IRDA unveils overhaul of regulation of Ulips

INDIA’S Insurance Regulatory & Development Authority (IRDA) has announced new guidelines for unit-linked insurance plans (Ulips). The changes, which offer greater protection for customers if they withdraw their funds early, come shortly after IRDA won a turf war with securities regulator SEBI for the right to regulate the products. As part of that deal, mortality cover has been doubled to 10 times annualised premiums, unless the customer is more than 45 years old, in which case it is seven times annualised premiums. Another change in the rules seeks to make the products slightly less attractive to insurance agents. Insurers will now have to spread the payment of agent commissions evenly over the lock-in period of the product, which has been raised to five years from three years. Irda has also made it mandatory for all regular Ulips to have level payments, with additional payments treated as a single premium. Insurers had tended to make Ulip premiums higher in the first year, thus permitting the payment of higher commissions.