Buoyancy in the equity market and the soft interest rate regime have prompted insurers like the Life Insurance Corporation of India, ICICI Prudential, Birla Sunlife and Aviva Life Insurance to focus on unit-linked products that provide life cover as well as tax benefits and capital appreciation to investors.
OM Kotak Life also launched a unit-linked policy recently while HDFC Standard Life is planning to do so shortly, industry sources said in New Delhi on Tuesday.
The unit-linked policies are fast catching the fancy of investors in the wake of falling yields on government securities to lower than 6 per cent that forced many insurers to promise a lower assured return and bonus.
LIC, for instance, plans to push up the sale of its unit-linked products Bima Plus to 40,000 policies for a premium income of Rs 50 crore (Rs 500 million) this fiscal.
"Unit-linked policies are becoming attractive. We are hand-picking agents to sell Bima Plus, as it requires additional skills," LIC chairman S B Mathur told PTI.
LIC has made huge gains on its equity and debt portfolio in the last couple of months. This would, in turn, push up the net asset value of its unit-linked product.
Aviva Life Insurance, which started operations only last year, plans more unit-linked products in the coming years, its CEO Stuart Purdy said.
"The NAV of the unit-linked fund has appreciated by 37.32 per cent during the last 12 months ending August 31," Vivek Khanna, marketing director, Aviva, said.
The unit-linked products are like mutual funds with the value of investment appreciating with the gilt and equity prices. They also offer life cover as well as tax rebates as provided under Section 88C of the Income Tax Act.
Mutual funds, in contrast, offer capital appreciation and some tax benefit on dividend income.
The failure of some of the mutual funds including US-64 to offer significant gain in the past years have to some extent shaken the confidence of investors.
Investors are now finding the unit-linked scheme of insurance companies as a more secured investment option.
Viewing this trend, some of the mutual funds are now tying up with insurers to offer value-added services to their investors.
JM Mutual Fund, for instance, tied up with LIC to offer insurance cover to the investors of its newly launched monthly income plan (JM MIP).
