IRDA tightens ULIP norms – Implications and Analysis

May 5, 2010 · Author: · Category: insurance 

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)

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