LIC continues to ride on Ulips

All 3 Ulips launched post-regulation see robust growth, outperform private peers.

All three unit-linked plans (Ulips) launched by Life Insurance Corporation (LIC) since September have shown robust growth. That has given the company an edge over competitors, which, in sharp contrast, have seen a dip in their Ulips portfolio since the Insurance Regulatory and Development Authority came out with stricter regulation governing these instruments six months ago.
“The Endowment Plus is the largest selling policy this year. Even the recently launched guaranteed NAV plan, Samridhi Plus, has been received very well,” the official said. “In the first 20 days, we have already sold more than 75,000 policies under Samridhi Plus and collected Rs300 crore.”
In the new guidelines, which took effect from September 1, Irda increased the lock-in period for Ulips from the existing three years to five years. And, all Ulips other than pension and annuity products were to provide a minimum mortality cover or health cover. This has resulted in a sharp drop in sales of Ulips, which had constituted more than 90 per cent of the sales of life insurance companies.
Yet, while private companies are still trying to find suitable answers under the new regime, LIC seems a big gainer. According to Irda data, during the first 10 months of 2010-11, LIC collected Rs67,135 crore by selling new policies, up 37 per cent compared to the Rs49,019 crore collected in the corresponding period a year before.
“All products under the new guidelines have been performing very well and this shows if a proper product can be developed, sales will not be an issue,” said an LIC official.
Private life insurance companies, on the other hand, have seen sluggish growth in the financial year so far. In the first 10 months, they collected Rs27,865 crore by selling new policies, a modest 5.8 per cent increase as against Rs26,328 crore collected a year before.
“The product mix has changed quite significantly. Now, 50 per cent of our business is coming from traditional plans. Ulip sale has been on a decline and we are finding no takers for our pension plans,” said a top official of a Delhi-based life insurance company.
“Volumes have come down, as we had to re-approve all our products under the new guidelines, which affected our sales,” said a senior official from another company.