Life insurance policies are trending up throughout India and that’s good news for investors interested in ULIP policies. According to a recent report from Financial Express, insurance contributions now account for a full 1.9% of India’s Gross National Disposable Income. This contribution level moves insurance investments up to the number three spot for financial vehicles after bank deposits and pension funding. Although less Indians invest in insurance versus their global counterparts, penetration percentage levels now exceed other countries with similar GDPs like neighboring Pakistan and Asian nations including Bangladesh, Indonesia and Vietnam.
The same Financial Express report shows just how volatile insurance penetration has been in India over the past two decades. From a low point in 2005, the number of Indian life insurance plans ranged up through 2009 before again going down. Over the past few years, however, policy investment rates have again grown higher, driven enormously individuals and families choosing to place their available investment funds in ULIPs, Unit Linked Insurance Plans.
Report figures show far higher growth levels in ULIPs than the relatively flat rates experienced by non-linked plans. Although fewer people have invested in ULIPs than non-linked plans over the same time period, the exponentially higher growth has driven the numbers for all insurance investments noticeably higher. Currently, among plans in India, about 85% of annual premiums are spent on non-linked products while the remaining 15% is invested in linked policies like ULIPs. That ratio is gradually changing as more investors learn of the opportunities offered by ULIPs.
Regulatory changes have also led to pattern differences in how individuals invest their disposable income. This has enabled more investors to realize the tax advantages of such plans. Additionally, spreading investment information online has led to growth amongst linked insurance products that was not previously seen when investment information was shared by recommendation basis or individual insurance brokers.
As the popularity of ULIPs continues to increase, India may gain even higher levels of insurance penetration within the country and begin to climb the charts for coverage amongst similarly-sized countries with larger GDPs. Although this is of great benefit to India as a nation, it represents an even larger win for Indians who are seeking to better provide for their family members through coverage that is available after their death. Life insurance policies can not only carry financial benefit now but ease difficult future circumstances as well.
