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Regulator may tweak rules governing Ulips

At present, units are deducted from Ulips if one buys riders with it.

, ET Bureau|
Updated: Mar 11, 2019, 09.39 AM IST
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This will make companies responsible for right selling.
Mumbai: The insurance regulator is set to revamp rules governing Ulip schemes for the first time in seven years as it tries to improve the product proposition. The regulator, Insurance Regulatory Development Authority of India (Irdai), is likely to tweak Ulips, pension plans and traditional products. It is likely to relax norms on buying annuity after the accumulation phase, do away with minimum capital guarantee, and allow partial withdrawal on pension plans. Similarly, insurers can be allowed to charge extra premium for buying riders with Ulips. Irdai has constituted a working group to consider the recommendations of stakeholders and the Committee on Review of Product Regulations - Life before coming out with the final regulation.

“Insurance companies will have an option to charge for riders by cancelling units, or by charging extra premium. However, companies will prefer to charge premium so that they can give commission to agents,” said an actuary who did not wish to be identified.
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At present, units are deducted from Ulips if one buys riders with it. Insurance companies offer various riders with Ulips such as critical illness and unit deduction is optional. In what would revive the pension insurance space, the regulator is likely to relax norms on buying annuity after the accumulation phase. Also, like other pension products including the PPF, partial withdrawal could be allowed for reasons such as illnesses, child marriage, education in insurance pension plans as well. Minimum capital guarantee would be made optional. Today, companies have to invest heavily in debt to offer minimum guarantee. “The big changes in pension products, including the option on capital guarantee, partial withdrawal and freeing up annuity norms will make pension plans attractive,” said Anil Kumar Singh, appointed actuary, Aditya Birla Sun Life Insurance. On traditional products, the surrender value at present is paid on 10-year plan premium paying term if the policyholder has paid a minimum of two years, and for products above 10 years premium paying term, if one has paid for premium for three years.

The regulator has proposed to guarantee surrender value irrespective of the premium paying term if the policyholder has paid a minimum of two premiums. This will make companies responsible for right selling.

“The regulator’s view is that companies have to take responsibility if a policyholder surrenders,” said another actuary of a life insurance company. The last changes were introduced in 2010. Earlier, Ulips were front loaded in terms of charges.
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