Understanding ULIPS

When it comes to Ulips, it appears that there are no shades of grey: you either love them or hate them. To put it in black and white, the industry and potential purchasers love them, and most of the people who have them tend to hate them. Accusations of mis-selling and hard-selling are hurled at the industry. Most investors admit that they don't understand how it works, but they keep buying Ulips more than any other insurance product. Hence, all kinds of records are being broken: there is an unprecedented growth in the number of Ulips sold and in the collection of premiums. All of this serves to boost the cause of privatisation. This is why we decided to make Ulips the subject of the first Money Today Round Table, held in Mumbai last month.

Since a number of investors (existing and prospective) purchase Ulips without knowing much about them, we felt it was the job of a magazine like ours to give them more information. But what are the industry stakeholders insurance firms, distributors and advisers doing about it? Surprisingly, many of them, who participated in the discussion, admitted that there was rampant mis-selling. But in the same breath they added that the system had become corrupted and they were only the byproducts of the system . They felt that the consumers didn't wish to be (seriously) involved at the time that they bought a financial product.

When we prodded the experts, they admitted that agents push potential buyers to opt for Ulips instead of other insurance products that might suit the latter better. Even the product manufacturers were blamed for not being able to realise the opaqueness in the manner in which they operated. An additional complication arose since it is extremely difficult to compare different Ulip products. Many said that even the insurance regulator might be unable to solve the basic problems that the industry faces today.

As a part of the Round Table, we invited six industry representatives to brainstorm and discuss where the Ulips were headed, and the problems that confront the industry at present.