By Avni Raja & Sruthi Gottipatti, CNBC-TV18

India's biggest insurance player, LIC has registered a dramatic decline in sales growth due to which the entire insurance sector has taken a hit.

After witnessing an exceptionally high growth rate, the life insurance industry's speedometer has taken a dip; LIC has registered a paltry 0.2% growth in sales in FY08 as compared to 90.7% in FY07.

The reason is the lack of takers for ULIPs, which accounted for 80% of its sales in the previous year. Sources say investors stayed away from ULIPs due to the volatile stock markets. It's not just LIC; growth of private insurance players has also fallen by 20%.

The overall growth for the sector for FY08 is abysmally low at 31% as compared to 95% in FY07.

Experts say market volatility has finally taken a toll on the seemingly resilient life insurance business. The UBS Investment Research report says it has changed its guidance for the sector. It now forecasts a growth of only 30-35% in the private sector, as against their earlier prediction of 45-50%.