Ulip sales have taken a hit since 2010
Mumbai, June 12:  
Though mutual funds have been able to attract inflows from retail investors due to the rally in the equity markets, life insurers have had no such luck in unit-linked insurance plans (Ulips).
New products

Insurers are struggling to attract premium flows as they are facing problems related to selling new products and low commissions on Ulips.
Ulip sales have taken a hit since 2010, when the insurance regulator revamped norms by increasing the lock-in period and lowering commissions on their sales.
Ulip sales, which earlier constituted 90 per cent of private life insurers’ overall product portfolio, has declined significantly to less than 10 per cent.
Amitabh Chaudhry, MD and CEO of HDFC Life insurance, said, “At present, most insurers are selling Ulips at a loss, as the cost of acquisition of customers is very high. So, most insurers have switched to selling participating products.” However, HDFC Life plans to launch a new Ulip product on the online platform, by eliminating distribution cost and stripping off all charges except fund management charge of 1.35 per cent and mortality charge.
“Every insurance company is charging the maximum that is allowed by the regulator. With an online Ulip plan, the overall charges will be cheaper than that of a mutual fund,” said Chaudhry.
The move to sell online Ulip comes at a time when most agents have stopped selling these products due to lower commissions.
Social media

Chaudhry said HDFC life plans to use its distribution reach and social media platform to sell the product.
The Insurance Regulatory and Development Authority had ordered the discontinuation of sale of life insurance products that do not comply with its revised guidelinesfrom January 1. As a result, all life insurance companies had to re-work their product portfolios.
Interestingly, the country’s largest life insurer, the Life Insurance Corporation of India (LIC), is not selling a single Ulip product as part of its new product portfolio.
Surrender of Ulips

However, a senior LIC official said with the expectation of a longer-term bull market, the insurer is considering a regular premium Ulip plan.
The life insurance industry has also seen a surge in the surrender of  Ulips.
Pankaj Razdan, MD and CEO of Birla Sun Life Insurance, said, “There has been a rise in surrender (of Ulips) in the industry (to cash in on the returns due to the market rally) in the last couple of months. We need to create more awareness as Ulips are very good long-term products in the new structure.”

(This article was published on June 12, 2014) .