Despite unit-linked insurance policies (Ulips) coming under a cloud due to a slump in the equities market, several life insurance companies are still able to sell these products in a big way to investors.

Leading insurers including ICICI prudential, IDBI Fortis and Bharti Axa Life Insurance say that Ulips account for 80-90 per cent of their total business.

Unit-linked insurance policies have been a growth driver for life insurance companies during the past couple of years and have accounted for more than 80 per cent of the total new business premium earned during 2008-09, which rose to Rs 72,017 crore from April 2008 to February 2009.

Pranav Mishra, Senior vice-president & head (products), ICICI Prudential, said, “There is definitely a shift in customer preference but it is not between Ulips or traditional plans. Customers are now looking at safer investment options and guaranteed/assured return plans.” About 80-85 percent of total business for ICICI Prudential still comes from Ulips, said Mishra.

Many insurers say that Ulips are more popular as they are well structured and have a lot of flexibility. Sanjay Tripathy, executive vice-president & head (marketing), HDFC Standard Life, said, "Ulips continue to be the most popular products. This is because of the transparency these products offer. The customer has the choice of funds with a combination of asset classes and is aware of the charges that are made under the plan.”

Tripathy added that customers are now preferring risk cover or traditional plans. However, a widespread preference for traditional insurance plan is not seen.

He, however, admitted that even though the number of policies sold has increased, the average premium per policy has come down a bit.

Shyamal Saxena, chief distribution & marketing officer, Bharti AXA Life Insurance, said, “Customer demand for ULIPs is intact and we are still to witness any substantial shift towards traditional plans. Within the Ulip category, there has been some shift towards products offering a guarantee of some kind.”

Bharti AXA Life will be launching new products in the coming months. They will all be on the Ulip platform.

IDBI Fortis Life Insurance, which started operation a year ago, has seen a sharp increase in sales of return-guaranteed Ulips. Amish Tripathi, national head (marketing and product management), IDBI Fortis Life Insurance said, “Ulips are most definitely still selling. Over the past year, one has seen a shift in the consumer preference for guaranteed return products. We have seen the proportion of customers investing in guaranteed funds rise steadily. The proportion of premiums going to guaranteed return funds has risen from around 20 per cent in March 2008 to over 50 per cent today”.

However, a few companies such as LIC and SBI Life say that they have witnessed a change in customer focus towards traditional products. LIC said it would launch more traditional plans in the coming months.

“For the past few years, there has been over-dependence of life insurers on Ulips. Now, we see the customer focus shifting towards traditional, term plans,” said a senior LIC official.

Rajesh Relan, managing director, MetLife India Insurance, agreed. He said, “This shift could be because of several reasons. While the real reasons are yet to be ascertained, we would like to attribute this trend to current market volatility combined with the introduction of new innovative traditional products by several

insurers.”

SBI Life Insurance is also looking at re-jigging its product portfolio by launching new traditional products.