The saying that public memory is short lived is aptly reflected in a big comeback of Unit link Insurance Policies (UlIP) in the insurance sector.
The sector is nowadays witnessing an unprecedented surge in the sale of these policies which were responsible for huge losses to the customers after the stock market meltdown of 2008.
The UlIPs are the insurance policies in which partial or a major part of the premium provided by the customer is invested in the stock market. With the opening up of the insurance sector in 2001 and advent of private insurance companies, these products were preferred by the customers and agents because of flexibility and market based returns.
With the meltdown of stock market in 2008, the customers and the companies began realising the problem with these products as their assets witnessed a huge erosion with decline of share market.
The scenes where the infuriated customers whose savings were lost in these policies arguing with the officials were a common feature across the country during that phase. Interestingly with the magnificent rally of the stock market recently these policies are back in bang.
These policies have pushed the dormant sales of insurance companies and the agents and companies are smiling again. However this rally is not going down well with those who know something about the stock market.
Arpit Jain a businessman said that the comeback of UlIPs is not a good sign for both the common people and the insurance industry.
“The agents are showing short term gains in the policies purchased in last six months during which the stock market rallied and are fooling the unsuspecting customers,” he said. It is worth mentioning here that the CEO of a leading private life insurance company, Reliance life Anup Rau has recently expressed his skepticism on the comeback of these policies.
He said that after the 2008 meltdown, almost all companies swore not to sell UlIP products and stick to long term traditional products, however, with markets showing healthy gains, this trend reversed.
Rau added that unless these policies are bought with a long term horizon, there will be an erosion in the assetswhen the cycle turns and which will hurt the industry.The Regional Manager of Bajaj Allianz life Insurance Company (BAlIC) Puneet Trivedi said that under the present regulator regime, the possibilities of mis selling are very less.
He added the companies now have adequate checks and balances and UlIP products now are designed in such a manner that the customers would actually gain from these policies. Trivedi added that these policies should be purchased with a long term perspective.