IRDA issues ULIP guidelines

The Insurance Regulatory and Development Authority (IRDA) has issued guidelines on unit-linked insurance products (ULIPs) CNBC-TV 18 says in a report. Under the guidelines the minimum policy term for ULIPs will be five years and all ULIPs would be expected to have an insurance cover payable on death. The regulator said the pension/annuity products would need to have insurance cover.

No loans would be allowed under ULIPs and a partial withdrawal in the ULIPs would be allowed only after the fifth year of policy. However, there would be no partial withdrawal for pension/annuity products.

The guidelines would be applicable to all ULIPs from 1 July 2010.

Commenting on the new guidelines, IRDA executive director A Giridhar said these formed part of the periodic review of norms. He added that the new ULIP norms were based on the insurer's FY10 financials and were aimed at making insurers adhere to regulations. He hoped the new norms would address some of the ULIP issues being debated.

On 29 April, the Securities and Exchange Board of India (SEBI) had moved the Supreme Court in the ULIP matter. The petition came in the wake of a spate of public interest litigations (PILs) and SEBI had sought the clubbing of all PILs.

Last month, SEBI set off the battle by directing all insurers to stop the sale of ULIPs, which it claimed should come under its regulations. In response, insurance regulator IRDA immediately struck down the call and asked insurance companies to ignore the regulator's order. A bitter public spat between the two regulators followed with the finance minister intervening and calling for a joint application before the judiciary.

Meanwhile, the parliamentary standing committee on finance has recommended that a financial stability and development council (FSDC) be immediately set up to address among other things issues pertaining to the financial sector.