Page 30 - Insurance Times September 2015 SAMPLE

meting out to them a patently discrimi-
native treatment.
Undoubtedly the objective of the
Authority's Advisory was all the more
apparent and its intent, firm and force-
ful. For the first time perhaps it was
found that, notwithstanding the clear
objective that had been spelt out, the
insurers were reluctant to heed to the
directive of the Authority or rather it
appeared so from their response.
The lackadaisical attitude shown by the
insurers to this vital issue created the
impression in the minds of insuring pub-
lic that the so-called Burning Cost is ir- urgent need for stake holders to re-
relevant to their business operation. The
Life insurers disapproves the investment of ULIP funds in G-secs
Life insurers are up in arms against
IRDAI's proposal that 25 percent of
Unit Linked Insurance Plan (ULIP) funds
be invested in Government Securities
(G-secs) on the thought that it might
impact the returns of policyholders.
The disagreement will be made in
writing and a representation will be
made through the Life Insurance Coun-
cil.
In its draft norms on investments,
IRDAI has said that not less than 25
percent of Ulip funds can be invested
in Central Government Securities. It
also added equity investments only in
CNX 200 or BSE 200 can be considered
as approved investments.
Arrays of statements were given by
the pioneers of the insurance company
on this which read as, "Large insurers
have been able to manage a higher al-
location to equity from Ulip funds and
offer good returns. There is no need
26 The Insurance Times, September 2015
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entire episode however,
has already created great
deal of confusion in the
non-life insurance market.
When viewed against the
prospect of the authority
issuing similar advisories
in future, the situation
that has arisen out of
large scale non-compli-
ance by the insurers is
very serious and needs
correction.
There can be no two opinions as to the
strain themselves from going over-
for mandatory investment in G-secs.
Ulips are not sold to all customers.
Those who have the risk appetite and
understand how the markets and have
a long-term view to them are these
plans sold. If 25 percent investment of
Ulip funds in G-secs is made compulsory, capped the charges and commissions
the end returns might be impacted and
policyholders might become wary of the
product."
A proposal was made earlier by the
IRDAI that Ulips will be made more
customer-friendly by giving at least
90 percent of the premiums paid as
fund value. However, no official guide-
lines were brought out regarding this.
The regulator had also planned to cap
board with discount gala and to intro-
duce their own product pricing and also
to have in place a system of good busi-
ness practice which in turn will help
restoring greater customer confidence.
age-group for Ulip purchase, so that
older people do not end up buying
these products with high mortality
charges.
In September 2010, IRDAI had
on Ulips. As fallout, the average com-
mission in Ulips as a percentage to
premiums collected fell to four per-
cent in FY12 from 10 percent in FY10.
This however, made the product more
transparent. The minimum lock-in was
also increased to five years from three
years.
Industry sources said that the proposal
for 25 percent investment in GD-secs
was to boost investment by insurers in
areas such as infrastructure and re-
lated projects. While they invest in
these sectors from their traditional
funds, Ulip funds primarily invest bulk
of their shares in equity due to the
nature of the product structure.