IRDA bans actuarial-funded insurance products, gives companies 15 days to pull-off
16 August 2007
Mumbai: The Insurance Regulatory and Development Authority (IRDA) has decided to ban unit-linked insurance products (ULIPs) that are too complicated for the customer to understand. The regulator has given the companies 15 days to pull their actuarial-funded insurance products off the shelves.
The IRDA said these products are too complicated for the consumer to understand the risks involved and the sort of charges that are deducted from his fund and hence the ban.
While normal ULIP products charge you upfront for all the administration and fund management charges, an acturial-funded product will not charge you upfront. They will invest all your money on your behalf and will charge you at the end of every month, by deducting some money out of your unit fund.
Currently, the biggest actuarially-funded product in the market is Bajaj Allainz Life's Capital Unit Gain. It was mostly responsible for Bajaj Allianz breaking-even last year and recording a profit of Rs9 crore in the first quarter of this year.
Another company, Aviva Life, has 14 ULIPs, most of which are actuarially-funded, will also be drastically hit by the ban. These companies will now have to replace a whole lot of unit-linked products.