The new norms for unit-linked insurance plans (Ulips) released on Monday are part of the periodic review of regulatory guidelines on various product portfolios, Insurance Regulatory and Development Authority (Irda) Executive Director A Giridhar said on Tuesday.
He also hoped the new norms may help address some of the issues currently being debated.
The new circular is purportedly aimed at silencing the capital market regulator Securities and Exchange Board of India (Sebi), engaged in a row over jurisdiction of these products.
“Every year we review various products, their regulations and other related issues. This will be done based on the statistics and numbers that we receive every year from insurers. The new norms are part of this periodic review,” he said.
Irda Monday raised the minimum term for such policies to five years and also increased the risk cover. Earlier, policyholders could surrender Ulips after three years. The new norms come into effect from July 1. The new norms also stipulate that partial withdrawals from Ulips will be allowed only after five years.
In the case of unit-linked pension plans and annuity products, no partial withdrawal will be allowed.
“After the review, we realised that earlier norms need to be redesigned. The fresh circular reiteration of earlier guidelines apart from the new changes,” Giridhar said.
According to him, Irda’s intention was to make insurance companies’ functioning free of complaints.
This is the second circular from Irda after its spat with Sebi started last month. Last week, Irda had asked insurance companies to disclose commission paid to agents on Ulip sales.
Last month, in its order barring 14 life insurers from selling or renewing Ulips, Sebi had said pension plans sold by them were similar to some of the products sold by mutual fund companies.
Sebi had earlier sent show-cause notices to insurance companies for launching Ulips without taking its approval.
After the turf battle between Sebi and Irda over Ulip, jurisdiction reached the government, the two regulators were directed to jointly approach the court to find a resolution. The Supreme Court will hear the case in July.
