full force, the nominee shall get the sum assured under the basic plan along with the policyholders fund value.
In case of death after the policy term but before the failing of the extended life cover period, the nominee will receive the sum assured under the basic plan.
Lock in period for this policy is 3 years and it can be surrendered only during the policy terms after achievement of third year. The minimum premium is Rs 20000 for three years term policy and there is no limit on maximum premium.
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Bajaj Allianz's new Ulip to offer 170% proceeds in 10 yrs

Bajaj Allianz Life Insurance has announced the launch of a unit-linked plan that offers a minimum guarantee of 170% at development. This Ulip with guaranteed returns will be offered for customers from January 11. This is a single-premium life insurance policy, known as Shield Plus, and the term is fixed at 10 years and the minimum premium requirement is Rs 25,000.

The returns, which work to around 5.45% on this product, could be compared to that of a bank or a post office deposit. But since the product has a justice experience, there is a strong opportunity of out performance over the long term, say experts.

The sum assured could be equivalent to 1.1 times or five times of the single premium paid, which takes care of the safety element of the ULIP. However, the insurer has capped the maximum sum assured at 1.1 times the single premium for persons in the age group of 56-65 years.

The product offers a choice of six funds but only Shield plus Fund offers minimum guaranteed unit price at maturity.

ING Life India launches New Plans

ING Life India, part of ING Group, has announced the launch of five new customer centric unit linked insurance products including savings for Retirement Plan and Children Plan education and investments.
The new products are ING New Creating Star, ING New Prime Life, ING Freedom Plan, ING Future Perfect and ING New Golden Life helping customers to maximise their returns. The company also launched two new funds.
Ashwin B, chief operating officer, ING Life India, told media persons here that in addition to the funds, two pre-defined investment strategies for customers were also announced, ING Prudent and ING Enhancer.
The company has completely revamped its ULIPs portfolio for enhanced customer benefits.
He pointed out that the ULIPs will find it helpful as the yield will go up due to reduced charges on the products and important loyalty additions to their funds upto 275 percent. The products offer the suppleness to customers to surrender, if they require funds in an emergency, without paying any submit charges after five years.

Max New York Life launches Four ULIP Plans

Private life insurer Max New York Life Insurance on Monday said it has updated its Unit Linked Insurance Plans (ULIP) portfolio by launching four products
.
The new products are Max New York Life Fortune Builder, Max New York Life Unit Builder Plus, Smart Invest Pension Super and Smart Express. All the four products are in fulfillment with the IRDA's regulation of capping of charge, the company said in a statement.

According to the standard all unit-linked products will have a standard charge organization not exceeding three per cent for ULIPs up to 10-year term and 2.25 per cent for ULIPs over 10-year term.

"In our new ULIP Plans, we have paid importance on the protection element and also introduced guaranteed reliability bonuses which clearly indicates on Life Insurance being viewed as a long-term protection product," Max New York Life Corporate Vice-President and head product management Manik Nangia said.

The elimination of humanity and morbidity charges from the cap has ensured that there will be no compromise on life cover, he said.

Max New York Life is a joint venture between Max India and New York Life, a Fortune 100 company.

Aviva Life launches Nine ULIPs Plan

Complying with the recent changes in the overall charges of unit-linked insurance plans Aviva Life Insurance today launched nine new unit-linked plans. The new variety of products includes child, pension and savings products with 14 new fund options cover savings, retirement, and protection and investment needs of all customers.

The company also introduced thematic funds - transportation fund and PSU fund across select products.
As per the new norms arranged by the regulator, all unit-linked products have a standard charge structure not exceeding 3 per cent for Ulips up to 10 year term and 2.25 per cent for Ulips over 10 year term. Within this, the fund management charges will be between 1 per cent - 1.35 per cent.

TR Ramachandran, CEO and MD, Aviva India said: “The new products are another positive step towards creation Ulips even more transparent and favorable for customers. With a cap on overall charges, the customers stand to benefit in the form of higher returns on their investment.”

The Infrastructure and PSU funds plan to provide capital appreciation by investing in equity or equity related instruments. For infrastructure funds the investments in equity will be in the range of 60 per cent – 100 per cent and in debt securities and money market in the range of 0 per cent – 40 per cent.

The fund will focus on large cap and mid-cap companies unavailable either directly or indirectly in the infrastructure growth of the Indian economy. The sectors would include construction, metals, building materials, energy, power, chemicals, and engineering among others. The PSU fund will invest in companies where the central and state governments have a majority shareholding of more than 50% or the management control is vested with the central or state government.

Aviva manages assets under management of Rs 6,170 crore.
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