New ULIP guidelines

Hi dear investors

A very strange row between SEBI and IRDA finally came to an end when IRDA issue new guidelines for a very controversial, expensive  and mis-sold product ULIP.

The fight was due to the administrative power over the product, as it is an investment + insurance product so both regulators were claiming their control on it.


The Insurance Regulatory and Development Authority (IRDA) has issued guidelines on unit-linked insurance products (ULIPs) Under the guidelines:

1.  The minimum policy term for ULIPs will be five years 
2.  All ULIPs would be expected to have an insurance cover payable on death. 
3.  The pension/annuity products would need to have insurance cover.
4.  No loans would be allowed under ULIPs and 
5.  A partial withdrawal in the ULIPs would be allowed only after the fifth year of policy. 
6.  However, there would be no partial withdrawal for pension/annuity products.

The guidelines would be applicable to all ULIPs from 1 July 2010.

Commenting on the new guidelines, IRDA executive director A Giridhar said these formed part of the periodic review of norms. He added that the new ULIP norms were based on the insurer's FY10 financials and were aimed at making insurers adhere to regulations. He hoped the new norms would address some of the ULIP issues being debated.

On 29 April, the Securities and Exchange Board of India (SEBI) had moved the Supreme Court in the ULIP matter, that the premium taken from the customers is being used to invest in the stock market so the product is just like MF and should be controlled by them, and set off the battle by directing all insurers to stop the sale of ULIPs, which it claimed should come under its regulations. In response, insurance regulator IRDA immediately struck down the call and asked insurance companies to ignore the regulator's order. A bitter public spat between the two regulators followed with the finance minister intervening and calling for a joint application before the judiciary.
Meanwhile, the parliamentary standing committee on finance has recommended that a financial stability and development council (FSDC) be immediately set up to address among other things issues pertaining to the financial sector.

But the question which arises is the returns which would be given by these so called  investment + insurance products, as they come with heavy entry charges which ranges from some 10-25% for first year of policy and gradually decreases with policy tenure, but eats up very large amount of our investment.

 There are also very stringent laws for exiting most of them uptil 5 years.

The regulator should look at the charges being imposed on name of various stupid charges and are gifted to the selling agents and companies as commissions, which ranges from 10-20% of our annual premiums till first 3 years.

The govt should also look into this matter


Read about Guaranteed Return ULIPs, are the returns really guaranteed after 10 years????? as claimed in TV ads

Kind Regards
Team EquityMarkets
www.theequitymarkets.com