IRDA to make ULIPs investor-friendly

    Insurance  regulator IRDA, which has won its turf war with market watchdog SEBI over
regulation of ULIPs, is expected to tighten norms for these schemes,including  commission charges,to make them,attractive for investors.

     There would be stricter and stringent distribution norms, leading  to lowering of commissions on the sale of such products, sources said.

          
   Currently, commission charges are as high as 50 per cent of the first-year  premium.

          
    According to IRDA Chairman J Hari Narayan, it will frame new guidelines for  these products to make them more attractive for policy holders.

          

    At  the same time, the regulator plans to come out with directives to improve the  transparency element of such hybrid products, which involve both investment and  insurance.

            

   The  regulator will also try and address the issue of increasing the lock-in-period  and raising life cover.

             
   These products need to be more transparent and whatever commission and expenses  are built into the product should be disclosed explicitly in a simplified  format, sources said.

           
    Indicating that IRDA would continue with its reforms of ULIPs, Finance Minister  Pranab Mukherjee had said, “I understand that Insurance Regulatory and  Development Authority has taken some very positive steps in respect of  regulations of ULIPs, which are in the interest of both the insurance industry  as also the policyholders.”

            

    “I am sure that the insurance industry and IRDA would continue to bring in these  reforms so that the interest of all the stakeholders are secured,” he said earlier this month.

             
    IRDA has already taken some measures like imposing a cap on ULIP charges,  extending the minimum term of the policy to five years, introducing the concept  of compulsory annuitisation in pension policies and fixing the maximum limit of  surrender charges.

             
    In order to put more money in the hands of investors, IRDA recently said that  insurers cannot charge a fee for surrendering a unit-linked insurance policy  after five years. 

     Insurance companies used to charge a nominal fee for customers  to withdraw their unit-linked policies even after expiry of the lock-in period.

            
    However, policies withdrawn during the lock-in compulsorily attract a high  surrender charge.