ULIPs stay hot despite market slide

MUMBAI: New insurance buyers are continuing to buy equity-linked schemes despite a slump in the markets. Much against their initial expectations, there has been no large-scale switching from equity to fixed income funds by unit-linked policyholders.

Of the Rs 113-crore new business premium generated by ICICI Bank, 85% went into the company’s Maximiser scheme which invests more of the funds into equity, and 12% found its way to balanced funds. Only 3% of sales were in fixed income and money market schemes.

Interestingly, even those who switched opted for investments towards equity schemes rather than move away from it. Of the Rs 44-crore that switched, 79% flowed into the Maximiser scheme.

Said Shikha Sharma, MD, ICICI Prudential Life Insurance: “Policyholders do not check NAVs on a daily basis and we do not advise them to use that approach.”

She further points out that the company advises customers not to react to market swings and stay invested as it’s impossible for an investor to time the market.

Bajaj Allianz Life Insurance has seen over 10% of its investments shift away from equity. This amount to nearly 10% of the company’s portfolio, but the switch is concentrated largely in the portfolio of high net-worth customers. “

Most of the regular income policyholders have opted to stay invested in equities,” said Sam Ghosh, managing director, Bajaj Allianz, adding that the shift was lower than what he had initially expected.

Birla Sun Life Insurance has had a similar experience. According to an official, the company’s Enhancer fund, which invests most of the its funds in equity, continues to be the preferred option for investors.

Rather than being worried about the correction, the company sees it as an opportunity to highlight its risk management skills while investing in equity. “We believe that this correction is a good reality check and will be healthy for long-term trend in the market.

BSLI has been recommending and following a very cautious approach towards building equity position in the volatile and presumably over-valued market. We have always stressed on value-buying with prudent approach even in the rising market situation,” said Anil Jhala, CFO, Birla Sun Life.
“We have not received many requests from customers to switch from growth fund, which invests 30-85% in equity to secure fund, which has a maximum equity component of 20%,” said Vivek Khanna, director marketing, Aviva India. He added there is no difference in sales trends after the crash and the company sees the correction as an investment opportunity with the market expected to rise in the long run.

“The advantage ULIPs have is they are long-term investment products as opposed to other products, which are short-term in nature. The market fluctuations do not have an impact on long-term investments as these can be controlled for investors in the long run. Moreover, most people who purchase ULIP products are already aware of this,” he said further.