The life insurance coverage business has noticed muted development for the initial-year premiums in the initial six months of the existing economic year. However, assured plans supplied by life insurance coverage providers have noticed robust response from the policyholders.
According to specialists, volatile equity markets through the start off of the economic year and declining interest prices on bank fixed deposits (FDs) are couple of causes why policyholders have been attracted to assured plans.
In the final couple of months, insurers like IDBI Federal Life Insurance and Canara HSBC Oriental Bank of Commerce Life Insurance have launched assured plans. Market participants also say that many significant players in the life insurance coverage business are also organizing to come out with goods providing assured maturity advantage along with market place linked returns.
Vivek Jain, head – Investments, Policybazaar.com, says, given that the outbreak of the pandemic and sharp volatility in the equity markets, investors have been not keen on market place-linked goods. This is a single of the causes why there is a demand for the assured life insurance coverage plans.
Officials also say that declining interest prices on bank FDs are a different purpose for danger averse investors to appear at assured plans. “Some of the top banks are giving FD rates of 5.4% for five years and returns are taxable in the hands of investors—effectively bring down the returns. But in guaranteed plans, investors can get tax free returns under Section 10 (10D),” added Jain. Guaranteed insurance coverage plans present returns in the variety of 5.5-5.7%, says the officials.
Guaranteed plans are non-participating goods and delivers rewards that are assured in absolute terms at the starting of the policy. According to the market place players, these types of goods are preferred by consumers who have a low danger appetite and are prepared to accept reduced but assured returns.
Vighnesh Shahane, MD & CEO at IDBI Federal Life Insurance, says, “There are two product categories where there is traction, one is protection and health, and the other is guaranteed non-participating savings products. The reasons why guaranteed plans are picking up is because of falling interest rates as investors want to lock-in money at higher interest rates and avoid the reinvestment risks.”
Market participants also say that even in the subsequent couple of months investors will be attracted towards assured plans from life insurance coverage providers. “With markets at all-time high, there are expectations of correction in markets. Also, we have seen second wave of novel coronavirus in Europe, so still there is some risks. In such situation, investors will avoid putting money into the market linked plans and look for investing in guaranteed products,” concluded the senior official from the top insurance coverage enterprise