As Ulip sales slacken, traditional products back in favour

Written by Sitanshu Swain | Updated: Dec 6 2011, 05:30am hrs
While buying an insurance policy, a customer should focus on protection and not investment, says AK Dasgupta, managing director of Life Insurance Corporation of India. In an interview with FE's Sitanshu Swain, he says that there's been a revival in childrens products and the state insurer is focusing on both Ulips and traditional products for growth. Edited excerpts:

What kind of growth are you seeing after the Insurance Regulatory and Development Authority (Irda) came out with the new guidelines on Ulips

The insurance regulator introduced a lot of changes in the last one year. Most of these changes were structural in nature. At the moment, the sale of unit-linked insurance plans (Ulips) has fallen slightly. But overall, our market share has increased. The growth in the non-Ulip segment is on the rise. By the year end, I believe that the ratio between Ulip and non-Ulip products would be around 60:40.

What kind of changes are you seeing in the policyholders perspective of insurance products after the new regulations came into effect

We are seeing a revival of interest in our products. While children's products have again become popular, products like Jeevan Saral will be back shortly. Some other products that may hit the market soon include Jeevan Tarang and Jeevan Anand. Some of the above-mentioned products have the money-back feature attached to them, while others have a pension component. But they are all tax-free products and offer good interest rates. They not only provide insurance income, but also investment income. So, there is a change of flavour in the market.

What will be your focus this year

We are always telling people that their focus should be on insurance and not investment. Today, banks are offering a 9% interest rate. We have policies where we offer more than or at least up to that level, that too for a longer period. There has been a decent growth in non-Ulip products in the current market scenario, unlike Ulips, which move both ways.

What are the new products that LIC is looking to launch

We have the Bima Bachat plan where we have a good guarantee on the product. When Ulips became a craze, these products got sidelined. But now, with the growth of Ulips slackening, these products are back in favour. There are a lot of people who are looking for returns; others want money for investment. Today, more and more people are going for such products. Sometimes, some products are able to offer good returns and Bima Bachat was one such product.

With the volatility in the stock markets, how are you seeing your market-linked products

We have got a mix of growth, guaranteed and balanced products. Earlier, we used to see a lot of people who entered the stock market in the short term and, then, went away. But Irda was against it. Hence, it said that making money in the short run will not come back as there is no reason to garner money in the short term.

And those who want to be a part of the growth story will continue to be there. Mostly, people want stability. Then, there are people who want short-term growth. While Bima Bachat is there for growth, people sometimes go for Ulips for fast growth in the short term. The stock market is currently at a low. So, you are entering at a lower stage and will end up at a higher stage. We are focusing on both Ulips and traditional products. Our Endowment Plus is selling very well and Bima Bachat is doing well too.

How are you looking at the pension market and do you have plans to launch new pension products

We will have to. If you see the interest income increasing or decreasing, we will have to change ourselves accordingly. We recently launched Jeevan Astha and Wealth Plus. Both products are runaway hits. We have quite a substantial amount of offering in the Ulip segment. Six month is too long a period. It is the right time for those who are slightly hesitant in buying Ulips.

Are you also looking at increasing your agent headcount

Yes, we want to add more agents. Micro-insurance is doing well and is growing at 36-37%. We have created a direct marketing channel, which is growing very significantly. Group insurance is also doing well. At this point, the growth may be moderate, but they've grown modestly during the last fiscal. This year, we are opening two divisional offices at Vardhaman and Begusarai. So far, we have opened more than 100 satellite offices.

How will you look at new opportunities of investment

LIC is always on a lookout for opportunities. Obviously, we are good investors at the lower end. I believe the upward trend will begin now and I do see the valuation attraction. It is not only a good opportunity for LIC alone, but also for investors.