Unit linked insurance products are complex in nature. In order to ensure fair treatment to the policyholder, IRDA has taken several initiatives.

1Insurers must provide the prospect/policyholder all relevant information about various charges for each policy year

2 Insurers must provide Benefit Illustrations giving two scenarios of interest – at 4% and at 8%

3The prospect is required to sign on the illustration also while signing the proposal

4The lock-in period has been increased from three years to five years to reflect the long-term, protection function of the policy

5 All regular premium/ limited premium ULIPs shall have uniform/ level paying premiums

6 Any additional payment shall be treated as single premium for the purpose of insurance cover Charges on ULIPs should be evenly distributed during the lock-in period so that the expenses are not excessively front-ended

7 All limited premium paying term unit linked insurance products, other than single premium products, shall have premium paying term of at least five years

8 All unit linked products, other than pension and annuity products should have a mortality or health cover

9 The minimum cover to be offered has been specified for these segments

10A cap on charges has been imposed from the 5th year onwards to smoothen the charge structure for the policyholder

Discontinuance/ surrender charges

A new regulation was notified to ensure that policyholders do not get overcharged when they discontinue their policies. They include:

1An insurer shall recover only the incurred acquisition costs and these charges should not be excessive

2 IRDA can order refund of discontinuance charges if found excessive on enquiry

3Discontinuance charges are capped as a percentage of fund value and premium and also as an absolute value

4When discontinuing a policy, a policyholder shall be entitled to revive it or withdraw from it without any risk cover

5 The Grace Period for different modes of premium payment are clearly defined