145;Ulip sales continue to be robust146;

So long as there was a bull run in the stock markets, life insurance companies had an easy time, selling market-linked Ulip plans.

So long as there was a bull run in the stock markets, life insurance companies had an easy time, selling market-linked Ulip plans. But with the markets tumbling since the beginning of this year, the sale of unit-linked policies has also been hit.

P. Nandagopal, chief executive officer, Reliance Life Insurance, in this interview with Suneeti Ahuja, insists that his company has managed to buck the trend.

8226;Ulip sales were riding piggyback on the bull run in the stock markets. How have sales been this year?

Almost 99 per cent of our business comes from Ulips. We have grown at a significant pace. Till September 30, we had clocked a growth of 126 per cent in business, which is much higher than the industry average. By the same date, the private sector insurers had grown by around 45 per cent.

8226;In the current market, life insurance companies are launching more traditional products than Ulips, something not seen during the last four years. Why?

Ulip and traditional plans are essentially two sides of the same coin. Therefore, one cannot say that Ulips are bad in these market conditions and traditional plans are good. Both have savings element in them that is invested in the market. In comparison with traditional plans, a Ulip does this in a more transparent manner and gives investors a chance to shift between funds. If you are a long-term investor, you need not worry because the volatility in the market will not continue forever. Ulips are good provided you stick to the policy throughout its term.

8226;Life Insurance Council is understood to be working on standardisation of Ulips. How will it benefit the customer?

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Standardisation means that similar features across products will be defined in such a manner that it will help a customer understand the product and differentiate among them. Life Insurance Council is not only working on standardisation of terminology but also on categorisation of certain charges. Charges will be defined and will largely bear the same name across products, which will help the customer in comparing products.

8226;According to IRDA8217;s Lapsation Report, the lapsation rate is higher for term plans than for others. Why?

A term plan is seen more as a cost while other plans are seen as investments. Generally, people feel that costs should be curbed in this kind of market. This is one of the reasons why people do not take life insurance through these policies seriously. They expect to get something back while they are alive.

8226;In the wake of the recent terror attacks, do you think life insurers will now look at standalone terrorism insurance cover?

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I don8217;t think so. Maybe it might happen in the non-life industry. But for the life insurance industry it is a very insignificant percentage in the overall risk categories that might cause death. We have bigger killers in this country like diabetes, AIDS, cancer, malaria, and so on.

8226;The IRDA chairman recently warned of asset-liability mismatch happening in the life insurance space.

Asset-liability mismatch will happen more for companies that offer capital-guaranteed products 8212; those that have pension and traditional plans. It will not arise in products that are marked to market, as unit-linked products are. Mismatch might not cause a serious solvency problem, but it does cause financial stress.

8226;What new plans are you working on?

We will introduce more plans in the health and the pension segment to cater to the diverse needs of customers.

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8226;Do you have any specific plans for products that will help customers make the best of the current market conditions?

For policies of over 10-15 years, the current market conditions are not very relevant. However, we have a variety of life insurance plans that cater to all kinds of risk appetites and financial needs. We have plans where there are certain built-in guarantees that reduce market risk. If customers prefer these plans because of their low risk appetite, they are most welcome to invest in them. For customers who see a great opportunity to enter at the current low levels of the market, we do have unit-linked plans.

8226;What would your advice to customers be?

Customers should view life insurance as an essential part of long-term financial planning. It can provide against several risks, such as death, destitution, disability and disease. These risks are long-term in nature, so the coverage must also be for the long term. Providing for long-term risk through short term coverages may expose customers to unacceptable risks and the cost of coverage could also be high. If customers choose life insurance plans carefully and invest in them for the long term, the benefits will be commensurate with the cost of insurance.