Insurance agents of all life insurance companies selling unit linked insurance plans (Ulips) will now show rate of returns ranging between 6 and 10 per cent to customers.Last month, the Life Insurance Council, (a self-regulatory body of representatives of all life insurance companies) agreed to project returns for Ulips at a rate between 6 per cent and 10 per cent.This is a step in the direction of the Life Insurance Council's initiative to implement an Apex Code of Best Practices for various activities, products and processes related to the life insurance business.Ulips are investment plans similar to mutual funds. The premium minus the charges (mainly expenses incurred by an insurance company) is invested in a fund of the choice of the policyholder. Ulip returns are dependent on the performance of the fund chosen, which, in turn, depends on the performance of the stock market.However, agents are known to lure customers into Ulips by offering them astronomical returns and guaranteed benefits. Some sales promotion materials which have been brought to the notice of Insurance Regulatory and Development Authority have projected a growth of 25 per cent per annum.It is felt that agents push Ulips more simply because they get a higher commission, even up to 35 per cent in the first year against only 20 per cent for traditional products. Also, the risk in a Ulip is borne by the policyholder and not the insurance company.At the meeting, council members also deliberated on getting the illustration signed by the customer to ensure that realistic and correct details are disclosed to the customer.A CEO of a life insurance company said, "Getting the illustration signed will result in a loss of time for agents. The insurance market is now moving to rural areas where there is lack of infrastructure and IT tools. Every time a customer changes the sum insured, policy term, or the riders, a fresh illustration will have to be generated from the main office and taken to the customer for signature.The policy pack that is given to the customer contains a specific illustration. Also there is a 15-day free look-in period wherein the policyholder can cancel the policy if he does not want it.S V Mony, secretary general of the Life Insurance Council, said, "The Apex Code has been recently approved for adoption and is now in place. However, getting the illustration signed has not been agreed upon by insurers."Irda is also considering taking several measures to curb the wrong methods being used in selling Ulips.Irda Chairman, CS Rao, said at a seminar recently, "We are examining several measures to curb the mis-selling of Ulips, such as the possibility of lowering the agents commission for Ulips, the agent filing with the insurer, as part of the policy document, a list of items which he has disclosed to the customer, and the customer attesting that he has fully understood the implication of his investment decision. Also, the illustration should show the rate of returns at 6 and 10 per cent."
