• CRISIL Research
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November 05, 2018 location Mumbai

New products top CRISIL ULIP rankings

Cost efficiencies from zero allocation/ admin charges help score over peers

Majority of the recently launched unit linked insurance products (ULIPs) figure in the top 30 percentile in the rankings released for the quarter ended September.

 

The performance rides on cost efficiencies flowing from reduced charges towards premium allocation and policy administration, etc coupled with additions offered.

 

As per regulations, the net ULIP costs at maturity, cannot be more than 3% per annum for policy term less than or equal to 10 years (2.25% per annum for policy term more than 10 years).

 

Says Bhushan Kedar, Director, CRISIL Research, “The regulatory changes brought in by the Insurance Regulatory and Development Authority of India after 2010 to rationalise costs had led to some reduction in ULIP charges. The recent cost efficiencies brought in by new launches to make them more competitive with peers and other financial investment avenues are an added plus for ULIP investors.”

 

CRISIL ULIP rankings analyse plans based on associated costs and portfolio performance, encompassing the two primary features that ULIPs offer – life cover and investment. While the performance assessment takes into account risk-adjusted returns of the funds based on performance in the past five years, the cost assessment factors in various charges involved and the benefits/ additions offered by the product.

 

CRISIL classifies products under four broad categories for its assessment – ‘Wealth I - Regular’, ‘Wealth I - Single’, ‘Wealth II - Regular’ and ‘Child’, with 14 sub-categories, factoring various combinations of policy term and premium.

 

CRISIL ranks ULIPs under four categories – ‘Large-cap oriented funds’, ‘Mid-cap oriented funds’, ‘debt long term funds’, and ‘debt short term funds’.

 

In the first quarterly rankings for the quarter ended December 2017, 65 products were included, with a coverage of 56.03%. However, with increase in sub-categories and five products launched post December 2017 being included, the total number of products covered has increased to 74 in the latest quarter (coverage of 62.18%).

 

Notably, three of the recently launched products have zero premium allocation charges and feature in the top 30 percentile of various categories for the latest quarter.

 

In terms of cost, Bajaj Allianz Life, ICICI Prudential Life and Bharti AXA Life have the highest proportion of product variants ranked in the top 30 percentile.

 

In terms of performance, Bharti AXA Life and ICICI Prudential Life have majority of their ranked funds in the top 30 percentile. All the funds of Bharti AXA feature in the top 10 percentile.

 

Ranks are assigned on a scale of 1 to 5, with CRISIL ULIP Rank 1 indicating very good performance. In any peer group, the top 10 percentile of funds are ranked as CRISIL ULIP Rank 1, next 20 percentile as CRISIL ULIP Rank 2, next 40 percentile as CRISIL ULIP Rank 3, next 20 percentile as CRISIL ULIP Rank 4 and the next 10 percentile as CRISIL ULIP Rank 5. For further details on rankings and methodology, refer to www.crisil.com.

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  • Bhushan Kedar
    Director, CRISIL Limited
    bhushan.kedar@crisil.com