ULIPS gets min. return assured of Saving Bank Account

October 18, 2011   ·   0 Comments

Those who bought Ulips and let them lapse will now get more time to revive their policies and earn better returns for the discontinued period. New rules allow insurers to review policies which would otherwise have been cancelled but require them to pay more to the insured.

www.stockssavvy.comInsurers are also required to ensure that they provide a minimum return equivalent to the savings deposit of State Bank of India which is currently 4%. This is the return that the policy has to receive after the insurance company deducts its fund management charge.

Informing life insurers of the new norms, IRDA said that policyholder will have the right to revive discontinued policies within two years from the date of discontinuance and not later than the expiry of lock-in period. The new norms on discontinued policies are effective next month.

In case of policy revival request from policy holder within 2 years, the discontinuation charges levied will be duly adjusted to the fund value of the policy holder. Unit allotment would be on the basis of NAV of the units as on the date of such revival.

IRDA’s move comes at a time when the life insurance industry is struggling with sales of new policies in the wake of new guidelines in September 2010 that capped distribution costs. Although numbers on discontinued policies are not available, insurers say that it would run into thousands of crores considering that over 20% of policies lapse for life companies. IRDA’s move comes at a time when the life insurance industry is struggling with sales of new policies in the wake of new guidelines in September 2010 that capped distribution costs.

“Many representations have been made by insurers to allow a higher revival period to enable the policyholder to revive at a later stage and requests were also made to allow the insurer to levy fund management charge for managing the discontinued linked fund,” the IRDA said in a circular.

Is this move by IRDA will help the revive the ULIP Market? A guarantee of Saving Bank account is as good as none. IRDA needs to understand the reason why the ULIP as a product is not appealing to Investors(due to high cost structure) & Distributors(due to decreased brokerage incentive) anymore & solid point of action needs to be taken to help revive the ULIP Market.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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