INVESTORS SHRUG OFF MARKET JITTERS, LINE UP FOR ULIPs

Despite the jittery stock markets, investors have so far not shied away from unit linked investment plans (Ulip). Investments in Ulips, in fact have risen by 8% to Rs 4,928 crore till May this year, according to figures released by the insurance regulatory and development authority. Till May 2007, Rs 4,531 crore was invested into such schemes.

Private life insurance companies are the better performers with a 66% growth in investments into Ulips. As compared to Rs 1,772 crore invested in such plans till May last year, in the first two months of this fiscal these companies have received investments amounting to Rs 3,030 crore.

However investments in public sector giant Life Insurance Corporation’s (LIC) unit-linked plans have dipped a significant 31% to Rs 1,900 crore till end May 2008 as compared to Rs 2,760 crore.

Analysts, however, feel that this is not really a cause of concern as most investments into LIC pour in the second half of the financial year when people begin their tax planning. SB Mathur, chairman Life Insurance Council, said, “More investments into LIC are likely to flow in as the financial year draws to an end.”

Ulips, which account for close to 90% of the life insurance policies, work like mutual fund schemes and provide an option to invest in equities but also have an insurance component.

As of now the market for such unit-linked plans is still strong despite the stock market volatility as most investors feel that there is no reason to worry, as these are long-term investments. The 30-share Bombay stock exchange sensex, which was at close to 20,000 in January has now dropped to 12,000-mark. On Wednesday it closed at 12,575.80 points.

However Mathur pointed out that the stock market chill might eventually begin affecting Ulips as well. In fact products such as health insurance, pension plans and money back schemes may once again stage a come back. He said many life insurance companies have already begun looking at selling other products more aggressively.

A word of caution was also recently sounded off by a Credit Suisse report that said that while there is at present strong growth in Ulips, if markets continue to remain weak, they would be affected.

Source: Surabhi
The Financial Express