BS Reporters / Chennai/Mumbai Aug 08, 2009, 00:01 IST
In an attempt to check mis-selling, the Insurance Regulatory and Development Authority (Irda) is planning to increase the lock-in period for unit-linked insurance plans (Ulips) from three to five years.
Talking to reporters on the sidelines of an insurance seminar, Irda member R Kannan said the regulator was taking steps to address concerns over mis-selling.
He said the move would reduce the problem of policyholders letting covers lapse and also benefit companies as it would help them minimise their administrative and marketing costs. “We are waiting for a consensus on the issue,” Kannan said. A senior executive at a large private sector insurance company said that the minimum tenure for a Ulip was five years at present, but partial withdrawals were allowed after three years.
“If the intent is to allow partial withdrawals only after five years, then it is good since insurance is a long-tenure product,” he said.
The chief executive officer of one of the country’s largest life insurance companies said that he had not heard of any industry-level discussion on the issue. He, however, added that the move would be beneficial for both policyholders and insurers. “Given the cost structure, returns would be better in case of a mutual fund if the investment tenure is five to six years. It makes sense to invest in Ulips only if you want to invest for at least seven or eight years,” he added
However, Future Generali Chief Actuary G N Agarwal said the move would benefit the mutual fund industry as the interest of Ulip buyers might be affected since they have to wait for five years before they could exit.
In recent months, Irda has tried to tighten regulations on Ulips. First, it put in place systems to ensure that policies were not front-loaded in terms of premium payment. Last month, it also reduced the charges levied on Ulips, though the circular was expected to be modified to factor in industry concerns.
Each insurance company takes it s major share f charges from the customer.
Unless the first premium is recd, the company donot process the applications. It goes the so called underwritters, who take thier onw time to clear, object etc on the proposals forms. Menatime, the cusomters first premium is not growing. Not invested in theUnits. Once the proposal is rejected, the money is refunded without any interest or so. It is aloss for the customer. The IRDA shold look in to these small aspects also. There are few companies , which are very rigid in the documnets. Thye donot accpet a proposal from woman wehn his husband is NOT insured. Thye want her income proof,his slalary. Interest income, dividend income is not taken in to account to consider this....Many things to change by IRDA.
Content Guide
