IRDA tightens ULIP norms, says life cover is mandatory

The insurance regulator has asked all insurance firms to offer a minimum sum assured on ULIPs if the policyholder expires. It has also extended the lock-in period to five years

The Insurance Regulatory and Development Authority (IRDA) has announced some sweeping changes to be implemented in the structure of unit-linked insurance plans (ULIPs), amidst the raging battle with the Securities and Exchange Board of India (SEBI) over the regulatory purview concerning ULIPs.

In what may be seen as a desperate attempt on the part of IRDA to shore up its defences prior to its court battle with SEBI, the insurance regulator has made life cover mandatory with ULIPs (including pension/annuity products), along with a minimum sum assured payable on death. This norm will come into effect from 1 July 2010.

ULIPs, which provide health insurance cover, will be required to provide death benefits. Loans will not be granted under ULIPs. Partial withdrawal will now be allowed only after the fifth year instead of the earlier three-year lock-in period, except for pension/annuity products.

Partial withdrawal in ULIP annuity/pension products will not be allowed and the insurers will have to convert accumulated fund value into an annuity at maturity. “However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of maturity. In the case of surrender, only up to a maximum of one-third of the surrender value could be availed in lump sum and the remaining amount must be used to purchase an annuity,” stated the IRDA circular.

An official from Reliance Life Insurance believes that this is a good move from the public’s perspective and it will have only a marginal impact on the company. Another official from Bajaj Allianz Life Insurance said that only time would tell how much impact this move would have on the industry.

Every top-up (ULIP) premium will have a lock-in period of three years from the date of payment of that top-up premium. However, no top-up will be allowed during the last three years of the contract.

The move comes at a time when the matter is due to be heard in a court.
“ULIPs as a product are not bad. The problem is because they are being sold as short-term products with a long-term insurance cover. If somebody is buying a ULIP and staying invested in it throughout the year, then it is a very good product. People pay compulsorily in an endowment policy. I would say that ULIPs should be made like an endowment policy. If there is a longer lock-in period, then it is always better for the client,” said Yogin M Sabnis, MD, VSK Financial Consultancy Services Pvt Ltd. 

 “Insurers will benefit if people stay invested for a long time. The actual allocation of funds starts after three years. Unless the commission is reduced, churning will not stop. Agents will still churn after five years. There are other investment avenues where initial charges are low. Why should one invest in a ULIP?” asked Sandeep Chimanlal Vasa, chartered financial planner (CFP), Total Wealth Management.



Deepak vyas CFPCM

6 years ago

Steps taken by IRDA are in right Direction. The Common Problems faced my ULIP holders are :
1. ULIP Sold as short term product, which infact is long term.
2. Most Agent/ SM sellings ULIPS are more concerned about Commissions & rewards.
3. Lack of Knowledge among advisors how much fund to allocate between different financial Products Considering there goals ,Risk profile.
4. Assets liabilities match is not done.
5. Also Income Expenses are not considered on long term resulting in wrong recommendation or over selling of ULIP.

Deepak vyas
Certified Financial Planner
Email : [email protected]


6 years ago

this is a good step taken by IRDA to given maximum benefit to the investors.....


6 years ago

i think its a good remark


6 years ago

It's a good move on IRDA's part, however for me it seems they have left one loop hole. Generally for insurance products, agents commissions offered are higher than pension plans, so there is a possibility that Insurance companies will now add insurance component in all pension plans and would pay higher commission to agents, thereby decreasing net returns for the policy holders.



In Reply to Pranav 6 years ago

no, u r wrong


6 years ago

1ST IRDA has to tighten the examination of agent & raise minimum qualification . Anyone want to make money becomes a L I agent with the help of L I Cos & their Unit managers. they called themselves as L I advisor and starts missell ULIPs to earn more.
2nd Remove agent reqruitment target of unit managers in L I cos.They are moving door to door and catching housewives, mechanics, plumbers , shop owners, salesmans, teachers, peons, tax advocates for taking an insurance agency.
3rd Stop banks to sell insurance policies under same premises where people comes for FD/ savings & current a/c deposits. Bank executives traps and missell L I policies to get bonus, high salary and meet branch target. 4th Extend the freelook period upto one month or more. with a remark on the envelop " TO READ THE POLICY BOND IN DETAIL"


6 years ago

WHAT is ULIP? IRDA chairman should learn from UTI-ULIP, INDIA'S FIRST ULIP.How it works since 1971.Then advise to his industry.As a result poor/innocent policy holder can create their wealth,Otherwise executives/agents will create wealth.

Remittances to India in April-December 2009 at Rs2.04 lakh crore

The country had received around Rs2.34 lakh crore in remittances from Indian expatriates in the financial year 2008-09

Notwithstanding the global financial meltdown, India received a huge amount of Rs2.04 lakh crore in remittances during April-December 2009.

The country had received around Rs2.34 lakh crore in remittances from Indian expatriates in the financial year 2008-09.

Overseas Indian affairs minister Vayalar Ravi told the Lok Sabha that the country received $40,810 million (around Rs2,04,050 crore) during April to December 2009.

Remittances to India have been on the rise over the past few years and it has become one of the preferred destinations of global flow of remittances.

The minister said that in 2006-07, the country had got $30,835 million in remittances while the amount increased to $43,508 million in 2007-08.

The Gulf region accounts for an average of 27% of the total remittance inflows into India, with major source countries being the UAE and Saudi Arabia.

The Reserve Bank of India recently had said that North America continues to be the most important source of remittances to India despite its share in total remittances falling to 38% from 44% in 2006.


Gold falls by Rs135 on weak global cues

Analysts said that reports of sovereign debt rise spreading beyond Greece weighed on other financial markets worldwide and investors preferred the dollar as a safe haven

Gold prices today fell by Rs135 to Rs 17,250 per 10gm on the bullion market here on heavy selling by stockists after weak global cues, reports PTI.

Silver prices nosedived by Rs900 to Rs27,850 per kg.

Gold in overseas markets, which normally set the price trend on the domestic front, dropped 0.4% to $1,166.55 an ounce after the dollar rose on European debt woes and a report showing an unexpected jump in US factory orders.

Analysts said that reports of sovereign debt rise spreading beyond Greece weighed on other financial markets worldwide and investors preferred the dollar as a safe haven.

Low retail demand for gold due to off-marriage and festival season also put pressure on the metals, they added.

Standard gold and ornaments plunged by Rs135 each to Rs17,250 and Rs17,100 per 10gm respectively. They had gained Rs155 in the three previous sessions. Sovereign, however, closed flat at Rs14,150 per piece of 8gm in restricted activity.

Similarly, silver ready dropped by Rs900 to Rs27,850 per kg and weekly-based delivery by Rs1,130 to Rs27,300 per kg. Silver coins fell by Rs200 to Rs33,700 for buying and Rs33,800 for selling of 100 pieces.


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