G. Naga Sridhar
Hyderabad, Dec 27 The Insurance Regulatory and Development Authority (IRDA) is closely monitoring the growth of unit-linked insurance products (ULIP) market on a continuous basis and sees the need for creating greater awareness about the products among the customers, according to Mr C.S. Rao, Chairman, IRDA.
Notwithstanding the phenomenal market share of ULIPS in the insurance market, the regulator is of the opinion that ULIPS serve the twin needs of protection and savings, provide option to the policy holder to participate in the gains of capital and debt markets consistent with his risk appetite and is broadly satisfied with the overall trend.
“The traditional products are not perceived as a savings instrument in view of the emphasis on safety of investments, lower returns and general lack of transparency. The ULIP scores high on transparency of the investment returns vis a vis traditional products,” Mr Rao said in a chat with Business Line here.
On the desirability of a dominant market share for ULIPS, Mr Rao said the rapid growth of the ULIP market in India should be seen as quite “natural” and “expected” and the accelerated movement is in pace with the global scenario.
The overwhelming shift in the insurance market in the last 5 years has been driven by a combination of the various factors and has been witnessed in most parts of the world also.
The global statistics reveal that both in the US, Europe and also other parts of the Asia unit-linked business constitutes around 80 per cent of the total life insurance business. “India is also following the same trend. Another important driving force is that in the declining interest rate regime, most of the insurance companies find themselves uncomfortable with the inherent investment risks involved in the traditional type of products,” he felt.
On the adherence to ULIP guidelines by the insurers, the Chairman said the industry scenario was satisfactory.
“It is mandatory for all insurers to provide appropriate disclosures to the policy holders. IRDA is closely monitoring the growth of unit-linked products market on a continuous basis,” he added.