Insurers act fast, start raising cover on Ulips

By Dipak Mondal Jun 23 2010

Several insurance companies are considering a hike in the insurance cover on their existing unit-linked insurance policies (Ulips) even as the Insurance Regulatory and Development Authority (Irda) seems to be working on making it compulsory for insurers to offer a minimum cover of 10 times the first-year premium. Insurers offer a minimum life cover of five times the first-year premium at present.

Max New York Life Insurance executive director and chief operating officer, Rajit Mehta, said, “The main purpose of insurance is protection. The average cover on our products is 11 times the first-year premium and we plan to take it to 15-20 times in the future.”

DLF Pramerica Life Insurance managing director and chief executive officer, Kapil Mehta, had told Financial Chronicle earlier this year that his company is trying to launch more and more protection-oriented insurance policies, which give higher death benefit to people.

“At present, the death benefit is 7-8 times the annual premium, but we have already increased the same to 10-11 times in our existing policies and will further try to increase it in our future schemes,” he said.

SB Mathur, secretary general of Life Insurance Council, said investors should have more options to choose from instead of forcing them to buy products with higher cover.

“Every one has different needs and they buy Ulips accordingly. We cannot have one-fit for all sizes,” Mathur added.

Gorakhnath Agarwal, chief actuary of Future Generali India Life Insurance, agreed with Mathur. “We feel customers should have the choice,” he said.

Agarwal said Future Generali Life Insurance’s average cover is 10.14 times the annual premium.

Aegon Religare Life Insurance offers an average cover of 10 times to Ulip customers, while Aviva Life Insurance said it is roughly between 8.5 and 10 times.

A Bajaj Allianz Life spokesperson said, “We try to sell need-based products. As per peoples’ need, we often add term riders to our policies for higher cover.”

Recently, the union government had made it clear that Irda will continue to regulate unit-linked products, thus quashing the Sebi stand on Ulips.

The capital market regulator in April had banned 14 life insurance companies from selling Ulips asking them to take prior approval from it before selling these products as it considered Ulips as more of investment products.