Life Insurers Bet on Participating Products to Diversify Portfolio Mix

Life insurers are making a strategic shift towards participating (par) products as they seek to reduce risk in balance sheet, amid choppy equity markets, a falling interest rate environment, and intense pricing competition in the non-participating (non-par) product segment.

- AATHIRA VARIER & SUBRATA PANDA

Many players in the industry have shifted towards par products after a period of being ULIP-heavy and relying on non-par products to drive topline and margins.

Par products are insurance policies that provide policyholders with both guaranteed benefits and a share of the insurer's surplus, typically paid as bonuses or dividends. The surplus is generated from the performance of participating funds, which pools premiums from par policyholders and invests them in various assets. While the guaranteed benefits are fixed, the bonuses or dividends are non-guaranteed and depend on factors such as investment returns, expenses, and claims experience.

The equity market has come off almost 7 percent from its peak in September last year, due to earnings disappointment, global headwinds, and sustained selling by foreign portfolio investors (FPIs). This has prompted insurers to diversify their portfolio mix.