Consumers continued to put in money in their existing unit linked insurance plans (ULIPs) expecting better returns from the stock market as the Indian economy recovers. Premium collection from renewal of ULIPs jumped 44 percent during the first three months of the current fiscal over the year-ago period even as the insurance sector has been seeing a slowdown.

The industry collected Rs 12,698 crore as renewal premium for ULIPs during the April-June period this fiscal, against Rs 8,793 crore in the corresponding period last year, as per estimates of the Life Insurance Council of India, the industry body of 22 life insurance companies in India.

"It is commendable that renewal premium in terms of ULIPs have witnessed a jump when the overall sector witnessed a slowdown in growth in terms of new premium collection," said SB Mathur, secretary general of Life Insurance Council of India.

ULIPs are long-term investment products that come with an insurance cover for the holder of the policy. The money collected as premium for ULIP is invested in the stock market and the value of the investment changes daily, based on the movement of stock prices of companies in which the investment has been made.

"Investors have not been impacted by the unprecedented stock market volatility in the last fiscal,” says Sanjay Kumar Jha, zonal manager for north and head of pension business at private life insurer Bajaj Allianz. "ULIPs cover a variety of needs, and are flexible and transparent and people have continued to invest in them keeping the long term returns in mind," he added.

The high growth in renewal premium for ULIP has come about at a time when the overall insurance industry has seen a slowdown in growth in terms of new premium collection. Moreover, sale of new ULIP products has actually dipped by about 10 percent during the period. This implies even though new consumers are still wary of putting in money in ULIPs fearing volatility in stock market, old ULIP customers are putting in more money.

ULIPs are the biggest products for private insurers who derive 70-80 percent of their premium collection from sale of new ULIPs. The country's largest life insurer, the government owned LIC derives a little more than half of its total new premium collection from ULIPs.

Government-owned life and non-life insurance companies have outshone their private counterparts in growth parameters. In the process, they have also become main growth drivers for the industry in both segments.

Latest data released by the Insurance Regulatory and Development Authority (Irda) for the four months of the financial year shows Life Insurance Corporation of India (LIC) grew by 32 percent on a year-on-year basis as aga­inst a 17 percent fall in the first-year premium collections of private players.

This helped the life insurance industry grow 9 percent (year-on-year basis) in new business premium collections in this period.

Total new business premium collected by LIC till July was Rs 14,265.99 crore against Rs 10797.10 crore collected in the same period in the previous year.

The total premium collected so far in the financial year stood at Rs 21,996.56 crore as against Rs 20,178.02 crore in the previous year.

For private insurers, total new business premium collection up to July was Rs 7730.56 crore against Rs 9380.92 crore in the corresponding period in the previous year.

In the general insurance segment, public sector general insurers posted 9 percent growth in the premium underwritten up to July 2009 over the same period in the previous year, while private insurers showed a 4 percent growth.

Total premium underwritten by public general insurers up to July was Rs 6920.64 crore against Rs 6367.70 crore in the corresponding period in the previous year while private insurers collected Rs 4761.97 crore up to July against Rs 4570.76 crore.

Total gross premium underwritten by the general insurance industry up to July was Rs 11,682.61 crore against Rs 10,938 crore in the corresponding period in the previous year, an increase of almost 7 percent.

Bigger private players like ICICI Lombard (-18.30 percent), Bajaj Allianz (-12.61 percent) and Tata AIG (-7.79 percent) all continued to post negative growth in gross premium underwritten.