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.
Wednesday, November 24, 2010
Thursday, October 28, 2010
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.
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.
Wednesday, October 27, 2010
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.
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.
Tuesday, October 26, 2010
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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Life Insurance
"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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Life Insurance
Wednesday, October 20, 2010
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.
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.
Monday, October 18, 2010
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.
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.
Wednesday, October 13, 2010
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.
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.
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