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ere was a change of guidelines for unit-linked insurance plans (Ulips) and the industry managed to come out with products that had matched the new rules. However, the challenges still remain for the industry. We also witnessed the launch of traditional plans in the interim.

A strong distribution network is a crucial element in selling insurance. Agents of a younger insurance company do not have as big a renewal book as the older players. Earnings viability of new agents is getting tested, making it necessary for companies to do things that will excite people to join the profession. We also have set guidelines to prevent mis-selling, so that customers see the true value of what they purchase and stay with the plan or come back for further insurance needs.

How can the industry face the crisis?:

We will have to seriously look at product and distribution innovation. We also have to promote more term or pure risk cover in combination with Ulips or as riders.

What lies ahead this year?:

You can expect many more Ulip products this year. We had around 250 products before the change of regulation. Only 70-odd plans have been launched since the new rules came into effect. So, naturally more Ulips with variations will be launched next year. I also think there will be some more interesting single-premium products hitting the market during the year. Besides this, we will continue to see traditional plans.

What should be investors' approach towards new plans?:

As far as Ulips are concerned, the most important aspect for policyholders is to understand that they have to stay with the plan. They must get into a plan only if its philosophy matches their need for protection and investment. Ulips target an X% return over the entire course of the policy. There is more likelihood of achieving this return if the investor remains with the plan for the entire period. Ideally, for a Ulip, a customer should start early and continue paying regular premiums to achieve set goals. As for singlepremium insurance plans, an investor should always have adequate term cover before opting for them.

This is because the cover tends to be smaller in a single plan. Investors should go for a single premium plan if they have a large amount to invest and cannot commit periodical premium payments. A mix of regular premium and single premium is the best bet.

There's a constant comparison between Ulip versus term plus MF combination. For me, it's never insurance or mutual funds. Before going for any investment, one should draw up a financial balance sheet. There will be good risks and bad risks on either side. Examples of good risk include spending more on your kid's wedding or education. Then there are bad risks like death, accident and so on, which can be tackled only through insurance. If you think you know a thing or two about investment, go ahead and invest in markets directly to take care of good risks.

But if you don't understand how to go about investing in the markets, you will have to think about saving or investing through an insurance plan. It will also ensure that you combine your protection and investment needs for easier handling. In any case one needs to first seek protection of what you have before you think of growing it. Insurance plans give you an opportunity to invest in a disciplined manner over a longer period. Hence, it's always insurance and mutual funds or any other investment mode.

Source: http://epaper.timesofindia.com