The Hindu Business Line : Lock-in period for ULIPs mooted

INVESTMENT in the unit linked insurance plans (ULIPs) in the future may have a lock-in period. According to Mr S.V. Mony, Secretary-General of the Life Insurance Council, the new IRDA guidelines expected to be issued shortly will put a lock-in period for such investments.

He said there could be a penalty for surrender of the policy during the lock-in period.

The lock-in period is to give a long-term character to the product. Otherwise, "ULIPs will be no different from mutual funds," Mr Mony said.

Unit linked plans would also be required to have a significant component of insurance. The Life Insurance Council, a self-regulatory body of life insurance companies, has recommended that the sum assured should be five times the annualised premium, in the case of regular premium contracts, and 110 per cent of the cover, in the case of single premium plans. The Council has recommended a minimum lock in period of five years.

ULIPs have enjoyed popularity illustrated by the fact that the bulk of the business of the private insurers comes from this segment. The boom in the stock market has only added to the appeal.

As opposed to traditional policies such as endowment and term insurance plans, with ULIPs the investor bears most of the risk. Regulatory Development Authority of India has been expressing its concern over lack of proper communication in terms of the sale of ULIPs, and insufficient insurance component in the product.

Birla Sun Life Insurance (BSLI), which was the first company to introduce the product, has more than 90 per cent of its business coming from ULIPs. In fact, the company's newly launched single premium product called "Prime Life Premier" does not have a lock-in period, but has surrender charges until the fourth year of the plan. The policy's face value is also five times the premium of the product — in tandem with the expected guidelines. BSLI's earlier "Flexi plans" had a lock-in period of two years, while the single premium plans had no lock-in period.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Rupee volatile; bonds bearish

Lock-in period for ULIPs mooted

Post-Katrina, Indian insurers faced with high re-insurance premium

PSBs also chant marketing mantra, divert surplus staff

Indians prefer to bet on family care — Very few have plans for life after retirement, says HSBC review

Vijaya Bank managers told to focus on farm, SME loans

182-day T bill `undersubscribed'

Lifestyle launches co-branded credit card with SBI

Credit deposit ratio picks up in Goa