Brokers are the other mode of distribution; since they sell products from multiple insurers,

they focus more on commissions.

FIGURE-4: CHANGE IN LIFE INSURANCE PREMIUMS SINCE 2010

The IRDA regulation in 2010 gave rise to a new challenge because 97% of BSLIs portfolio
was unit-linked. This led to a reduction of first year premiums by 47% in the 2010-13 period
(Figure-4). The effect on the total premium was milder with a 20% reduction in the same
period.

BSLI has issued dividends in the recent years. Since, issuing dividends is a recurring affair,
this act might instill a favorable perception among the investors about BSLI’s ability to
generate positive growth in cash flows in the future. Though BSLI’s market share in the
insurance industry is declining, the issue of dividends might act as a signaling mechanism to
restore some goodwill in the market.

2.2 MUTUAL FUNDS

Indian mutual fund industry has a lot of ground to cover before a broad spectrum of investors
trust a significant portion of their savings with the equity and debt funds. The recent stock
market volatility has taken a toll on investor sentiment, which is aggravated by the wrong
perception of retail investors that equity investments are short-term profit opportunities rather
than long-term solution to financial needs.

Equities funds are specifically taking a beating amidst the persistent volatility; AUM (Assets-
Under-Management) in the equity segment dropped 5% over the year 2012-13. However, the
average AUM grew by 23% over the year, much higher than the 12% over the previous year
and compounded average growth of 18% between 2009 and 2013.[4] This disparity in growth
of overall AUM and equity AUM is indicative of risk aversion as investors flock towards
safer investments such as debt and money market funds; AUM under debt funds grew by

ADITYA  BIRLA  FINANCIAL  SERVICES  GROUP   9