Bajaj Allianz is worst hit by IRDA ruling on Ulips

DNA Money

Bajaj Allianz is likely to be hit the most by the Insurance Regulatory and Development Authority (IRDA) ban on certain category of unit-linked insurance policies (Ulips).

The "capital unit-linked" products, which were banned by IRDA on Thursday, account for 40 per cent of the company's premium income.

Bajaj Allianz CEO Sam Ghosh confirmed this to DNA Money.

"True, a large amount of premium comes from this category, but not everyone is financially astute. We will devise new products. The same happened with our single premium plans, which once constituted about 45 per cent of our premium, but now they account for just 7-8 per cent," he said.

The banned products, which the IRDA terms "customer unfriendly", are hot- selling cakes for insurers.

Ulips constitute the bulk of premium for almost all private life insurance companies as well as the Life Insurance Corporation, which has seen a rise in its premium, largely on account of Ulips.

While asking companies to withdraw the products, the insurance regulator said that even though the policies may be technically sound, they're quite complicated for the insured.

Said Ghosh: "IRDA has indicated that this is a complex product and should be withdrawn from the market. It feels that the customer may not understand the product. Such capital unit-linked products are sold in other countries but perhaps it is a difficult product for the regular customer."

Aviva India is another company that's likely to be hit by the latest IRDA directive.

While mis-selling has been a serious issue in the market in recent times, the stern action by IRDA on specific categories of unit-linked plans comes as the second major step since last July, when all unit-linked plans had to be locked in for a three-year period.

These unit-linked products, unlike other Ulips, are structured in such a way that they have two types of allocations in capital and regular units.

Ghosh said that as his company prepares new products, it would target more pension and children's products, for which it has applied to the regulator.

Bajaj Allianz is one of the few private life companies that have already started making profits. According to Ghosh, the company has a "cost under-run" as most of the expenses are covered within the cost structure.

An Aviva spokesperson said, "We have no communication from the IRDA on any ban on actuarial-funded products. All our products, including the one where actuarial funding has been used, have been pre-approved by IRDA and are designed on sound actuarial principles."

"We have been selling these products for years in the country and these have been approved by the regulator as they follow all guidelines and regulations laid down by IRDA. None of our products are detrimental to the interest of any existing or prospective customers. In fact, one of our actuarial-funded products was approved as recently as May 2007," the spokesperson added.