Insurance regulator to cap charges in ULIPs | business | Hindustan Times
Today in New Delhi, India
Oct 17, 2017-Tuesday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Insurance regulator to cap charges in ULIPs

Policyholders of unit-linked insurance plans (ULIPs) will soon see a higher amount of their premium being invested, with the Insurance Regulatory and Development Authority (IRDA) deciding to cap charges. The move comes close on the heels of Securities and Exchange Board of India abolishing the distribution commissions for mutual funds on June 18.

business Updated: Jul 06, 2009 00:04 IST

Policyholders of unit-linked insurance plans (ULIPs) will soon see a higher amount of their premium being invested, with the Insurance Regulatory and Development Authority (IRDA) deciding to cap charges. The move comes close on the heels of Securities and Exchange Board of India abolishing the distribution commissions for mutual funds on June 18.

ULIPs are insurance-cum-investment plans where a high portion of the premium is deducted towards charges such as premium allocation charge (this includes the commission for insurance agent), mortality charge (for providing insurance cover), policy administration charge, switching charges and other miscellaneous charges. Only the remainder is invested. As a result, ULIP buyers lose a high portion of their premium as charges to insurance companies.

“Yes, we are looking at introducing caps on charges on ULIPs, said J. Hari Narayan, chairman, IRDA. “We are looking at how to do it. We will take a decision soon.”

Explaining the move, a senior IRDA official close to the development said, “We are looking at two things. First, how to introduce a cap on the fund management charge. Second, examine if we should also have a cap on mortality charges. And three, since some ULIPs offer capital guarantee, should we consider those kinds of ULIPs or not.”