Regulator acts like an industry association; IRDA promotes ULIPs!

The insurance regulator has launched an unprecedented advertising campaign, hard-selling ULIPs. Not only is this a bizarre action for a regulator, but the ad is also misleading as it fails to provide any concrete evidence of ULIPs’ superior performance

Can you imagine the Reserve Bank of India (RBI) hard-selling recurring deposit schemes of banks or the Securities and Exchange Board of India (SEBI) bombarding investors with ads asking them to buy infrastructure funds? That is exactly what the Insurance Regulatory and Development Authority (IRDA) is doing.

IRDA recently launched an advertising campaign promoting unit-linked insurance plans (ULIPs) for pensions. The ads seek to educate investors of the benefits of ULIPs in providing for regular income or pension during retired life. However, in its attempt to hard-sell ULIPs, IRDA has brought out an ambiguous and misleading ad.

A ULIP is a life insurance policy, which provides a combination of risk cover and investment. It is the most common ‘insurance’ plan sold by life insurers and is quite popular among investors, thanks to massive promotions and incentives. The ad basically tries to impress upon the reader that a ULIP is a sound investment option if one is looking out for regular income during retired life. However, there are several issues with the claims made in the ad.

First, it has failed to substantiate this argument with any comparative indicators as to the returns that the product is likely to generate over a period of time. The ad provides no factual basis for making claims that ULIPs are the right product to ensure that you are well-provided for in your retirement. There is no comparative data of the returns of other long-term investment products, to underline ULIPs’ superiority.

The fact is that IRDA or anybody cannot provide this comparative information. This is simply because ULIPs have no track record. Who can say how ULIPs would do over, say, 30 years? Even products with established records do not perform as per their promise. What if ULIPs turn out to be the worst option between bank recurring deposit schemes, balanced funds, New Pension Scheme and even diversified equity funds? There is no guarantee that a ULIP will provide the holder with a safe kitty once he reaches retirement. If so, is the regulator pushing the investors into a wrong product?

Second, what is the rationale behind the insurance regulator recommending an investment product? The main purpose of insurance is to provide protection to the policy-holder and is not meant for generating investment returns.

Third, the ad also appears vague in advising the reader on the tenure of investment. It says, “If the term is too short, the policy accumulation would be insufficient for a pension corpus. If you stretch the term too long, you may end up being required to pay premium when you would actually like to receive pension payouts.” The obvious question that arises here is what term or period is ideal for a ULIP? The ad leaves this bit of information hanging in thin air.

Fourth, as we mentioned in the beginning, it is bizarre that IRDA as a regulatory authority should be expounding the benefits of a single product type. The fact that it is touting the benefits of ULIPs while ignoring other products is surprising. If instead it were to launch a public awareness campaign highlighting the benefits of insurance, it would make more sense.

Interestingly, IRDA’s advertising blitz comes at a time when it is waging a war with SEBI over the regulatory purview of ULIPs. Moneylife tried contacting some industry experts on their views on this matter, but no one appeared to be willing to speak on this strange ad. 

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    sanjay singh

    9 years ago

    ULIP is probably the best thing to have happened to the insurance industry in a long time. Majority of the people who comment against ULIPs are those who have little or warped knowledge of this product. I am not saying that there is no misselling of ULIPs at all. But don't blame the product for the misdeeds of the few. Sell / Buy ULIP as a long term insurance plan with a high insurance cover. And you will never lose


    10 years ago

    It's a shame that instead of regulating the ULIPs, especially expenses and the mis-selling parts, IRDA is promoting ULIPs. In my opinion, the minimum period of investment of ULIPs should be raised to a minimum of ten years to prevent so much mis-selling by the agents who just states that the insured needs to remit money for just three years. They are even advising investors withdraw the money after three years and re- invest to generate exorbitant commissions. At least the collection of some charges by the companies by the cancellation of the units should not be allowed in any case. If the IRDA allows such daylight robbery, may I ask why they are still called a regulator.


    1 decade ago

    What is the issue:-
    Govt marketing
    or wrong marketing
    If issue is Govt marketing point taken but then govt does market many products, ULIP is just another... maybe there was a better way to do it
    Wrong marketing- if pvt company does its all ok, ig govt does any advt... we rape is thread bare! Actually we r double standarded


    1 decade ago

    There are many instances now that Highest NAV Gauranteed products are sold by distributing pamphalets that guarantee high figures sometimes even bearing Company logos.
    IRDA does nothing.
    And why buy a product that has such a high cost?
    SIMPLE-Your AGENT & his company wants to become rich by taking money from your pocket.

    Anadi Shankar Biswas

    1 decade ago

    A timely & good article. These days ULIPs are being blatantly mis-sold & the LIC of India has also joined the band-wagon since 2007 (Money Plus days). The IRDA should take steps to stop mis-selling. Like in Mutual Funds some statutory warning should be boldly printed in the ads & application forms like "Investment in ULIPs are subject to market risks & the buyer should satisfy himself of the monetary returns before buying the L I policy"


    1 decade ago

    ULIP is probably the best thing to have happened to the insurance industry in a long time. Majority of the people who comment against ULIPs are those who have little or warped knowledge of this product. I am not saying that there is no misselling of ULIPs at all. But don't blame the product for the misdeeds of the few. Sell / Buy ULIP as a long term insurance plan with a high insurance cover. And you will never lose


    1 decade ago

    Each ULIP scheme should clearly mention how much expenditure is incurred on the investment and the track record clearly.
    IRDA is like what was SEBI intially.

    Hemant Beniwal

    1 decade ago

    Insurance in India is an institutional Fraud.

    dillip swain

    1 decade ago

    First chairman of irda who was chaired without life cover. In orissa there is a saying 'BANJHA KI JANE PRASABA BEDANA'.So X-chairman forming rules without buying life insurance.Now New chairman campaining ads in favour of ulip,why not TERM INSURANCE.It is millibhagat work between L.I. companies & irda.govt should form a separate to watch role of irda .

    R Balakrishnan

    1 decade ago

    It is a wake up call for a dodo organisation called AMFI. This has provided the right opportunity to respond with aggressive advertising, stripping the ULIP bare.
    Alas, AMFI will NEVER wake up. The old team did NOTHING and the new avatar it is taking is becoming a division of SEBI.
    SEBI, of course, promoters insurance, by hitting at mutual fund industry.

    Mehul Mehta

    1 decade ago

    Unsure of what it's supposed to do to be in the limelight or to make its presence felt, IRDA seems to have been misguided by marketing geniuses. Shall we say IRDA now means I'd Rather Do Ads...


    1 decade ago

    IRDA has lot of DEAD WOOD of aged persons -may be retired from LIC/GIC who have not been trained to learn difference between Protection ( Insurance ) and Investment.

    IRDA and its officials ARE NOT AT FAULT. GOD only can save indian policy holders and investers.

    I fail to understand how IRDA will protect policyholder's interest???


    1 decade ago

    Thanks for being bold!

    priya Kapoor

    1 decade ago

    Yeah..I also came across this advertisement by IRDA and was wondering how can a regulator promote a particular product without any comparitive analysis with other products. Though ULIP is beneficial in the long term, it doesn't imply that it would work the same for every individuals as socio-economic condition, risk appetite and responsibilities of each is different. Also, he may achieve the same goal by investing in other products..Such a hard selling ad by the regulator is certainly worrisome...I endorse that a general ad about significance of insurance would have hold it in high esteem rather than trying to hard sell a particular product.

    R Murugan

    1 decade ago

    I had some time back sent photocopy of a pamphlet circulated by an agent of SBI Life promising very high returns on some SBI life schemes to IRDA and SBI Life.
    IRDA replied that the mail had been forwarded to SBI Life. SBI life said the agent had been informed not to mislead the public. IRDA did the job of a post office and naturally SBI Life did not bother to take any punitive action against the agent.This is the sorry state affairs.

    Markets taking the path of least resistance

    Domestic bourses may keep rising as long as overseas markets stay firm

    The market was range bound throughout the day. The Sensex gained 59 points (up 0.34%) to end at 17,578 and the Nifty closed at 5,262—16 points higher (up 0.32%) over the previous day’s close. The key benchmark started the day with a gain, which was, however, trimmed shortly. The broader market traded at a narrow range throughout the day, touching an intraday low in afternoon trading. It recovered from the low of the day to end the day with a gain.

    Yesterday, the Dow Jones Industrial Average closed 45.50 points (up 0.42%) higher at 10,779.17. The Nasdaq Composite ended at 2,391.28, up 2.19 points (up 0.09%). S&P 500 was down 0.38 points (a dip of 0.03%) at 1,165.83. Almost all Asian markets were in the black.

    The market may remain volatile in the near term as traders roll over positions in the derivatives segment from the March series to the April series ahead of the expiry of the near-month March derivatives contracts on Thursday, 25 March 2010.

    European markets were higher on Friday, led by bank stocks. The key benchmark indices in France, Germany and the UK rose by 0.35% to 0.56%. We were expecting a small dip since the market is in an overbought mode. But the market may keep rising as long as the overseas markets stay firm. Low interest rates continue to attract money into risky assets like equities. The market always takes the path of least resistance and the current path is up—until a big shock comes from somewhere.

    In the domestic market today, the biggest gainers were Bharti Airtel (up 3.95%), Reliance Communications (up 1.98%), Hero Honda Motors (up 1.76%), State Bank of India (up 1.42%), Hindustan Unilever (up 1.40%), and Reliance Industries (up 1.37%).  Infosys fell 0.47% on profit-taking after hitting an all-time high of Rs2,792.15 on Thursday.

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    Bank harassment driving SSI units to sickness

    Infinity Metals, an export-oriented SSI unit, has been struggling to keep itself afloat after its bank systematically abused the SARFAESI Act and harassed it into near-bankruptcy. Denied justice by the ombudsman, the troubled unit is now left gasping for breath

    At a time when small-scale industries (SSIs) are being given ‘priority treatment’, many units continue to be left at the mercy of callous and grasping banks. One such unit, Infinite Metals, is being systematically dismantled by its banker under the umbrella of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and despite its desperate cries for help, regulators and authorities continue to turn a blind eye. The Act empowers banks and financial institutions to recover their non-performing assets (NPAs) without the intervention of the Court, through various methods.

    The case of Infinite Metals shows how SARFAESI’s draconian powers are misused by banks against small companies. Infinite Metals is a small-scale export-oriented unit (EOU) which is facing a daily battle for survival as its lender, Corporation Bank, is unfairly utilising the provisions of the SARFAESI Act to force the otherwise healthy unit into sickness.

    The Bank has been resorting to various strategies to recover its claimed dues. The unit alleges that Corporation Bank wrongfully classified its account as an NPA, when there were no overdue amounts. Its accounts were immediately frozen following this classification, which prevented the unit from access to working capital. It states that in order to justify the NPA classification, the Bank has been cooking up the amounts and due dates in various submissions to the Reserve Bank of India (RBI) and the Banking Ombudsman (BO). The Bank apparently also failed to give due notice of the account becoming an NPA before enforcing the SARFAESI Act on the borrower. The Bank also blatantly refused to make any efforts towards restructuring the unit’s debt and helping it get back on its feet.   

    Following such harassment, Infinite Metals filed a complaint with the BO to get justice and protection. The BO, after a detailed investigation and written and oral submission from both parties, finally concluded that there was indeed a deficiency in service on the part of the Bank on all points mentioned in the complaint.
    However, a year later, the BO unceremoniously closed the case on the grounds of lack of adequate documentary evidence and failed to issue a decisive order.

    Emboldened by this move, Corporation Bank promptly stepped up its harassment and threatened to sell the unit’s residential property under the SARFAESI Act.

    The Bank finally succeeded in arm-twisting the unit into selling its property, for which the unit had to pay a capital gains tax. It has also lodged a recovery suit at the debt recovery tribunal (DRT). This is despite the fact that the unit has paid the Bank 100% of its principal dues. Corporation Bank is now choking the unit into paying up the inflated principal and outstanding interest. {break}

    Harish Bhatia, director of Infinite Metals, points out how the Bank has refused to follow RBI guidelines. “Corporation Bank has wrongfully invoked the SARFAESI Act within three months of NPA classification. It has not followed any RBI guidelines in this matter. Despite accepting the fact that no dues were outstanding, the Bank has gone ahead and invoked SARFAESI. Also, when the credit facilities were guaranteed by Export Credit Guarantee Corporation of India Ltd (ECGC), what was the legal reason for the Bank to come on us so hard? The BO’s decision to drop our case is simply baffling. In my belief, it is a clear case of corruption and malafide intention on the part of the Bank.”

    When contacted by Moneylife, an official from Corporation Bank claimed that the Bank has followed RBI’s guidelines on the SARFAESI Act and that it is yet to receive 100% of its dues. “Bank classification of NPA is nothing to do with the ECGC’s claims. They have their own way of settling things. It could have taken a long time for them to actually conclude investigations and settle the claim.”
    When asked why the Bank did not attempt to restructure the unit’s debt, the official said, “The company should have initiated a definite proposal for restructuring if it so wished.”

    The BO’s failure in providing justice to the unit has now left it at the mercy of the lender. Continued harassment at the hands of the Bank will only drive the unit further into financial losses, ultimately leading to its closure. The unit’s appeal to the RBI against the BO’s decision has been referred back to Corporation Bank. However, no reply has been forthcoming from the Bank and hence, the appeal is held up. In this scenario, the SSI unit now appears to have nowhere to turn to. It certainly cannot expect to get justice from the civil courts, where various cases have been pending for ages.

    Ironically, an RBI survey itself points out that only 4% of sick SSI units are viable. “Has anyone tried to check how many of these sick units are a case of bank-induced sickness? Are 96% of our SSI brethren such dumb entrepreneurs,” asks Harish Bhatia.  

    The fact is that many such small businesses are being subjected to torture and harassment at the hands of bankers with selfish interests. While it is very easy for bigger companies to have their way with the banks and the judiciary, small businesses with no clout always end up on the losing side.

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    dhaniram gupta

    9 years ago

    dear sir
    my naame is dhani ram gupta maine 6 month se 3 time sbi me tm ke liye apply kar chuka hu par banks wale sunte nahi hai mine ek mail dgm and sbi customer cre me ki phir bhi koi feed baack nhi mila


    Harish Bhatia

    In Reply to dhaniram gupta 9 years ago

    Dear Guptaji,

    Aapne kis type ke loan ke liya apply kiya hai??
    AAp koun se sheher se ho. AAP apne ilake ke Banking Ombudsman ko complaint kar sakte ho.


    10 years ago

    Yes the act is SARFAESI draconian in terms of borrower rights.

    Imp: Like indeed 1000 SSI units shall first start Signature action to Finance Ministry, President and MSME ministry as step 1

    Secondly file SLP in supreme court by at least 25 like minded and sufferers.

    • Bank will entered in to a business deal by lending money for the purpose business. It is unfortunate that FIs are blessed with the kind of powers to go beyond business under this act.
    • The kind of actions FIs take under this act in most of the cases effect the future, and peaceful life of the borrower after from social damage.

    • The banks abuse the SARFAESI act to arm twists the borrowers to extract extra funds, charge extra interest and some times bribes. The act itself is one sided and gives immense powers to lending FIs curtailing the basic rights of borrowers.

    • In case of cases of SSI units the whole asset either capital, liquid , real estate will be locked by the bank or the customer at any point of time. Banks applying SARFACEI locking up every opportunity and arm-twisting the SSI borrower to pay other wise auction all the assets is nothing but barbaric.

    • Even when the dues to FIs are fractional amount of the assets pledged/ mortgaged FIs will conveniently auction the total assets in association with land mafia and Scrap dealers and sell the assets at much lower prices and also adjust the sale receipts towards inflated dues and interest leaving the borrowers on road.


    Harish Bhatia

    In Reply to srinivas 10 years ago

    Hi Srinivas

    Let us start a signature action for Finance Ministry and also action for filing SLP in Supreme Court. Ours is live case on misuse of sarfaesi act. We are an SSI-EOU manufacturing unit. Its a case of bank induced NPA even though there were never any dues or overdues.

    Our account was never classisifed as NPA, Sarfaesi was invoked, home auctioned, 100% principal dues paid, entire advances were guaranteed by ECGC, refused upgradation of accounts to standard even after payment of all dues, etc etc.

    The Bank officials have butt kicked all RBI guidlines on asset classification, SSI rehab., Codes on Lenders liability, SME, Fair practises, Sarfaesi act., etc.

    The bank does not want release securities by inflating Interest rates and charging interest even after payments have ben received.

    Bank filed recovery suit at DRT even after 100% payment is made. We are dragged into litigation for probably 10 years.

    We are paying the price for honesty. RBI refuses to intervene and is actively sheilding the bank inspite of detailed investigation and documentary evidence.

    We are as good as street beggars. Over 50 employees and their family are sufferers. 3 of our suppliers are NPA with their banks because we could not pay them.


    In Reply to Harish Bhatia 9 years ago

    Please take little pain to publish through the local SSI association (Monthly Magazine)

    I will try to get the same to be published in few more associations.

    We need at least 25 cases to start a moment

    Harish Bhatia

    In Reply to srinivas 9 years ago

    Dear Srinivas,

    I give below my contact details. Please send me your so that we could communicate and coordinate the action faster and in a organised manner.

    Harish Bhatia
    C 83 Sita Sadan, Skybuild Village
    Behind: Bhatia School, Opp: Dev Nagar
    Kandivali West, Mumbai 400067, India
    Tel: +91 98208 03444
    E-Mail: [email protected]


    10 years ago

    From: Dr. A. R. Kamboj,( proprietor),
    Linear Pack, 208/5, G.I.D.C.,
    Godhra. Dist Panch Mahal, Gujarat.

    Mobile : 094298 46425

    Dear Sir,

    My unit was funded under self employment technical entrepreneur equity fund scheme , to the tune of 96% project cost, under credit Guarantee scheme, in the year 1986.The unit could not took off due lack of need based working capital fund, bank took court action @ unit in Jan.1990 unilaterally. After 20 years out of which bank took almost 11 years to produce certain specific documents asked by us for our defence. But local civil court ignored the fact of breech on the part of SBI, and passed decree in favour of State Bank of India

    My unit is a documentary evidence of

    a) Incipient sickness as need based working capital was not provided by bank,

    b) Even though my unit was funded under equity fund scheme, banker asked me to provide equity funds from friends and relatives, instead of taking my required equity from national equity fund under RBI policy.

    c) Even though my unit was funded under Credit Guarantee Scheme, without any collateral security, the bank asked for collateral security to enhance my working capital needs.

    My unit is classical documentary evidence about the harassment not only by landing bank but the whole system that does not work impartially, honestly for a comman man like me.

    I am a researcher technocrat having lot many innovations to my credit along with a Indian patent about a blown film extrusion process which is first time invented in the world.

    Can you please study my unit in details b'coz my unit has find out the reasons scientifically documented to show that why in spite of the known fact that a bank does not provide a adequate & timely fund to SSI, as to why bank then does not provide these funds.

    I want to share my experience to show that on this very reason every one has remained silent so far, and my question is why?

    So please analyse my whole case openly honestly and let us team together to open the closed eyes and ears of policy makers and implementers.

    Would you require any further evidence &/ document please just ask me.

    With kind regards



    1 decade ago

    If RBI and Banking Ombudsman are listening - I would like to highlight a Supreme Court judgement in case of Canara Bank vs P.R.N.Upadhyaya wherein it states "Banking - Ombudsman is obliged to comply with directions/circulars and notifications issued by RBI - While dealing with complaints he cannot ignore circulars and directions issued by RBI."

    This way BO has to pass a decisive order and cannot close the case unceremonously.


    1 decade ago

    The root of the whole problem is RBI and Banking Ombudsman. It is well known fact that RBI would always protect the banks and Banking Ombudsman under supervision of RBI would also always prefer not to give any verdict against a bank with exceptions of small petty matters.

    Due to this attitude, it breeds corruption and high handed approach by babus mainly at Nationalised banks who religiously terrorise small individual and SSI borrowers who are always a soft target. These borrowers always bend to their whims and fancies because they have no legal remedy. Banking Ombudsman has chosen to remain impotent and toothless and civil courts like DRT work for banks, consumer courts, high courts etc have a very long back log. Further, as our fore- fathers have advised - always avoid people with Black and White coats because they make your life more miserable.

    Till RBI seriously wakes-up and also makes the Banking Ombudsman scheme Potent and Robust small borrowers shall remain in the clutches of the corrupt bank officials.

    It will be interesting to watch what verdict is given in the appeal against BO order made by this SSI borrower. I am sure the appellant authority will find someway (technically) not to pass any order favouring the borrower or for that matter against the Bank even if all glaring deficiencies in service are proved with documentary evidence.

    Ram Kishan

    1 decade ago

    Slap a dame suit against lender,
    contact Mr. Ram Kishan
    Mobile - 09302103689
    Off-cum-Res. LL - 07314049358 and 07313290201
    E-mail - [email protected] and [email protected]
    Web site -

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