IRDA tightens ULIP norms and the following changes are effective from July 01, 2010 – Our Analysis on each of the norms follow,
- Minimum policy term of five years – Overall improvement in quality of business, Long-term positive
- All ULIPs (including pension/annuity products in accumulation phase) to carry sum assured – Render long-term protection element to ULIP (and ULIP-based pension and annuity) contracts, differentiating ULIPs from MFs
- All top-ups to carry sum assured and be treated as single premiums – Significant persistency risk to be borne by policyholders: Positive for margins
- Loans against ULIPs disallowed – Insurance selling to get tough. Some impact likely on new business volumes over next 3-6 months, which could result in expense over-runs
- Partial withdrawal not allowed for pension and annuity products; for others, allowed only after the fifth policy year – Some rise in capital requirement due to increase in sum at risk (for incremental business)