Bluerating | September 2021

Unit Linked Insurance Plans (ULIPs) are insurance policies linked to investment fund shares. They combine insurance and investment benefits under a single integrated plan.

In theory, ULIPs could be a miracle cure for our Country, its two main issues being underinsurance and large amounts of liquid assets on checking accounts.

The market tends to highlight three selling points: 1) ULIPs cannot be impounded or seized; 2) the possibility to name as recipient someone with no natural right to inherit; 3) exemption from inheritance taxes.

On the other hand, ULIPs have long been criticized for their high fund management charges, especially when compared to the average returns for the policyholder.

Of course, if the charges were to match or exceed in absolute terms the returns from the investment component of the policy without there being any advantage for the policyholder, it would be foul play. 

Even more foul when perpetrated against Italian investors, some of the most underinsured and least exposed to investments not only for lack of financial and insurance education, but mainly for lack of trust in banks and insurance companies.

In addition, the damage would be terrible not merely for single investors, but for the entire society: this would undermine Italian people’s chance to be adequately protected and for their money to be adequately managed, which would affect future generations as well.

Just like any professional field, the ULIP sector includes professionals for whom a bird in hand is worth two in the bush, ready to fleece their clients hoping they remain unaware.

The shortcomings of Unit Linked policies are connected to their nature as a product within a product. Therefore, giving up the insurance component would be the best bet for those whose only goal is to invest; on the other hand, when it comes to inheritance, the characteristics of ULIPs are certainly compelling.

To choose whether to mix insurance coverage and investment exposure or to opt for two separate solutions it is necessary to rely on a specialist. And the good faith of the proponent must be combined with expertise in the insurance field.

In fact, investments and insurance policies belong to two different worlds: the former are linked to a risk component, while the latter are linked to protection.

For this reason, some financial networks have their insurance specialists work alongside financial advisors; or, they invest on the integration of the expertise of insurance agents and financial advisors, like Allianz with Casa Allianz.

Even the Swiss giant Zurich, guided by Mario Greco, seems to believe in this mix, having expressed an interest in the acquisition of Deutsche Bank’s financial network.

Winning this match with the right alchemy is fundamental to develop a market in which everyone is a winner: savers, agents, and financial advisors.

Nicola Ronchetti