After a long delay, the controversial Unit Linked Insurance Plans (Ulips) known for their complex charge structures, names and jargon, are set to come under common standards.
The Life Insurance Council (a self-regulatory body of 22 life insurance companies) has decided to standardise the formula to calculate charges linked to Ulips and also make uniform the nomenclature of charges, to enable customers to make easier comparisons between policies and plans.
At present, insurers use different terminologies and have divergent methods of deducting charges. Often, buyers have complained that this makes the task of selection more complicated for them.
Speaking at an industry round-table, SB Mathur, the council’s secretary-general, said, “We have initiated an exercise to standardise the nomenclature and have a common method for calculating the charges. This will make it easier for buyers to compare products across companies.”
Mathur said charges such as entry charge, risk premium charge, accidental benefits, mortality premium, health premium, disability premium will be calculated between plans in the same way, and implementation will start in July selectively.
“We have also proposed to the insurance regulator that the benefit illustration also give the internal rate of Return (IRR) on a product,” he said.
Ulips are insurance-cum-investment products where a part of the premium goes towards a life insurance cover while the rest is invested in equities or government securities, as preferred by a policyholder.