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Our Bureau

New Delhi , Dec. 21

IN its final guidelines on Unit Linked Insurance Products (ULIP), the Insurance Regulatory and Development Authority has said that insurers have to ensure that the benefit payable on death under a single premium product should be at least 125 per cent of the single premium paid.

In non-single premium products, the regulator has said that the death benefits should be a formula (0.5 x term of the policy x annualised premium) or (5 x annualised premium) whichever is higher.

ULIPs are products that provide partial insurance cover along with a substantial sum out of the premium being invested in equity and debt instruments to provide investment returns to the holder of the units. However, there were concerns that the products often lack adequate insurance protection.

The IRDA has said that the sum assured payable on death shall not be reduced at any point of time during the term of the policy except to the extent of the partial withdrawals made during the two-year period immediately preceding the death of the life assured. However, on attainment of 60 years of age of the life assured, all the partial withdrawals may be set off against the sum assured payable on death.

Moreover, no cover should be extended after the expiry of the policy term and only settlement options (which are clearly outlined at the commencement of the contract) may be allowed. The minimum policy term shall be five years.

The IRDA has said that a unit-linked product must have a guaranteed sum assured payable on death and may have a guaranteed maturity value.

Moreover, guarantees provided on death, and/or on maturity shall be reasonable and consistent in relation to the current and long-term interest rate scenario. In this regard, demonstration of proper pricing, including the appropriateness through sensitivity and scenario testing shall be required under the File and Use, it said.

The regulator has said that insurers should ensure that all ULIP products that do not conform to the guidelines must do so by June 30, 2006.

ULIPs have emerged as popular products and the insurance sector has been witnessing significant growth during recent years. The IRDA has said that considering the several features differentiating the linked insurance products from the traditional insurance products, a review of the products has become necessary.

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