CEOs of life insurance companies are turning increasingly sceptical of the huge sales being racked up by unit-linked insurance plans. Should the equity markets fall, there could be a sales problem for the insurers, they fear.
Launching Tata AIG's pure endowment product with guaranteed returns, ShubhLife, Leslie William Forrest, director-agency, said: "It is important that investors take a balanced approach when buying insurance products."
He advocated that it would not be right on their part to risk everything on the stock market or on interest rates.
Sam Ghosh, CEO Bajaj Allianz Life, said, "My main worry is all our agents are selling ULIP. What happens when markets change? Will they know how to sell traditional policies as the customer realises the risk factor has been passed onto him."
Contrary to many other private insurance companies, ULIP accounts for just 22 per cent of total policy sales at Tata AIG Life, compared with 55-75 per cent for other players.
ShubhLife is an endowment plan which offers guaranteed additions of three per cent every two years for the first half term of the policy.
That means a 30-year old individual who has bought a Rs 250,000, 10-year endowment cover, and paying Rs 26,850 annually, would get a guaranteed addition of Rs 22,500. Many policyholders have been asking for simply products with guaranteed returns, said Joydeep K Roy, director-alternate channels, Tata AIG Life.
"The downside investment risks are managed by the guaranteed additional returns, while there is no cap on the upside as 90 per cent of the investment profits go to the policyholder in the form of bonus," added Roy.
Tata AIG Life on the other hand, has a balanced sale of various different policies. "If you (agent) push one product only, naturally that will see maximum sales," said Forrest.
He pointed that the risk to return ratio be supplemented by policies that offer guarantees.
Meanwhile, Forrest says insurance products are today being bought and not just sold. What's more, insurance is being seen by customers for risk mitigation, savings, and fufilling retirement needs, rather than for tax rebates alone.
"In the last 5 years, we have seen 15 per cent of savings move into the insurance sector. This is as policyholders see risk products as a means of planning for good times and bad," he said.
