The new guidelines for Ulip’s which promise to give all policy-holders a fair deal, including guaranteed returns of 4.5 per cent, seem to be on slippery ground. One had expected Irda to send out a clear message to the policy-holders about the pros and cons of guaranteed returns and investment in equity-based funds which is risky but gives better returns.
We are all aware of what happened in 2002 when the Central government was forced to bail out UTI to enable it to honour its obligations in the portfolio of US64. In a free market, policy-holders ought to have freedom to opt for earning higher returns and improve profitability by investing in equity yielding 10-12 per cent compounded return over a long span of 20 years. One must bear in mind that yield will be always on a lower side under “guaranteed returns”. To cut it short, the disastrous experience of guaranteed returns of life insurance in Japan cannot be ignored by Irda. Hence more viable and profitable investment avenues for insurers should be thought of in the larger interest of policy-holders.
Satish R.Murdeshwar, Pune
