Life Insurance Corporation of India is likely to submit new unit-linked insurance plans Ulips with the regulator in light of its two plans coming to a close. The corporation’s endowment plan Wealth Plus closed on May 8 while another pension plan Market Plus will close at the end of next month. It is likely to float new schemes to ensure that there are enough products in its stable.
The corporation has created the position of chief product development officer by splitting the position of the chief actuary who was earlier responsible for both product development as well as valuation. LIC has appointed CB Prasad, actuary, as head of product development while M Kulkarni has been appointed actuary for valuation. The creation of the new position is aimed at speeding up product development in the corporation.
Incidentally, LIC is not among the 14 life insurance companies which have been asked to stop selling Ulips by Sebi. Also, LIC is in a unique position that every policy sold by the corporation is guaranteed by the government under the LIC Act, 1956. LIC chairman TS Vijayan said the corporation usually files for new products at the middle of the year which gives it enough time to market the product. The corporation has seen exceptional sales in April 2010 with premium from new policies growing 97% YoY.
For the current financial year, the corporation has set a target of growing its new business premium by 25% from Rs 43,000 crore in 2009-10 to Rs 54,000 crore in 2010-11. The corporation is also targeting to cover 10 crore lives this year against 6.5 crore in FY10, which includes coverage under group schemes.
According to Mr Vijayan, the corporation is unaffected by Irda’s recent guidelines, which prescribe the ceiling on surrender charges on life insurance policies. “We are not affected by the guidelines on surrender charges as we never had these charges on Ulips. We believe that funds belong to the policyholder and should be credited to his account.
He, however, feels that compulsory annuitisation (receiving accumulated benefits in the form of regular income) might not work in pension plans where the plan is terminated early. According to Vijayan, under such plans, the annuity payments might end up being too small. Mr Vijayan said the corporation was not considering a single payment product like Jeevan Aastha as interest rates were low. “Right now, if we bring out a similar product, interest rates would have to be much lower. We would rather wait as we can bring out a product in 10 days,” said Mr Vijayan.
