By M Saraswathy
To increase the appeal of unit-linked insurance products (Ulips), the Insurance Regulatory and Development Authority (Irda) has proposed the commission for these be brought on par with those for traditional products. In an exposure draft on linked insurance products, it proposed the commission for non-single, non-pension products be at least 15 per cent of the premium in the first year.
According to the proposal, agent commission for these policies would stand at 15 per cent of the premium for the first year, 7.5 per cent for the second year, and five per cent for subsequent years. For brokers, the limits have been set at 30 per cent for the first year and five per cent for subsequent years.
Irda proposed a grace period of 15 days where policyholder paid the premium on a monthly basis, and 30 days in other cases.
A lock-in period of five years would be applicable from the inception of the policy. For protecting the interests of customers, discontinuance charges for policies have been capped at Rs 6,000 for policies with annualised premium of more than Rs 25,000.
Irda stated insurers should have one discontinued policy fund for all pension products, another for all life insurance products and a third for all health insurance products. In the case of Ulips, Irda proposed the discontinued policy fund be a unit fund, with government securities and money market instruments as asset categories.
Guaranteed interest of at least two per cent a year, payable annually, would be applicable on the discontinued policy account. According to the draft, the net reduction in yield would be up to four per cent every year, from the fifth year of the policy. It would be 3.75 per cent in the sixth year, three per cent in the tenth year and 2.25 per cent from the fifteenth year.
The net reduction in yield at maturity for policies of up to 10 years would be up to three per cent, while for policies of terms exceeding 10 years, it would not be up to 2.25 per cent.
Irda stated insurance companies would have to disclose products conforming to these requirements by March 31, 2013. It added products already filed but not yet approved should be re-filed, after meeting regulatory requirements.