Long-term life insurance policies are expected to grow in popularity if the EET (exempt exempt tax) regime under the proposed Direct Tax Code comes into force by 2011.According to Mr G.V. Nageswara Rao, Managing Director and CEO, IDBI Fortis Life Insurance, customers would choose long-term policies if the Government decides to tax the final lump sum of matured policies.
“Though raising tax exemption limit to Rs 3 lakh is a good thing, because of EET, I expect that people will tend to keep policies till retirement, as then they will fall under a much lower tax slab. Long-term insurance policies, say, with terms of 20 or 30 years, are bound to get more attractive,” he said.
IDBI Fortis, which has just launched a new plan on the traditional format called ‘Incomesurance’, feels that after the financial crisis the proportion of ULIPs may fall compared to traditional policies. Following the experience of the last year, when the markets were bearish, customers now prefer more secure and low-risk plans with guaranteed returns.
“Currently, our product mix has 70 per cent ULIPs and the remaining 30 per cent traditional policies, which is similar to the industry. However, as we launch more traditional products, the mix of such policies will go up by a tad,” said Mr Rao.
The private insurer has introduced the ‘Incomesurance Endowment and Money Back Plan’, that would provide an additional guaranteed income with every subsequent premium paid. “This plan is designed to give a guaranteed income to our customers who can realise their dreams, like their child’s education, providing financial security to their loved ones, or ensuring a comfortable retirement income,” he said.
Under the plan, a customer can get his income as a lump sum endowment or as annual money back. The plan also provides death benefits.
The company, which is capitalised at Rs 450 crore after Rs 250 crore infusion in March, collected Rs 193 crore in premium in the first half of the fiscal. It has around 1.3 lakh policyholders and plans to have 100 branches and double the number of agents by the next fiscal.