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Are you relieved that the uncertainty that hung around the Ulip business has ended now?
It is nice that the ruling has come and the uncertainty cleared. What is now required is a little awareness among the people who are investing in unit-linked insurance products (Ulips). Now, with Irda taking control of Ulips, very clear and very transparent guidelines are expected to come forth so that we are able to structure a better product for customers and it is definitely going to be very healthy for the insurance industry in the long run.
For the short few months that the uncertainty did prevail, did you see any pressure on Ulip sales from customers as well as distributors?
There was some sort of uncertainty in the market, especially in the minds of investors because they wanted to know what the future would be for them who have invested their money in Ulips. Secondly, distributors were also 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 that LIC's performance was adversely impacted. During that period, we launched Wealth Plus on a Ulip platform. It has done very well. So it shows that people were still interested in buying Ulips provided they know that the money is safe, the money has been put into transparent schemes. So there was no serious impact on us.
How much is the proportion of Ulips in the total new business premium collections for LIC in particular?
As on March, we had a ratio of around 65:35, 65 was coming from Ulips and 35 from conventional products. At one point of time, it was pretty high, almost 80%, because when the entire industry was riding the wave of the capital market and the capital market was moving, people were selling Ulips.
But subsequently, we took away the conscious decision that as a prudent insurer, we have to shift back to conventional products because that is where the basis of insurance lies. So today, the share of Ulips is down to 60%. Also, Ulips are products which are in demand. We like to keep products in that space, but definitely, we are focusing more on conventional products.
What is your sense of the draft direct tax code (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 in particular?
Our apprehensions are that Ulips may not be covered under the EEE (exempt-exempt-exempt) system. The insurer has to look into the core benefit which he is given, that is the risk coverage, and 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 investors at some point of time are able to capture some profit out of that. If we are giving the exemption in pension products, in conventional products and in term insurance, that will be of great help to investors.
Source: http://economictimes.indiatimes.com/
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