Amidst the reigning controversy over who will regulate Unit Linked Products (Ulips) and Sebi moving the Supreme Court, the Insurance Regulatory and Development Authority (IRDA) has come out with new guidelines on Ulips. These aim to make it look more an insurance product and thus weaken Sebi’s argument that Ulips is an investment product.
The guideline, which comes into effect beginning July 1, has revised the minimum policy term for Ulips from three years to five years for all individual products. It says that partial withdrawal will be allowed only after the fifth year and that too for products other than pension/annuity products for which no partial withdrawal shall be allowed. “Earlier one could have withdraw the full amount (except for pension/annuity) by paying a cost,” said a financial planner.
IRDA has also said that all top-ups must have an insurance cover and all linked products must have a minimum sum assured payable on death. Experts say that these moves of IRDA are intended at weakening Sebi’s case against Ulips.
“By these moves IRDA is trying to convert investment products of insurance companies into insurance products on which Sebi was contending,” said an industry insider. Insurance companies, however, welcomed the move. “We will abide by the new guidelines as directed by the regulator,” said a insurance company official.