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Interview of Ian Watts,
Managing Director,
Tata AIG Life Insurance Company
Unit linked insurance plans are popular today.
Why?
The demand for Unit Linked Insurance Plans is guided by
the returns that the instrument generates and the strengths
of the insurance company. Awareness and knowledge of unit
linked insurance plans have increased substantially today
as compared to the time they were first launched.
Unit Linked Insurance Plans primarily offer protection
in the form of life insurance and along with it; also offer
the opportunity to earn better returns on the premiums,
thus helping the policy holder to accumulate savings.
The Indian economy, growing at a brisk pace, has positively
impacted the capital market sentiments and the overall investment
climate. This has, in some measure, led to the increased
popularity of unit linked insurance plans.
How many unit linked products have you launched?
Tata AIG has recently launched its first unit linked insurance
produce called ‘Invest Assure”. Tata AIG offers the option
of choosing among a variety of funds, which includes three
pure funds - Equity, Income and Liquid Fund and two pre-packaged
funds - Growth and Balanced Fund.
The Equity Fund will invest in listed equity shares whereas
the Income Fund will invest primarily in government bonds
and fixed income instruments. The Liquid Fund will invest
in a variety of liquid options such as treasury bills, short-term
Government bonds, bank deposits, commercial papers and other
money market securities.
The Growth Fund will invest in the pure funds in proportions
of 50% to 80% in Equity, 20% to 50% in Income and 0% to
25% in the Liquid Fund.
The Balanced Fund will invest in the Equity, Income and
Liquid Pure Funds in the proportions of 25% to 55% in Equity,
35% to 70% in Income and 5% to 35% in the Liquid Fund.
Is the Indian customer matured enough to understand
the nuances of the product?
Absolutely. Heavy consumers of insurance and mutual fund
products have responded very favourably towards these products.
They are able to immediately identify with the benefits
offered.
Who is your target audience in case of unit linked
plans?
Since unit-linked plans appeal to both, insurance and mutual
fund consumers, Tata AIG is targeting heavy users in both
categories of consumers.
Does your product "Invest Assure" offer
any minimum guarantee on the returns in case the market
tanks out?
Like all investment plans that are linked to equity or
debt markets, investments in ‘Invest Assure’ are also subject
to market risks. Investors are advised to understand the
risks involved while choosing the investment options. ‘InvestAssure’,
like any other unit linked insurance plan, doesn’t offer
any minimum guarantee.
How many free switches between funds do you allow
in a year. What are the charges for more switches?
Under the ‘InvestAssure’ plan investors have the freedom
to move between funds and there is no restriction on the
quantum of switching between funds. However, this will be
without charges for the first FOUR switches in a policy
year
What are the points that a customer should take
into account while purchasing unit-linked products?
Investors should carefully consider what their investment
priorities are and map them against what kind of risks they
can take.
Since these products are directly related to the
ups and downs associated with the stock market, when the
market sees a downward phase, will the customer not lose?
Customers have the flexibility of switching between investment
options. These options should ideally be exercised in the
event of changes in the market.
While transparency is one thing, regularly monitoring
the fund is an important aspect. How far will the common
man be able to do so considering that insurance products
hitherto did not have such features?
Unit Linked Insurance Plans are quite transparent. NAVs
will be declared on a regular basis enabling the policyholder
to assess and monitor the growth of their investments regularly.
Will it not make better sense and also mean better
returns if an individual invests in mutual funds if returns
are what he looks forward to instead of investing in unit
linked risk plans since insurance should be for protecting
risks?
The first promise that a life insurance product makes is
to insure life. Life insurance is one product that provides
a guaranteed sum assured from the day the policy begins.
This ensures that in the unfortunate event of demise of
the policyholder, the income flow to his dependents does
not cease. And no other financial product can compete with
insurance companies in this aspect.
In the case of unit linked insurance plans, they primarily
offer protection in the form of life insurance and, along
with it, also offer the opportunity to earn better returns
on the premiums helping the accumulation of savings. A mutual
fund, however, is a pure investment avenue, with no life
cover whatsoever. Further, mutual funds are short-term plans,
whereas insurance plans have a long-term horizon.
The decision to invest in either of the investment avenues
would entirely vary from one individual to another. It will
depend upon an individual’s financial need which can be
assessed by an individual himself or with the help of a
financial advisor.
How much of the premium component goes into administration,
fund management & other charges and how much of it actually
constitutes the risk cover?
A monthly administration fee, initially of Rs.
38, is automatically deducted from the account. This rate
will be revised every 1st April in accordance with Retail
Price Index changes.
Besides the fund management fee can vary anywhere between
0.90%-1.75% depending on the fund chosen. The cost of insurance
is also deducted every month from the InvestAssure account.
Your distribution network?
Tata AIG Life Insurance Company has a distribution
network that covers the top 20 investment centres in the
country. The company uses a multi-distribution network that
comprises insurance advisors, bancassurance, brokers, corporate
agents, and direct marketing to reach out to customers.
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