Page 39 - Life Insurance Today June 2015 SAMPLE

allocation
in equities. In case of policies in which desirable.
the debt component is 60 per cent,
the maximum amount that can be
borrowed is 50 per cent. In case of
mutual funds, it is slightly higher at 50
per cent.
The comeback of Ulips has to be seen
from the context that it was heavily
mis-sold in the late 2000s. To go back
into the past, unit-linked plans had
become a cause of concern for the
customer due to the high charges lev-
ied by insurance companies, some-
times even more than 110 per cent of
the first-year's premium.
This led to excessive mis-selling by
agents who did not disclose the com-
mission. This invited regulator Insur-
ance Regulatory and Development
Authority (Irda)'s wrath and new
guidelines were introduced in 2010. As
there was no incentive for distribu-
tors, Ulip sales saw a sharp drop. In-
surance experts said while overall
charges in Ulips have come down since
September 2010, other charges - in-
cluding mortality charges, premium
Left to ourselves, we might pick the wrong health insurance, the wrong mortgage, the wrong school for our kids; why, unless they stop
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charges - con- Complaints began to be filed with
the regulator, insurance ombuds-
tinue to be as man and consumer courts on how
several investors were duped of
high as 35-40 crores by clever agents out to
make a quick buck
per cent.
In April 2010, markets regulator
Though things Securities and Exchange Board of
India (Sebi), under chairman C B
are much bet- Bhave, banned 14 life insurers
from raising money without its
ter than the permission
earlier phase, Sebi-Irda entered into a tussle to
control Ulips. The government
buyers should ended the turf war in June 2010
through an ordinance declaring
look at these Ulips will be regulated by Irda
products from In September 2010, Irda issued
stringent guidelines cutting down
the perspective commissions significantly and in-
creased disclosures and increased
that they are the minimum lock-in to five years.
buying a Sales immediately took a big
plunge since distributors did not
bundled prod- have any incentive to sell. Ulip
portfolios of insurers dipped to 20-
uct, which is un- 30 per cent due to increase in
redemptions by policyholders as
well
HISTORY OF ULIPS In 2013, guidelines for linked prod-
The first unit-linked insurance ucts was again modified, reducing
plan was launched by Unit Trust of the net yields apart from linking
India, a mutual fund house, in commissions to tenure of the
1971 product, with higher tenure prod-
ucts giving ability to an agent to
Private life insurers entered the earn higher commissions
insurance sector in 2000
With stock markets rising, Ulips
The Insurance Regulatory and De- have started making a comeback,
velopment Authority (Irda) came mostly through the online route.
out with detailed guidelines for (Source : BS)
Ulips in 2005
Due to higher commissions, many
agents sold it aggressively during
2005-2008, when the stock mar-
ket was rising consistently. Share
of Ulips almost went up to 70-80
per cent in companies
In 2008, when the market
crashed, customers realised that
instead of doubling their money in
three years, they were reduced to
half or even less due to high front
loading
us, we might pick the wrong light bulb.
June 2015 35