ULIPs are the results of opening up of indian insurance industry. Private players were not in a position to compete with LIC in the field. Inspite of around 10 years of opening,you may see that none of the private players could beat LIC with neither the business volume nor the annual bonus declared on convntional business not connected with the market.
so when private players started insurance connected with market,LIC has also started marketing ulips,where the risk of return has been fully taken by the market.
there again ,private insurance company could sell those products by offering exorbitant rate of commision to their agents. to meet these expenses,they in turn charged high allocation rates as high as 60 to 70 %.i.e ,if an investor invest rs.one lakh,only 30 to 40 thousand is invested in the first year. Inspite of the stock market performance,no private insurance companies could return even the capital back.
because of the unprecedented growth of the stock market,from 2002 to 2008, nobody noticed this.
however,with recession and the resultant fall of the market,everything changed.
since november 2009, there is no commission for the agents of mutual funds and hence their sales naturally came down. they had then complained to the sebi regarding ulips of insurance companies.
how do you think a mutual fund work with out any entry load? from where they find the fund for their operating expenses? Only with manipulation of day to day sale and purchase they will manage. there is no transparency in their action.
ULIPs are not that bad to the investing community as you are trying to establish.