SBI Life Bets Big On ULIPs As Demand Picks Up
Investors believe that they will get something back at the end of the term in ULIPs.
A faster pick up in demand for unit-linked insurance plans than pure protection has led to a higher proportion of these instruments in SBI Life Insurance Co. Ltd.’s new business premium, Managing Director and Chief Executive Officer Arijit Basu said.
Investors prefer ULIPs because of assured returns at the end of the term, he told BloombergQuint in an interview.
An understanding that you may not get back anything at the end of the term, is something that is not very well appreciated until now, that is why pure protection tends to be low.Arijit Basu, Managing Director and Chief Executive Officer, SBI Life Insurance
Protection is not understood well in India, said Basu. Since financial understanding is at a very nascent stage in the country, everything depends on the understanding of the consumer.
“In a protection product, the premiums are low because the entire cover is reserved for mortality. The individual does not get back anything but the product does protect his family and his near and dear ones (in case he dies),” Basu added.
ULIPs have picked up mainly because in case of ULIPs you decide that savings is one component you want to give back to the consumer, he said.
The premiums tend to be much higher in ULIPs and consequently the size of the cover also remains higher. In fact, investors who demand more of ULIPs, have a greater appetite for risk-taking.
In spite of all this, Basu insists that ULIP cannot be considered as a mutual fund because it provides 10 times more cover than the premium, which is not present in a mutual fund.
Currently, SBI Life has Rs 40,000 crore worth ULIPs in their assets under management, said Basu. These funds underlying ULIPs are either debt funds or equity funds and are left to the choice of the consumer, he added.
For us, Rs 29,000 crore is in debt, and only 19,000 crore is in equity, so SBI life customers, even in situations where markets are doing very well, have chosen debt.Arijit Basu, Managing Director and Chief Executive Officer, SBI Life Insurance
SBI Life Insurance Company Ltd. , subsidiary of country's largest lender, State Bank of India, launched it's initial public offer on Wednesday, to raise up to Rs 8,400 crore. In the three-day offer, the company will issue up to 12 crore equity shares at a price band of Rs 685-700 apiece.