IRDA’s Circulars on Ulips – Viewpoints on Pension & Annuity norms

Date	Circulars/ Order	Reason
03-May-10	All ULIP policies, pension and annuity products, should offer a minimum sum assured payable on death effective from 1 July*	To prove that ULIPs – unit-linked insurance plans are pure insurance products, even if they are similar to mutual funds.
21-Dec-05	Laid down the ground rules for Ulips with the document heading – “Guidelines for Unit Linked Life Insurance Products”	To ensure that they lead to greater transparency and understanding of these products to the insured, since, the investment risk is borne by the policyholders.
Post Dec 05	Irda amended previous guideline	To plug the loop holes therein and curb adulteration of Ulips
20-Feb-07	In view of the queries raised by the insurers as to the manner of reporting further clarifications were issued. For details please click on the link below:	Intended to further improve the quality of disclosures on ULIPs
	http://www.irdaindia.org/Circular_F&A23Feb07.htm

Guidelines are:

Minimum policy term: The minimum policy term shall be five years in the case of individual products and group products shall continue to be on annually renewable basis.
Guarantees on policy benefits: All linked products including pension / annuity products must have a minimum sum assured payable on death, as per the Circular. In case of unit linked products providing health insurance cover, the provision of death benefit is not mandatory.

For details please click on the link below:

http://www.irdaindia.org/actuarial/circular/guideline_unique.htm

Viewpoints:

The latest circular has created quite a stir as insurance is about risk. A life insurance policy offers protection against the risk of death of the life assured. The purpose of the “sum assured” is the sum of money that may become available to the dependents so as to overcome the financial distress.

Irda, therefore, ensured that all Ulips carry a significant sum assured; because without that they would cease to be life insurance policies.
A pension policy too is about risk (other than death) – it is to provide protection of living long. Living beyond the age when you can work and sustain yourself is a risk that one carries in the absence of social security or extended family. Its purpose is to provide a regular flow of money so as to overcome financial distress post retirement.
Pension policy transfers the risk of living too long to an insurance company. By promising policyholder a sum assured payable on death, and making him pay for it, Irda is defeating his very purpose of buying a pension. Thus pension is in itself a risk product so no need for minimum sum assured required.

Know More about pension click here…

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Tags: Pension Plan, ULIP