In order to make unit-linked insurance plans (Ulips) more attractive and giving flexibility to the insurers, the Insurance Regulatory and Development Authority (IRDA) has mooted relaxing the cap on distribution cost of Ulips, with effect from October 1, 2009. The move has come after the apex body met with the Life Insurance Council, where the latter suggested for a flexible mortality charges and to keep it outside the ceiling imposed by IRDA.
Arguing the dependence of mortality and risk charges on the age and choice of the sum assured, insurers suggested these charges need to be kept outside the overall cap.they also said that application of the cap to mortality charges is likely to prevent insurers from offering cover to people in the higher age group, which may hurdle the efforts for enhancing insurance penetration in the country.
IRDA has put a cap on fund management charges at 1.5% for polices with tenure of less than 10 years and at 1.25% for polices with tenure over 10 years w.e.f. August 1.
In this regard, insurers have proposed a uniform cap across all tenures and said that there must be flexibility to manage expenses.