You can soon expect calls from life insurance agents hard-selling unit-linked pension plans (ULPPs) once again. ULPPs have been out of circulation for a while, after the Insurance Regulatory and Development Authority (Irda) imposed a guaranteed-returns clause on them last September.
The authority has now relaxed its norms on guarantees. The new norms, to be effective from December 31, could trigger a partial revival of the pension Ulips category.
New Pitch
For one, insurers do not need to guarantee a return linked to the reverse repo rate of the Reserve Bank of India (RBI) anymore. The assured-return requirement had been a bone of contention as many insurers felt the target couldn’t be met.
Simultaneously, agents felt these pension Ulips were not lucrative as commissions were capped post September 1, 2010. This meant there were hardly any pension Ulips being launched.
Only LIC designed a regular pension Ulip. Companies like SBI Life and ICICI Prudential came out with single premium pension Ulips. In contrast, in the pre-September 2010 era, insurers banked heavily on pension plans to drive their business and these products accounted for nearly 30% of their premium collections.
What’s more, the new form of the product being launched after September 1, 2010, was not considered beneficial to policyholders either, as the need for guaranteed returns meant funds had to be directed to safe, fixed income instruments, curtailing their return-earning ability.
[Source- ET]
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