IRDA caps charges for ULIPs

Insurance Regulatory and Development Authority (IRDA) today put a cap on overall charges that life insurance companies can levy on subscribers of their Unit Linked Insurance Policies (ULIPS), the products which could be invested in equity markets.

For those products which have maturity of 10 years, insurance companies have to maintain the difference between gross yields and net yields at 300 basis points.

When various charges levied by insurers are added on to net yield, it becomes gross yield.

"The difference between gross yield and net yield cannot exceed more than 300 basis points," IRDA chairman J Hari Narayan told PTI.

Of this, fund mangement charge cannot exceed 150 basis points.

For those products which are of tenor of over 10 years, the difference between gross and net yields cannot exceed 225 basis points, Hari Narayan said. Here, fund management charges cannot exceed 125 basis points, he added.

Justifying lower cap on charges for longer term insurance ULIPs, IRDA said in a circular here, "Insurance products are long term saving vehicles and the policy prescriptions should help the customers' to move towards long term savings cum protection rather than short term one."

MetLife India Insurance Company Managing Director Rajesh Relan said the regulation is likely to help in the long term nature of the business which is the real essence of insurance.