Market volatility fails to dampen sale of Ulips

The growth in the first year premium (FYP), particularly in unit-linked insurance policies (Ulips), of life insurance players, has been largely unaffected by the unprecedented stock market volatility in the last quarter.

Sources at the Life Insurance Corporation indicated that the market conditions have not impacted the sale of Ulip products and the business growth was absolutely in sync with expectations.

"The proportion of linked business to non-linked business has remained the same in the last quarter," the sources added, attributing this to the 3 years lock-in period associated with LIC's unit-linked products.

According to Gary R Bannett, MD and CEO of Max New York Life Insurance Company, the market volatility would have no impact on Ulip products.

"In fact, people have been shifting from the fixed interest schemes to equity," he added. Around 50 per cent of the company's total premium income constitutes Ulip and the proportion increases to around 80 per cent when it comes to FYP.

The company has registered a growth of 60 per cent in total premium income to around Rs 5,400 crore (Rs 54 billion) in the fiscal ended March 2008 against Rs 3,055 crore (Rs 30.55 billion) in the corresponding period last year. This includes FYP of around Rs 3500 crore (Rs 35 billion), which grew by over 70 per cent

in the last fiscal.

"We have been registering a year-on-year growth of 99 per cent in the last six months," said Gary R Bannett, MD and CEO of Max New York Life Insurance Company.

Similarly S Bharat, Senior Vice President of Tata AIG Life Insurance rubbished possibilities of any impact since most of the Ulips are long-term investments. "I don't see any effect as far as our products are concerned," he added.

However, this has not been the case with the largest private life insurance player SBI Life.

"The Ulip products have suffered due to the market conditions as the customers have been following a wait-and-watch policy. During January-March, the FYP growth from the Ulip products has been 60 per cent," said US Roy, MD and CEO, SBI Life Insurance.

SBI Life, the largest private life insurance player in the country, registered a growth of around 90-95 per cent in the quarter ended March compared with 170 per cent a year ago. The total premium income would be around Rs 5,800 crore (Rs 58 billion).

"Our premium income was Rs 3000 crore (Rs 30 billion) last year and our growth this year would be close to 100 per cent," he added. The FYP would be around Rs 5000 crore (Rs 50 billion) against Rs 2500 crore (Rs 25 billion) reported a year ago.

"The growth expectation has been affected in the last quarter," he admitted.