Final word on Ulip fund investments from Irdai in Aug

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Mumbai | Updated: July 29, 2015 3:41:31 AM

Irdai in the first week of July had sent exposure drafts on investments that mandated at least 25% of unit linked insurance plans Ulips funds to be invested in central government securities.

Insurance regulator, Insurance Regulatory and Development Authority of India (Irdai) is set to come out with final ruling on various issues pertaining to the insurance industry in its board meeting. The meeting which is likely to be scheduled in the second half of the August will review draft guidelines which mandates at least 25% of unit linked insurance plan (Ulip) funds to be invested in central government securities. It will also decide on commissions given to the distributors on the initial premium in life insurance.

A member of the Irdai on condition of anonymity said, “Few other issues will be discussed, but we hope to take some final verdict on the issue of Ulips and commissions. In the next few days we will get the views from the life insurance industry and findings of the view will be discussed in the meeting.”

Irdai in the first week of July had sent exposure drafts on investments that mandated at least 25% of unit linked insurance plans Ulips funds to be invested in central government securities. However many players in the industry believed that, this move will lead to less participation from the retail investors. Later, Life Insurance Council, an apex body of life insurers along with representatives from the life insurance sector met the insurance regulator with their views .

Insurance regulator had also sent a note to life insurance companies on commission structure and restrict the expenses that insurance company can charge on premiums. Currently commissions as high as 25-30% of first payments on policies are paid to the distributors. Subsequently, the quantum of commissions goes down as the investor stays in the product.

“Both are important matters and we hope that we get some clarity on the issues. While lower commissions can bring in more transparency and will benefit investors, but we hope that on the issues of Ulips they take some proper decision. If they mandates us to invest in 25% of Ulips funds in central government securities, there will be lower returns for investors in the longer duration. But we anticipate that, final verdict will be in our favour,” said a CEO of the life insurance company.”

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