Finance Minister Pranab Mukherjee today said the new guidelines for unit-linked insurance products (Ulips) will boost investor confidence and draw more customers to such schemes.
"Irda has come up with a number of regulations and guidelines especially in the area of Ulips. This initiative is in the interest of the policyholder and would help in building confidence of the prospective policyholders in the insurance products," Mukherjee said addressing the global insurance summit here.
The new Irda guidelines which came into effect from today have capped various Ulip charges, increased their lock-in period and mandated a minimum return guarantee for pension plans.
Under the new regulation, policyholders would get their money back even if they exit prematurely, as against the present surrender charges of up to 100 per cent of the premium paid.
Currently Ulip products, which are equity linked insurance schemes, account for about 80 per cent of the total premium collected by the 23 private life insurance companies.
Most of the life insurance companies have approached the Insurance Regulatory and Development Authority (Irda) for approval for new Ulip products which comply with the guidelines.
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"I am happy to note that the insurers have adapted to the new regulations. I commend the regulator and the industry for taking this very positive initiative and am sure that this process of reforms shall continue," Mukherjee said.
He added that competition has intensified in the insurance business with the entry of the private sector, but asked insurers to keep premiums at affordable rates.
"The insurers have to ensure further penetration of the health insurance in this country. Simultaneously, there is a need to concentrate that the premiums are affordable for the insured," he said.