IRDA caps charges for ULIPs


For those products which have maturity of 10 years, insurance companies have to maintain the difference between gross yields and net yields at 300 bps.

“The difference between gross yield and net yield cannot exceed more than 300 basis points,” said IRDA chairman J Hari Narayan.

Of this, fund mangement charge cannot exceed 150 bps. For those products which are of tenor of over 10 years, the difference between gross and net yields cannot exceed 225 bps  and fund management charges cannot exceed 125 bps, he added.

Justifying lower cap on charges for longer term insurance ULIPs, IRDA said in a circular, “Insurance products are long term saving vehicles and the policy prescriptions should help the customers’ to move towards long term savings cum protection rather than short term one.”

MetLife India Insurance Company Managing Director Rajesh Relan said the regulation is likely to help in the long term nature of the business which is the real essence of insurance.

“We welcome this move by IRDA as this is another positive step towards making ULIPs even more transparent and favourable for customers. With a cap on overall charges, the customers stand to benefit in the form of higher returns on their investment. Moreover, lower charges on products with a term greater than 10 years will provide further impetus to long-term policies,” said Aviva India CEO & MD, TR Ramachandran.  

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