Life insurance companies have asked the Insurance Regulatory and Development Authority (Irda) not to cap charges on universal life policies (ULPs). “The regulator should wait for three-four months to see how unit-linked insurance plans’ (Ulips’) sales have picked up before taking any call on ULPs. In a free market, prices should be determined by the market,” said Sunil Kakar, chief financial officer of Max New York Life.
The insurance regulator had recently expressed concerns over ULPs and indicated strict guidelines, including capping of charges. Complaints of life insurers promoting ULPs like Ulips has prompted Irda to check the charges.
“We have to see what the level of cap is. It is not appropriate for the regulator to control price. There is a ceiling on the overall expenses and companies functions well within it,” said a senior executive at a life insurance company selling ULPs.
Sources close to the development said insurers had conveyed the regulator not to put any ceiling on charges in ULPs. Irda has not cleared any ULP for the last three-four months.
ULPs are a combination of Ulips and traditional products. So far, there is no separate guideline for this complex, hybrid product. Like Ulips, the premium amount is invested in bonds and equities after deduction of mortality and other charges.
According to the present guidelines, commission on single premium is capped at two per cent. For pension products, it is capped at 7.5 per cent, while for any other insurance product, it can go up to 40 per cent.
After September 1 changes to Ulip norms, commission to agents declined to seven to nine per cent from 12-15 per cent. Experts expect the volume to pick up as new norms boost policyholders’ confidence.
After the new norms came into force, insurance companies have started selling more traditional plans along with Ulips and ULPs. While the regulator has cleared two-three Ulips per company, there are some 10-15 products still lying for approval. It is likely to approve all products in a couple of days.