As the IRDA & SEBI tussle over ULIPs gets into a prolonged battle- it seems to have started claiming its first victims.
In a bid to make Life Insurance sales come closer to the transparency levels in Mutual Funds, IRDA has mandated all Life Insurers to clearly spell out the commission structure on their policies.

This means that any customer would henceforth know how much of his/her first year premium is being pocketed by the sales guy. This could give a lot of bargaining power in the hands of the consumers. As it is, the market is known to have numerous instances of agents passing back a part of their commission to customers to close sales. With this - one can only expect such dubious sales processes to increase.

Not surprisingly, most insurers are unhappy with the move & they feel that such disclosures on margin structures are not really required.

Securities & Exchange Board of India (SEBI) and the Insurance Regulatory & Development Authority (IRDA) have initiated dialogues to come up with an agreeable regulation regarding the star product of India's Life Insurance industry- Unit-linked insurance plans (Ulips).

SeEBI spokesman announced that SEBI had agreed to explore various ways to resolve the matter. SEBI Chairman CB Bhave had an hour long meeting with the IRDA Chairman J Hari Narayanan.

The trigger for the meeting was the show cause notices issued by Sebi to life insurance companies for selling ULIPs without an explicit prior approval from SEBI.

IRDA maintains that the unit-linked plans were approved by them under the Insurance Act. SEBI's contention is that ULIPs if sold under collective investment schemes should come under their purview.

The final decision will have significant impact on the Insurance Industry as the ULIPs are a substantial portion of new policies sold in the industry

The Insurance regulatory body- IRDA- is said to be exploring an option of paperless Life Insurance policies, with an aim to cut down on the distribution costs.

If this goes through, Life Insurance policies could follow the share routes into a demat format- which means that in future your Life Insurance policies could reside in a digital format with players like NSDL & CDSL.

Life Insurance Sep 09

The Indian life insurance industry grew by 12.85 % in new premium collected in 1st half of 2009-10. Most of the industry's growth can be attributed to the healthy 35% increase registered by LIC on its massive base.

Key highlights are:

IRDA, the insurance regulating authority has just approved the ULPs- Universal Life Policies for Bharti Axa Life Insurance and Max New York Life.

Its an interesting development in our opinion because of the inherent nature of ULPs.

Here are few of the salient features

1.Customers have flexibility in premium, sum assured as well as the tenure of the product.

2.Freedom to vary the payment of the premium over the policy’s life- you can start with monthly payments, switch to annual then quarterly and so on. What does not change is the premium quantum.

3. Also the policy is not automatically cancelled even if the customer fails to pay the premium. Even if the lapsed payment is not made , the ULP will be kept in force- what does change is the sum assured at the time of payout.

Today's Economic Times had a nice article by Sarabjeet Singh (a partner at BMR Advisors) about how AML guidelines can be and need to be implemented in the Life

IRDA has come up with some new guidelines to discourage agents from switching across companies, primarily to discourage & check policy lapsation.

Across India, most Life Insurance co's have been seeing almost 25% lapsation in their overall portfolio, and a big chunk of this is contributed by the agent channel. Most lapsation was observed to occur in orphaned policies (ie policies without an active agent in the system).

IRDA has now come up with the following guidelines:
- The agent has to submit details of all his policyholders including their contact details. The insurance company, in turn, has to ensure an alternative service arrangement for all those policyholders.

The Life Insurance Council , an industry association , has taken up the issue of introducing standard nomenclature for all charges across life insurance companies.

This means that when you now go and wanna apply for Unit Linked plans, you will know how much charges are gonna go towards fees etc.

The industry regulator has been pushing towards this for last one year.In last one year the growth of the ULIPs across insurance companies has been huge.For most Insurance companies ULIPs has been the growth driver.

IRDA's reducing the Capital Requirements for Insurance companies to sell term policies will result in an immediate fall in the rates of term plans, making them much cheaper than the current prices.
While a few Insurers like Kotak & Religare have already revised the rates downwards , most others are expected to follow suit, soon.

Experts say that the similar trend would be seen in the Endowment policies also, but with a certain lag.

Compare Term plans | Don't Know about the Types of Life Insurance Policies? Read here