AIA expects unit-linked insurance plans to be more popular
Unit-linked insurance plans are expected to play a vital role in the life-insurance market in the near future as the returns from traditional insurance policies are not as attractive as before, while ULIPs provide the benefits of both insurance and invest
ULIPs were introduced to the Thai market in 2009 by AIA Thailand, but so far only 2 per cent of its 5.4 million customers have bought them.
Five insurers now offer ULIPs, but these products are still not well known in Thailand because they need to be explained by agents, and few are licensed to do so. Meanwhile, banks prefer to offer simple insurance products to their consumers, said Anucha Laokwansatit, general manager and chief investment officer of AIA Thailand.
Of AIA Thailand’s 60,000 agents, only 3,000 have ULIP licences.
"We have to train our agents for [qualify for] this licence, because unit-linked [plans] finally will become the investment choice for policyholders as they seek higher returns than traditional insurance policies offer. Moreover, insurers have to lower the returns offered by traditional policies because of the economic circumstances and interest-rate uncertainty," he said.
ULIP policyholders can switch their investment to various funds during the tenure of the plan and can reduce or increase the level of insurance protection.
At present, AIA offers AIALINK Single Premium, AIALINK Regular Premium and AIA Life Isara.
The company is encouraging regulators to make it easier for insurers to develop ULIPs that are attractive to customers. When ULIPs become more widespread, it will help promote the capital market as well, Anucha said.
He said AIA had focused on selling ULIPs with life protection rather than savings plans because it wants its customers make their own protection a priority.
Premiums for ULIPs are three times as high as for traditional policies, so they are not aimed at the mass market. Moreover, clients who buy such plans must be knowledgeable about investing.
Anucha said low interest rates had affected investment yield, and AIA has an investment portfolio of Bt700 billion. Even though AIA is a long-term investor, the unpredictable nature of interest rates is forcing the company to consider increasing its investment in stocks |in overseas markets. The Thai |stock market has become quite volatile, so the firm wants to reduce risks by investing more outside the country.
Currently less than 1 per cent of AIA’s investment portfolio is overseas.
