LIC Decides to go-slow on Ulips, Focus more on Traditional Offerings

A new unit-linked insurance plan (Ulip) from Life Insurance Corporation of India (LIC) may take some more time, While the insurer's one existing Ulip has collected premiums of around Rs 200 crore, it has consciously decided to go at a slower pace in this segment.

VK Sharma, Chairman, LIC said that while their Ulip product performed well, their focus will be on traditional products. "At the end of the day, our policyholder interest is supreme and their returns should not be impacted," he said.In 2015, LIC had launched a Ulip product after a hiatus of almost two years. This was after the new norms for traditional products kicked in from January 1, 2014 that made changes in the product design and structures. Due to this, life insurance companies had to stop selling existing products and introduce new ones.

During this period, LIC also had to withdraw its products from the market that included their market-linked Ulip plan as well.

Traditional products constitute almost 90% of the insurer's product portfolio while Ulips constitute the rest. Several private life insurers, which are primarily bank-promoted, gave up to 50-60% of business from the Ulip segment.

It is to be noted that commission structures for traditional products are much higher than that of Ulips. Due to this, life insurance agents are also not very keen to sell these products. In September 2010 new regulations had mandated the minimum lock-in term for Ulips to be five years compared to three years earlier.

Product structures including NAV disclsoures were also made very transparent in order to curb misselling of these products. Post this, insurers heavily reduced their Ulip portfolio and shifted their focus to traditional products. In terms of features and charges, insurers agree that Ulips are more transparent than traditional products.