The share of unit-linked insurance policies (ULIPs) in the product-mix of life insurers has surged on the back of buoyant equity markets in 2023-24.
The Sensex has risen 25.23 per cent from 59106.44 on April 3, 2023 to 74014.55 as on April 1, 2024. The Nifty-50 grew by 29.10 per cent from 17398.05 on April 3, 2023 to 22462 on April 1, 2024.
Research reports from Motilal Oswal shows that private life insurers like HDFC Life, SBI Life, ICICI Prudential Life, which have declared their fourth quarter results for FY24, have all registered a year-on- year growth in share of ULIPs within the individual annualised premium equivalent (APE) mix on a year-on-year basis, reflecting a higher preference among buyers for market-linked policies despite the income tax liability on maturity of policies with a premium above ₹2.5 lakh.
APE is measured as the sum of annualized first year regular premiums with 10 per cent weighted single premiums and single premium top-ups.
“ULIPs continue to see strong traction driven by buoyant equity markets, with a surge in popularity even in higher than ₹2.5 lakh segment,” said Vibha Padalkar, MD and CEO, HDFC Life Insurance at the Q4 earnings call of the company.
“Growth in ULIP is attributed to positive movement in equity markets and change in customer preferences,” said Amit Jhingran, MD and CEO, SBI Life Insurance at the Q4 earnings call.
However the change in the product mix of insurers in favour of ULIPs had an impact on the new business margins. SBI Life’s value of new business margins declined to 28.1 per cent in FY24 compared with 30.1 per cent in FY23. HDFC Life’s VNB margin fell to 26.3 percent from 27.6 per cent while that of ICICI Pru Life fell to 24.6 per cent from 32 per cent.
“The decline in VNB margins has been primarily on account of shift in underlying product mix towards unit liked and par from non par business, decline in group term business and higher expense ratio for the current year,” said Anup Bagchi, MD and CEO, ICICI Pru Life Insurance at the Q4 earnings call.
