A working group of Insurance Regulatory and Development Authority of India (IRDAI) has recommended the introduction of Index-Linked Insurance Products (ILIP).

ILIP is an insurance product where the returns are linked to benchmark indices.

In its report submitted to the regulator, the group, which was formed by the regulator last year, said the relevance of ILIP is “further enhanced, in the current context of volatile investment markets leading to the customer preference for guarantees”.

“ILIPs could be an apt alternative or complimentary option to the current conventional guaranteed products (including annuities and savings products) and ULIPs, particularly in the context of volatile investment markets/ stressed interest rates,” it said.

For the annuity product with return of purchase price, the panel favoured allowing resetting of annuity rates with reference to a specified index on top of the minimum stipulated guarantees at stated periodicity.

The customer concerns are to be taken care of with a properly disclosed benchmark index and option for customers to change the annuity option to switch the full amount to other form of annuities or opt for open market option.

“This will reduce the risks for insurers as well as enhance the customer value and options for the annuitants and pensioners,” it said.

The working group recommended that under ULIPs, a segregated fund may also be allowed to be offered as an option with an option to invest in assets confirming a chosen index.

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