IRDA control of ULIPs will benefit insurer and people: DK Mehrotra, LIC

What is your first reaction to the government ruling in favour of IRDA as the regulator for ULIP products? Are you relieved that the uncertainty that has hung around the ULIP business has ended now?

Actually it is nice that the ruling has come and the uncertainty which was in the market has been clarified and cleared. That would definitely go a long way in supporting the insurers and the investors in the ULIP products.

But today, what is required more is a little awareness among the people who are investing in the ULIP products. Now with the IRDA taking control of the ULIP products, definitely the insurer and the people would benefit. Very clear and very transparent guidelines would be coming forth so that we are able to structure the products, to give a better product to the customers. In the long run, it is definitely going to be very healthy for the insurance industry.

For the short few months that the uncertainty did prevail, did you see any pressures on the ULIP sales from customers as well as distributors?

There was some sort of uncertainty in the market, especially in the minds of the investors because they wanted to know what the future would be for them who have invested their money in the ULIPs.

Secondly, the distributors also were slightly confused and they wanted to know what could be the road forward. So for a certain amount of time, there was a slight impact but I would not say it very adversely impacted the performance of LIC as such. We will say this because during that period only, our product Wealth Plus - on a ULIP platform- was in the market and it has done very well. So it shows that people were still interested to buy ULIP provided they know that the money is safe, the money has been put into transparent schemes for which LIC is famous for. So we did not find very serious impact of that with us.

How much is the proportion of ULIPs in the total new business premium collections for LIC in particular?

If I say that as on March, we had a ratio of about 65:35. 65 was coming from ULIP and 35 was coming from the conventional. At one point of time, it was pretty high because the entire industry was riding the wave of the capital market and the capital market was moving and people were selling ULIPs.

We, however, also reached almost more than 80% of contribution from ULIPs. But subsequently, we took away the conscious decision that as a prudent insurer, we have to shift back to the conventional products because that is where the basis of insurance lies. So today, we say that it has come down to 65:35. Most ideal for us would be say 60:40.

ULIP also is a product which is in demand in the market. We like to keep products there in that space. But definitely, we are focussing more on conventional products because it gives a better return to the customers, it gives stability to the customers, gives stability to the insurers and also it gives some sort of a comfort to the intermediaries who get the commission, compensation on the longer period.

What is your sense of the new business premium growth for LIC and how much are you targeting this fiscal?

In March we grew at 33% in the premium income and this year, we are targeting somewhere around about 25% for the year. Going forward, with the new guidelines coming and our thrust on more on commissioned products, we should be able to maintain our expected growth of 25% in premium for the year.

What is your sense of the draft DTC guidelines? They have not exempted ULIPs from taxation as they have done for other products. Do you think that is going to affect this product in particular?

The draft guidelines have come and we have seen it. Most probably our apprehensions are that ULIPs may not be covered for the EEE system. Insurer has to look into the core benefit which he is given i.e., is the risk coverage. If my pure risk cover - whether it is through pure term insurance or pure endowment policy - is given an exemption, it will serve a lot of purpose.

ULIP does have some element where investor at some point of time is able to capture some profit out of that. If we are giving the exemption in pension products, in convention products, in term insurance, that will be of great help to the investors.