The insurance sector regulator – IRDA to streamline Ulips has proposed to uniform the charges imposed by insurers for surrendering these securities-linked products. This means that at the time of surrendering these market linked product you would not have to pay differential rates. This move by IRDA is to strengthen its position in the fight over the authority of regulation of Ulips.
IRDA also said that most insurers follow best global practices. They also proposed various uniform norms that should be adopted by insurers for closing the policies or reviving them. According to draft –
- No charges for surrendering a policy with a maturity of less than 10 years, if the policyholder surrenders his/her policy after six years and for a policy with a maturity of over 10 years. Also maximum limits that insurers could charge from policyholders, if they surrender their policies before the sixth year is specified.
- No charges if the surrendered from the seventh year and if surrendered before then the charges are also mentioned.
- The grace period for payment of the premium will be 15 days if the premium payment mode selected is monthly. In other cases, it is fixed at 30 days.
- A policyholder a policyholder must be given an option within a period of five years of the beginning of a policy to revive or reinstate the policy. However, the insurer will have the right to decline revival of the policy based on the grounds of moral hazard or medical conditions.
- In case a policy lapses, a notice should be issued to the policyholder asking him/her to take a decision whether to continue with the policy or not within 30 days of receipt of such notice.
These welcomed changes are brought on by IRDA post the tussle over the jurisdiction of Unit linked insurance plans. This initiation is to make the functioning of Ulips more transparent. Recently, IRDA had asked life insurers to disclose the commission paid to agents for Ulips. Also amidst all the tug of war statistics show that the share of Ulips has increased from 50.95% to 54.80% of life insurance business in 2009-10.
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