Hike SA for single premium Ulips: Irda

In an attempt to make unit-linked insurance policies (Ulips) run parallel to endowment policies, the Insurance Regulatory and Development Authority (Irda) has asked insurers to increase the minimum sum assured or the death cover based on the tenure chosen for single premium policies.

In case of single premium Ulips with a policy term of less than 10 years, the minimum sum assured or the death cover has to be 125 per cent of the single premium. Similarly, where the policy term is 10 years or more, the death cover has to be 110 per cent of the single premium. For regular premium Ulips, there has been no change and the death cover will remain five times the annualised premium.

"The move is aimed at improving the long-term character of the unit-linked products. In the last two years, the average tenure for Ulips has come down to 8 years from 12.5. This will help companies as well as policyholders as they can now select a higher tenure and the money will remain with insurers for a longer term," R Kannan, member actuary, Irda, told Business Standard.

The new norms will come into effect from April 1.

The present norms do not specify the death cover according to the tenure of Ulip. According to existing norms, the minimum sum assured for a single premium should be 125 per cent of the single premium, while it should be five times the annualised premium for a regular premium irrespective of the tenure chosen.

With the opening of the insurance sector, Ulips have emerged as popular investment products contributing more than 70 per cent of the new business premium income of life insurers.

In December 2005, the insurance regulator had revised the guidelines for Ulips and asked insurers to modify their products as per the new norms. Insurers were asked to launch the then existing Ulips with new changes before June 30, 2006.

According to experts, the insurance regulator does not want Ulips to lose their prime focus on life insurance.