ULIPs-a Blessing or a Curse in Disguise

Unit Linked Insurance business forms a significant part of the life insurance business. A Unit Linked Investment Plan (ULIP) is an instrument which combines the security provided by an insurance plan with the opportunities provided by an investment plan. A significant amount of premium of insurance companies comes from this instrument. In this paper author has tried to compare ULIPs with other investment and insurance options available in the market. The purpose of this paper is to study the investor's perception about the ULIPs as an investment option in Indian financial market. The basic thing that an investor keeps in his mind is value orientation. Investor 'balances off' risk, return and cost, means that they want good option with high return but not necessarily too risky and costly, or the less risky and costly which they do not trust in quality and return terms. So, it is just a matter of right balance. Due to SEBI ban on 14 private life insurance companies in India the basic question that comes in the mind is 'how carefully consumer thinks about their investment? Is the investor more concerned with the characteristics (transparency) of investment option to ensure investment is worth or not or the return? Or they believe that the transparency of investment and fewer charges on investment still merit return? This paper investigated investment pattern, attitude and perception of investors about ULIPs as an investment option after SEBI ban on 14 private insurance companies. The result is that investors are losing their trust in ULIPs due to less transparency and less insurance coverage as compared to other options available in market. ULIPs have failed to convince people that the return and coverage is really up to what could be expected for their investment. In these cases investors are attracted towards other option available in market which are more transparent and are giving same return patterns, i.e. People want to invest but they do not want to invest at high front-end cost and less transparency.