Insurers like Aegon Religare, HDFC Life unleash fee war to make Ulips attractive

NEW DELHI: There was a time when insurance companies were selling Ulips (Unit-linked Insurance Plan) with promises of high returns without explaining the charges to customers. Now, they are selling the insurance-cum-investment plans by tom-toming the very same charges that they kept under wraps earlier.

A new online Ulip launched by Aegon Religare Life Insurance has set a new benchmark by lowering the fund management charge to 1%. Last year, HDFC Life had launched its online Ulip Click2invest with an ultralow fund management charge of 1.35%. But, while Click2Invest has a uniform charge for all its funds, the iMaximize unit-linked insurance plan from Aegon Religare has differential charges for its three funds.

Investors in the Secure Fund of the iMaximize plan, which will invest in a mix of debt and equity, will pay only 1% a year as fund management charges.

For the Debt Fund, which will invest in debt securities, the charges are 1.1% while the Blue-chip Equity Fund will charge 1.35% a year.

“This is the lowest fund management charge in the industry. Even mutual funds charge 1.8-2.5% a year,“ says Yateesh Srivastava, COO of Aegon Religare Life Insurance.

The iMaximize plan also charges Rs 100 a month as policy administration charges.There is no policy administration charge in Click2Invest.Besides the fund management charges, these online Ulips also levy mortality charges for the life cover to the policyholder.

Though the fund management charges of these online Ulips are lower than what even the direct plans of mutual funds charge, rival companies are not enthused by the `charge war' triggered by HDFC Life and Aegon Religare Life Insurance.

“At some point, the competition will move from pricing to performance. Instead of focusing only on how much he is paying, the buyer will have to see how well his funds are doing,“ says Deepak Mittal, CEO and MD, Edelweiss Tokio Life Insurance.