Almost 50% of private insurers business comes from ULIPs

New age ULIPs, which offer better tax advantage than equity funds and better commission to agents is the bread and butter product for most private insurers.

IRDAI’s latest data on assets shows that of the total assets of Rs.7.73 lakh crore of private life insurers, ULIPs account for Rs.3.77 lakh crore or 49% of the total assets.

A senior official of a large insurance company told Cafemutual that ULIPs are more attractive for insurers given requirement of lower solvency margin and higher management fees, which translate into profits.  Another key advantage of ULIPs is mark to market valuation. As compared to the traditional policy, the investment risk is lower in case of ULIPs as investors bear loss if fund managers’ call goes wrong, he added.

Vignesh Shahane, CEO, IDBI Federal Life Insurance seconds his view and said that high ticket size in ULIPs  drive the topline for private insurers.

Meanwhile, LIC India recorded just 1% business from ULIPs. The state owned insurer has an AUM of Rs.34272 crore in ULIPs.

Overall, ULIPs accounts for 12% of the industry AUM with Rs.4.11 lakh crore as on March 2019.

Most of the industry’s assets were invested in traditional policies such as endowment, money back and whole life insurance policies. The traditional policies account for 66% of the total industry’s AUM. The AUM of life policies reached close to Rs.24 lakh crore. The AUM of these policies went up from Rs.21.37 lakh crore to Rs.23.47 lakh crore in FY 2018-19, a growth of 10%. Of the Rs.24 lakh crore, LIC India accounts for 87% or Rs.20.42 lakh crore.

Similarly, the AUM of pension and general annuity (including group policies) increased from Rs.6.74 lakh crore in FY 2017-18 to Rs.7.74 lakh crore in FY 2018-19. At 15%, this category was the fastest growing last financial year.

Overall, the life insurance industry has crossed AUM of Rs.35 lakh crore to reach Rs.35.33 lakh crore as on March 2019, shows the recent data published by IRDAI. The industry saw a growth of over 10.7% in the last one year i.e. from Rs.31 lakh crore in March 2018 to Rs.35 lakh crore in March 2019.

Of the total AUM, LIC India accounts for 78% of the total AUM of life insurance industry with assets of Rs.27.61 lakh crore. LIC India AUM grew 9.24% last fiscal. On the other hand, private life insurers managed over Rs.7 lakh crore assets last fiscal.

This growth is largely due to new business, consistent renewals and rise in stock market performance.