Insurance watchdog’s latest move will ensure informed decisions


Chennai : The Insurance Regulatory and Development Authority’s (IRDA) recent move to make life insurers disclose the charges levied on their unit-linked policies (Ulips) would enable policyholders to make informed decisions, said a top official.

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On Jan 1, the regulator issued a circular to all life insurers to clearly spell out the charges levied under their Ulips and the amount available for investment for each policy year.

The regulator has also stipulated that life insurers should spell out the guaranteed and non-guaranteed returns separately.

The new regulation will come into effect from Feb 1.

“The new regulation would bring in standardisation is disclosure practice followed by life insurers. A Ulip buyer can now compare the charges levied by different insurers as well as their product features,” R. Kannan, member, actuarial, IRDA, told IANS.

Currently, many life insurers do not specify the different charges explicitly, resulting in complaints of “mis-selling” by policyholders.

“Such complaints will not be there as the policyholder and the agent have to sign the table of charges at the time of signing the proposal form and the two statements will form part of the policy,” he pointed out.

Queried as to how Life Insurance Corp of India (LIC) and its one million agents are geared to meet the new regulation, G.N. Agarwal, executive director, actuarial, LIC, said: “Our IT systems are ready to fulfil the new IRDA disclosure norms”.

The new disclosure norm will help LIC agents, who can now go to town showing the insurer’s low charges compared to the competition.

According to Kannan, there is no move on the part of IRDA to stipulate any ratio of Ulip and non-Ulip sales.

“Nowhere in the world is there any such regulation. We are concerned with the solvency of the company. When the solvency norms are satisfied by the life insurers, there is no need to regulate the kind of products a company sells,” he remarked.

He also said the regulator is not bothered by some life insurers appropriating the entire first year premium paid by policyholders towards expenses.

“We ensure disclosure of various charges levied by life insurers. The decision to buy a product that has no investment allocation out of the first year premium depends on the risk appetite of a policyholder,” Kannan said.