Life Insurance Council has voiced concern over the overnight ban imposed by insurance regulator IRDA on sale of universal life policies (ULPs) and has asked it to allow companies to continue with their sale till month end.
"We have voiced its concern to the IRDA on Friday. We have asked IRDA to allow companies to continue usual ULP business till October 31," Life Insurance Council Secretary General S B Mathur said.
On October 21, the Insurance Regulatory and Development Authority (IRDA) had asked insurers to stop selling ULPs till November 4 on the face of alleged violations in sale of these products.
"An overnight ban is harsh for insurance companies. They (the insurers) have to adjust claim payments and premiums that are due from policyholders," Mathur said.
ULPs are basically hybrid products between unit-linked policies and traditional plans, providing policyholders the flexibility to ULIPs while investments are more like traditional plans.
ULPs are still in the evolving stage in India, and only four companies — Reliance Life, Bharti Axa Life, Max New York Life and Aviva Life — offer these plans.
IRDA has issued draft guidelines for variable insurance plans (which would now govern the ULPs) and sought comments from companies before the end of the month.
After overhauling the ULIP policy with new guidelines effective from September 1, IRDA chairman had made references that ULPs would be the next in line for a regulatory change.
Insurance industry response was, however, mixed with some companies saying that the ban should have been imposed on companies, which were found violating norms.
"The norm should be different for different companies. It should have been a direction for companies, which have violated norms. Putting a ban overnight would disrupt the business functioning," Max New York Life MD and CEO Rajesh Sud said.
So far there are no clear guidelines for governing the functioning of ULPs. Although these products are not treated as a separate category like ULIPs, they have certain features that differentiate them from other traditional plans.