The Life Insurance Corporation of India will be developing a new Unit Linked Plan (ULIP) by the end of 2014 financial year. Speaking at the summit conference hosted by the Asia Insurance Post, S.K. Roy, Chairman of LIC announced that the product design team is working on devising a profitable ULIP plan.
In an effort to improve its products, LIC has been introducing new guidelines for the traditional insurance products, since January this year. Under this new plan, the Life Insurance Company of India will no longer sell its existing range of insurance and money back products and will rather introduce plans backed by a ULIP plan or a refurbished plan with improved benefits.
The ULIP plan was launched in 2013 that constituted less than 10% of the total LIC products. However, with crashing stock markets the product was withdrawn, only to be re-launched in a new avatar in the coming 2015. The team is designing the ULIP product with high-end features as compared to the 2013 plan.
LIC intends to monetize its holdings through the Specified Undertaking of the UTI or Suuti, through an exchange traded fund, and expects to raise INR 7000 crore in the coming times. By taking into consideration this proposal, LIC being the investor, will continue to respond to ULIP and new insurance products, as and when the need arises.
LIC with its total investment may cross over INR 3 Lakhs crore in the 2014-15 financial year, if the new ULIP plan comes into force. Today, the investments stand at INR 2.25 Lakhs crore, out of which only 15% was reserved for Equity. As per the original plans of LIC, the company aims to make a profit of INR 32 Lakhs crore by the end of 2020. According to the public opinion, LIC has acquired a net profit of INR 1656.68 crore in the current financial year, as compared to INR 1437.59 crore in the year 2013.
Mr. Roy alleges that LIC has crossed the INR 20,000 crore mark in terms of equity investments in 2014. He attributes this colossal profit making to the Bull Run in the stock markets. Unlike the previous years, where LIC had 60 products with lower profit margins, today with only 16 Life Insurance products and 8 ULIP backed insurance products, the company is booking good profits.
Each year, the LIC research team studies different companies and their fundamentals before taking any ‘buy’ or ‘sell’ decision in the stock market. However, investors must note that ULIPs are subject to market risk, because they are stock market dependant. Thus, investors if seeking to invest in a ULIP plan should invest with a long-term view of 8-10 years for optimal return on investments (ROI).
(Source: This article has been adapted from the article "LIC to have Ulip by end of fiscal" that appeared on October 30, 2014 in business-standard.com.)
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