IRDA regulates ulip products of insurance

IRDA, the regulator for insurance business in India, has come out with a notification that w.e.f.1st October 2009, the difference between the ‘gross yield’ and ‘net yield’ of ULIPs shouldn’t exceed 3% for policies of less than 10 years and 2.25% for longerterm policies. Gross yield is the fund’s returns on investment and net yield is what it gives to the policyholder. Of these, fund management charges are capped at 1.5% for the shorter-term policies and 1.25% for longer-term ones.

This directive of IRDA will have far reaching impact on the insurance advisors who earn around 12% out of the present charges deducted on the first year premiums of new insurance business procured.

Still, there is no claritiy on other charges like allocation charges, administrative charges which are periodically debited to the account of the policy holders.

We may have to wait and watch this recent directive of IRDA how things will fan out for the policy holders, intermediaries and the insurance companies.