Wealth Management During Covid-19: The Policybazaar Show

In these unprecedented times, consumers are realizing the importance of health and term life insurance. There is also a difference in consumer behavior on the investment side. People are moving away from market-linked instruments to more guaranteed return insurance products. Vivek Jain, Head, Investments, Policybazaar said that they are seeing a lot of traction towards non-participatory guaranteed insurance products which typically give about 5.5-6% tax-free returns. “These are much safer because the returns are guaranteed upfront and unlike Fixed Deposits (FDs), they don’t have any tax on the returns that you make,” said Jain. 

People are more interested in this product because it also comes with an additional life cover. Typically, these plans have ten times the annual premium as the life cover but if the customer is paying in monthly mode option, effectively they are getting 120 times life cover from Day 1. For example, if they invest Rs 5000 per month in a guaranteed return product, they will get a life cover of Rs 6 lacs. 

CUSTOMERS DIVERSIFYING INVESTMENT ACROSS ASSET CLASSES 

Insurers have come up with innovative solutions to ally the fears of customers averse to investing in equity centric products given the state of the equity markets. People are moving towards a portfolio-based approach and diversifying their investment across various asset classes. The portfolio investments are divided into three categories or parts, which are the large-cap funds, mid-cap funds, and debt funds. Customers are also opting more for monthly mode payment options. 

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SMART INVESTMENT PACK

Policybazaar recently launched the Smart investment pack on its platform which follows a portfolio-based approach wherein the customer’s money gets invested across different asset classes with the best fund managers. 

For example, if Bajaj Allianz Life manages the large-cap funds the best, part of the customer’s money would go in the pure stock fund which is the large-cap fund of Bajaj Allianz. If HDFC Life manages mid-cap funds the best, part of the money will get parked in the opportunities fund of HDFC Life. ICICI Prudential manages the debt funds best, so, one-third of the money would go in an income fund. This is how Policybazaar has created a smart solution for people to diversify their risk across different asset classes and get the best of the funds in each of these asset classes. 

Within low-cost Unit Linked Insurance Plans (ULIPs), a customer can diversify funds within a large-cap, mid-cap, or a debt fund but in a Smart Investment Pack, they don’t have to invest with only one insurance company. They can diversify across two or three different insurance companies thereby picking the best fund from each asset class. A smart Investment pack is a combination of low-cost ULIPs. 

The insurance companies have also developed their ULIPs making investments profitable, convenient, and simple for the consumers. ULIPs are in many cases, better than a mutual fund, as it also provides a life insurance cover to the consumer and don’t attract any tax. 

ULIP has no policy admin charge and also has a waiver in commissions. The mortality charges in a ULIP are refunded on maturity. All new-age ULIPs come with a five year lock-in period. Customers are free to change funds as and when they want and there is no exit-load. 

One-third of Policybazaar’s sales are moving towards Smart Investment Pack. Their average investment amount per month in Smart Investment Pack is Rs 10,000 and in a standalone ULIP is Rs 5000. People have now realized with the current situation, diversifying portfolios across different asset classes is important. 

Ideally, for an investor, ten years is a good time to invest in equity markets as historically, Sensex has given a healthy return of 10-12% in this time frame. 

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