IRDA adopts tough standards for approving new ULIPs

CHENNAI - The Insurance Regulatory and Development Authority (IRDA) is going through the new unit-linked insurance plans (ULIPs) filed for approval with a fine comb so that it is not pulled up later for laxity.

According to an IRDA official, more than 60 products have been filed for approval by the life insurers.

Industry officials told IANS that the bulk of the products filed for approval are non-pension products.

The insurance regulator had come out with policy holder-friendly regulations sometime back, capping various charges levied by the life insurers. On the pension products, IRDA has mandated life insurers to guarantee a minimum of 4.5 percent return to the policy holders.

The IRDA had said that life insurers have to design and file new products confirming to the new ULIP regulations so as to sell them from Sept 1 onwards.

“We have filed only normal ULIP for approval and not pension policy. We have to work out the 4.5 percent guarantee,” Chief Financial Officer of Bharti Axa Life Insurance V. Srinivasan told IANS.

According to him, the change in ULIP norms can be likened to detariffing (removal of administered pricing mechanism) in the general insurance sector.

While life insurance officials agree that IRDA’s much belated move is good for the policy holders, they are irked at the manner in which the former is proceeding with the approvals for new ULIPs.

“Even though the overall product framework confirms to the new norms in terms of expenses charged to the policy holders, IRDA is forcing the players to match the outgo with that of the income under each head. This is nothing but micro managing,” a senior official of a private life insurer told IANS on condition of anonymity.

According to him, the IRDA has asked companies to match the first year policy allocation charges with that of the outgos like commission paid to the distributors.

“The companies will recover its expenses over a period and in the initial policy years the shareholders may pump in money to meet the cost,” he said.

Another senior official of a private life insurer said: “The regulator has raised queries on the investment schemes which we think is largely unrelated.”

Industry officials told IANS that they had to redesign the products as IRDA had sent the clarifications raised by them on the new norms only on Aug 4 and also barred modifying existing products.

“We had to design, name and file the products. On the whole actuaries in life insurance companies and at IRDA are spending sleepless nights these days,” officials said.

However, IRDA officials were not available to comment.