Indian insurance companies have recorded a huge rise in income from selling traditional endowment products, data from the sector regulator Insurance Regulatory and Development Authority (IRDA) shows, a sign that non-unit linked policies are making a comeback as stock market volatility and new regulations take the sheen off ULIPS.
According to data from the IRDA income from selling traditional investment products rose 90% in the 9 months to end December, 2013 compared with a drop of 80 % for ULIPS.
The overall first-year premium income during the period was down 6 %. Experts say market volatility & regulatory changes regarding ULIPS have fuelled the shift towards traditional plans.
In the traditional products category, norms require 50 % investment in government securities, 35 % in equities and other approved securities, and 15 % in infrastructure.
In comparison, investment allocation in ULIPS depends on a policyholder's risk appetite, with the product allowing 100 % investment in equities. ULIPS are similar to mutual funds and are sold as units.
The corpus in these products is mainly invested in the equities & debt. However, a change in rules, including a higher lock-in period of 5 years, has kept customers away from this once popular product.
Regulatory changes have also lowered agent's commission on ULIPS. While the commission from selling traditional products can go up to 35 %, that for a ULIPS is now about a fourth of that.
Unit-linked pension plan, which was the bone of contention between market regulator SEBI and IRDA in 2010, registered an 85 % decline in the previous fiscal. The product features have changed significantly since then, and there are not many takers for it under the new guidelines. The share of pension plans has fallen from 25 % before October 2010 to less than 1 % of the new business income now.
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