Bowing down to pressure from life insurance companies, the Insurance Regulatory & Development Authority (IRDA) has issued a clarification and completely eased the norms concerning mortality charges on unit-linked insurance plans.
The clarification issued on Thursday said that insurance companies will be free to decide the mortality and morbidity charges in a Unit Linked Insurance Plan (Ulip). The norms issued last month had said that for policies with a tenure up to 10 years, the charges levied by an insurance company cannot exceed 3 per cent of the total returns including mortality charges. However, the regulator has revised this norm by excluding the mortality charges out of the total cap on the charges.
“There will be very minimal impact on the return for policyholders as 80 per cent of the Ulip products today anyway meet the current norms where the difference between the gross and the net returns (after deduction of charges) does not exceed 3 percentage points over a 10 year period,” said Yashish Dahyia, CEO, Policybazaar.com.