IRDA has finally woken up to the ill-effects of ULPs, which we again highlighted four days ago. The question to ask is why these products were even allowed in the market? It gave insurers ample time to make a killing by charging 80% premium allocation charge in the first year as in the case of Reliance
One would think that 80% premium allocation charge in the first year would ring alarm bells with the regulator, but the Insurance Regulatory and Development Authority (IRDA) had approved one such universal life policy (ULP), launched less than a year ago. It is Reliance Super InvestAssure Plan which had 80% premium allocation charge for the first year premium.
But ULPs, which were being promoted as an alternative to unit-linked insurance plans (ULIPs) had a field day for a year. Yesterday IRDA announced an overnight ban on all ULPs. In the past IRDA gave advance notice to insurers, but companies have taken undue advantage of this and have pushed these products by positioning them as a "limited period offer".
"After examining the complaints, the authority is satisfied that universal life products need a better regulatory framework for protecting policyholders' interests," IRDA said. Interestingly, Moneylife had reported just four days ago on 18th October that IRDA will go after toxic ULPs; Reliance will be hit the most. (See: http://www.moneylife.in/article/76/10112.html).
ULPs come mainly from four companies - Max New York Life, Aviva Life, Bharti Axa Life and Reliance Life. Companies had built in high commissions into these plans. In a way, they contain the shortcomings of both traditional plans and ULIPs - high costs and pathetic returns.
Reliance Super InvestAssure Plan had 80% allocation charge for first year premium while Max New York Life Secure Dreams plan had 30% of the same. There are additional charges like policy administration charge and fund management charges that eat into investor premium.
According to industry sources, insurers anticipated that IRDA would order ULPs to be wound up effective from the end of year. This anticipation only prompted them to go all out and push this toxic product with even more vigour. It happened for ULIPs and now for ULPs. It will happen again in the future unless IRDA is proactive and not reactive.
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Instude institute a fair payout that will be good to all stake holders. insist on the education qual of the agents to be atleast grad + spl couse level. this will strength the system and make it more robust.
'Jeb jarur khali karenge' is exactly what the regulator is supposed to prevent.
The whole comparison is totally unrelaterd in terms of the type of product, sales methods, utility or any other aspect.
Now my question is why IRDA silent on Traditional plans, where companies offer around 40% as first year commission.The customer is getting peanut bonuses on maturity!If some changes can happen in this segment, lot of customers will be benefited by this. But the so called LIC agents will be the most affected and so is LIC.
Please calculate the entry charges in this policy?Is it 100%??
The regulator should protect this wonderful product till all our customers are fooled again.
better late than never!
Sorry to use such harsh words.
the IRDA should also make it mandatory that good people with more knowledge about financial products join Insurance industry and the fees of exam should also be made high as is done in AMFI.Then only the genune people will come to the industry
The issue here is about IRDA permitting & later retracting permission for these products. They are the guys who need to be answerable in the first place.There is no need to malign the poor insurance agent in the process. yes no doubt all insurance agents are not all white & clean but they will sell whatever they are allowed to sell by law
Why is it only that people think about morals & selling togetther when it comes to insurance & financial produts. Why is no noise created when market yard dalals get 200% margins betn the farmer to the end user or your TV cos charges you 50K for a TV set which costs 10K to manufacture. What about genuine people in these industries or about customer loss & welfare here