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HDFC Standard Life to launch `unitised with profits' scheme

M Ramesh
N S Vageesh

Chennai , Aug 18

HDFC Standard Life Insurance Company proposes to introduce a `unitised with profits' policy, which is a sort of a combination of a unit-linked scheme and an endowment scheme. The company would then be the second insurer to offer this policy, after Aviva Life Insurance.

A `unitised with profit' policy is an insurance contract structured in the same way as a mutual fund. Premiums paid under a UWP contract are use to purchase units in the `WithProfits fund' (or, the policy holders' fund). The price of these units changes according to bonuses declared by the life insurance company. These bonuses reflect the investment performance of the company (and, to a lesser degree expense and mortality experience).

This differs from a unit-linked scheme, where the investor has the option to choose the type of investments his money would go to (like in a mutual fund). In an UWP policy, the investment decisions are with the insurance company.

According to Mr Deepak Satwalekar, Managing Director, HDFC Standard Life, the Indian market is not fully mature for unit-linked schemes, as the average insurance buyer is not market-savvy. "So, a lot of mis-selling is happening," he said.

On the other hand, a UWP policy gives the basic advantages of a unit-linked scheme, (such as better returns, entry and exit options by purchase of units), but the responsibility of investment is fixed on the insurance company. "The advantage of a UWP is that by declaring regular and terminal bonuses on the UWP fund (and breaking the direct link with the investment performance of the underlying assets), policyholders can get exposure to a wide range of assets while having some protection from stock market volatility," Mr Satwalekar said.

He said that HDFC Standard Life's business continued to be agents-driven. The company has 11,600 agents, with about 2,500 more in the process of being recruited. The company intends to up this number to 20,000 by the end of the current year.

Bancassurance, Mr Satwalekar said, accounted for about 20 per cent of the business. Last year, the company earned a premium income of Rs 132 crore. Premium income in the current year is expected to touch Rs 300 crore.

He said that the HDFC Standard had budgeted for an ad-spend of Rs 15 crore in the current year, roughly the same as last year. Ad spend would not need to grow correspondingly with the projected growth in business, because the company proposes to open fewer offices this year. It proposes to open just five offices this year, compared to 24 last year and 25 in the year before.

"Everytime you open a new office, you need a bout of advertisements to let people know you have come there," Mr Satwalekar explained.

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HDFC Standard Life to launch `unitised with profits' scheme


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