‘Insurers to focus on protection’

The market may be flooded with a slew of long term savings products that offer attractive returns. But Sunil Kakar, senior director and chief investment officer, Max New York Life is of the view that life insurance is the only product that helps people align their financial planning with their life stage goals in life. In a free wheeling interview with The Indian Express, Kakar also laid out investment ideas for first time investors. Excerpts:

There are a lot of long term savings products in the market. But what are the benefits of life insurance products?

Firstly, life insurance is the only financial instrument which provides the combined benefit of long term savings and protection. Life insurance products are also the only instrument, which helps people align their financial planning with their life stage goals in life. Apart from providing tax benefits, life insurance is also flexible as an instrument where...you with options such as partial withdrawals, switching, re-directing, automatic re-balancing of funds, etc. Life insurance also gives you the option to invest according to your risk appetite be it debt or equity or may be balanced funds and thus letting you maximize your returns. Today, there are life insurance products which are inflation proof by means of a unique premium indexation feature which allows you to provision for inflation at the time of maturity.

Unit linked insurance plans or mutual funds -- what is your advice to potential investors?

Much has been spoken and written about whether mutual funds or unit linked insurance plans (ULIPs) are a better option for you to put your money in. However, both of these financial instruments are meant for very different needs. While Mutual Funds are for short term needs ULIPs are for long term savings and protection based on your life stage...needs. Therefore, in case you are investing for a short term of about five to eight years it is better to go for mutual funds. But if you are looking at a time horizon of anything above 10 years, then you must opt for ULIPs. The added advantage with ULIPs is that it also ensures protection specially after the new guidelines where the sum assured multiple has been set to a minimum of 10 times. The new ULIP guidelines have also increased the customer value proposition.

What has been the impact of the new ULIP norms on the industry?

The new ULIP guidelines have significant implications for the life insurance industry in India and we believe will help create a positive momentum in the market through an improved customer value proposition.