IRDA PANEL SEEKS TO CURB ULIP SALES

Mumbai: Recent volatility in stock market has made Insurance Regulatory and Development Authority (Irda) to set up a committee to suggest ways to discourage rampant sale of unit-linked products by life insurance companies.

Sources familiar with the development said the insurance regulator has set up a committee of appointed actuaries from various life insurance companies to make suggestions to encourage life insurers to sell more traditional products, especially in semi-urban and rural areas.

Irda is of the view that there should be a minimum quota for traditional products that any insurer has to sell, sources said.

About 90 per cent of the total premiums collected by the insurance companies come from unit-linked products. The figures will further rise if only private sector players are considered.

In a meeting held in Bangalore recently between Irda members and the appointed actuaries of life insurance companies, the insurance regulator said it has received complaints from public regarding unit-linked products.

"The regulator's concern is that linked products have volatile returns that are not suitable in rural areas, and for unsophisticated policyholders," said a source present in the meeting.

The regulator's concern comes due to volatile stock market. The Bombay Stock Exchange's 30-share Sensex has lost over 35 per cent from its all-time high of 20,873 on January 8 to 13,461 on June 30.

The insurers, on the other hand, have said traditional products are not transparent, offer lower returns because of prescribed asset allocation, and require higher capital to support the guarantees.

In the meeting, R Kannan, the member actuary of Irda, indicated that Irda is looking at making "profit business" more attractive to insurers.

The profit business, which is related to "par policies" or "policies with participation in profits", entitles the insurer to retain maximum 10 per cent of the profit during the term of the policy. The remaining 90 per cent is distributed to policyholders in form of bonuses.

Source: NW18, Business Standard