After ULIPs, now a ban on Universal Life Policies (ULPs)

Last Updated: Oct 19, 2011 | 274 Views

Last six months have seen quick and decisive actions from the insurance regulator in India. In yet another move to ensure consumer confidence, IRDA banned the sale of Universal Life Policies from today.

This action was taken by IRDA after a lot of customer complaints were received by the regulator with regards to universal life policies. [more] Universal life policies are in some way similar to ULIPs – the product being a mix of traditional insurance plans and the ULIP product. ULPs offer greater flexibility to the consumers in terms of product parameters – all of them at a cost though!

Not all life insurance companies sold universal life products. The problems with universal life products were similar to the ones being faced by unit linked insurance plans – high commission structures, which in turn leads to aggressively selling (& mis-selling) by insurance agents and distributors. Reliance life insurance would be the most affected as ULPs formed a major chunk of their business.

The insurance regulator also issues draft guidelines for the product which looks at capping the overall commissions which can be paid. The lock-in period would be three years and the minimum term of the policy needs to be 5 years. The minimum sum assured too needs to be ten times the annualised premium.

Most of the changes are in line with the ones which have been brought into effect for ULIPs.

Deepak Yohannan
Deepak Yohannan is the CEO of MyInsuranceClub. He enjoys writing on Personal Finance and contributes regularly on sites like Reuters & Moneycontrol. He is a strong proponent of online insurance and is often found pointlessly babbling about it!