Lip service bad for Ulips, says Irda chief
Irda chairman J Hari Narayan said misselling of Ulips continues to be an issue, though there has been a marginal drop in the number of complaints.
By ET Bureau |
HYDERABAD: Unit-linked insurance products (Ulips) may be loosing sheen in a choppy market, but investors are still being taken for a ride. Irda chairman J Hari Narayan on Friday said misselling of Ulips continues to be an issue, though there has been a marginal drop in the number of complaints.
���Complaints on misselling accounted for nearly 12% of the total complaints that we received in FY08 as against 15% in FY07. But we cannot draw any conclusion based on this 3% drop. Misselling continues to be an issue,��� he said on the sidelines of a function.
Ulips are popular savings instruments as they offer protection in terms of life cover and flexibility in investments to the policyholder. A part of the premium is invested in equities or government bonds, depending on the choice made by the policyholder.
In most cases, the cost structure is front-loaded, with the bulk of the agents commission being paid in the first year. Hence, if a Ulip were to be sold to an individual with an investment horizon of only three years, most schemes are likely to result in generating returns lower than expected due to the front-end charges.
The regulator has now made it mandatory for companies to give a break up of all charges they have to pay and the exact amount that will be available for investment during the premium payment period.
Mr Narayan also said insurance companies that are planning to list will have to comply with commonly accepted benchmarks and disclosures on valuation. ���The Actuarial Society of India (ASCI) is working on these standards.
Depending on the norms, we will mandate insurers to follow them,��� he said.
The present regulation requires Indian promoters with majority holding to dilute their stakes through an IPO at the end of the tenth year of operations.
���Complaints on misselling accounted for nearly 12% of the total complaints that we received in FY08 as against 15% in FY07. But we cannot draw any conclusion based on this 3% drop. Misselling continues to be an issue,��� he said on the sidelines of a function.
Ulips are popular savings instruments as they offer protection in terms of life cover and flexibility in investments to the policyholder. A part of the premium is invested in equities or government bonds, depending on the choice made by the policyholder.
In most cases, the cost structure is front-loaded, with the bulk of the agents commission being paid in the first year. Hence, if a Ulip were to be sold to an individual with an investment horizon of only three years, most schemes are likely to result in generating returns lower than expected due to the front-end charges.
The regulator has now made it mandatory for companies to give a break up of all charges they have to pay and the exact amount that will be available for investment during the premium payment period.
Mr Narayan also said insurance companies that are planning to list will have to comply with commonly accepted benchmarks and disclosures on valuation. ���The Actuarial Society of India (ASCI) is working on these standards.
Depending on the norms, we will mandate insurers to follow them,��� he said.
The present regulation requires Indian promoters with majority holding to dilute their stakes through an IPO at the end of the tenth year of operations.
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