ULIP policies must come with life cover: IRDA

Insurance regulator IRDA, locked in a turf war with capital market watchdog Sebi over regulation of unit-linked policies, has reemphasised that insurers should offer assured life insurance cover with ULIPs.

Reiterating its December 2005 order on ULIPs, IRDA in an order late last night said: "All Unit linked Insurance products (ULIPs), including pension/annuity products must have a minimum assured sum payable on death."

IRDA's assertion that ULIPs must provide assured insurance cover is one among the several it has passed recently following a row with the Securities and Exchange Board of India (SEBI) over who should regulate ULIPs.

Sebi claims that it was best suited to regulate ULIPs as they were investment products like mutual funds.

In yesterday's order, IRDA, however, clarified that provision of death benefit will not be mandatory in case of unit linked products providing health insurance cover.

ULIPs, it further said, cannot be used to obtain loans. "No loan shall be granted under Unit Linked Insurance Products."

IRDA further said that minimum policy term would be five years in the case of individual products, while the group products would continue to be renewed annually.

Partial withdrawal from the policies, IRDA said, would be allowed only after the fifth policy anniversary for all unit linked products, except pension or annuity products.

In the case of unit linked pension or annuity products, no partial withdrawal will be permitted and the insurer will be allowed to convert the accumulated fund value into an annuity only at maturity.

Every top-up premium will have a lock in period of three years from the date of payment of that top-up premium, it said, adding they will not be allowed during the last three years of the contract.

The revised norms, IRDA said, will come into effect from July 1, 2010.

IRDA is locked in a turf war with Sebi over control of ULIPs. The problem came to fore after the insurance regulator advised 14 insurance companies to ignore the SEBI's order banning ULIP schemes.

Both the agencies were later advised by the Finance Ministry to seek a legally binding order from a court over control of ULIPs.

Meanwhile, Sebi had moved the Supreme Court to transfer all cases pertaining to ULIP issue to the apex court, following which notices were sent to the Centre, IRDA and 14 insurance companies. The next date for hearing has been fixed on July 8.