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Will unit linked risk products continue
to rule?
Unit linked risk plans are doing roaring business agreed but
if the recent reports are any indication a shake up is on the
cards. The mutual fund industry is all set to get aggressive
to counter competition from the insurance industry’s unit
linked risk products. For mutual funds the unit linked insurance
products launched by life insurance companies are an encroachment
on their territory. Consider this: Around 80 per cent of the
premium income of life insurers has come in through unit-linked
plans in 2004 thanks to the boom in the equity markets.
Which means mutual fund companies are losing out on a huge
market that would have otherwise been theirs. To put an end
to such a situation they are toying with the idea of aggressively
publicizing its products through celebrity endorsements which
mutual funds feel will give a never-before fillip to its unit
linked schemes.
Unit linked insurance products launched have been doing brisk
business and insurers have been coming out with several such
products with slight variations to suit the changing needs of
the customers. These products are investment avenues that provide
market related returns to the investor with an element of insurance
thrown in. For the customer the attraction of market related
returns with insurance is an attractive option. On the contrary
though mutual fund companies also have unit-linked products
what is absent is the insurance cover.
But the grouse of mutual funds is that they have to adhere
to stringent regulations that are absent for insurance companies
when the products are almost similar. While for insurance companies
it is not mandatory to disclose the various expenses related
to unit linked risk products such as expense ratio and brokerages
among others, for mutual fund companies it is mandatory. The
Association of Mutual Funds will soon be setting up a committee
to work out an advertising strategy after which it plans to
approach SEBI to take it from there. But will SEBI be able to
take up the matter with the insurance regulator?
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