IRDA tweaks norms for ULIPs

MUMBAI: Insurance regulator IRDA on Monday tweaked some norms related to unit-linked insurance products (ULIPs). These include rules stipulating compulsory insurance cover to be included in the top-up premiums for these products. The move comes at a time when the country's apex court is hearing a case that will decide which of the two regulators — Sebi or IRDA — should have the final say on the investment part in ULIPs.One of the main reasons for Sebi tointervene in the sales of ULIPs was that in several of these products, asubstantial portion was investment, while only a minor part comprised insurance.Sebi's contention is that it is the final authority to regulate all productsrelated to investments in the country.Some of the changes includedsay that pension and annuity products should have a minimum sum-assured, alltop-up premiums should have a minimum sum assured, just like in single-premiumpolicies and all partial withdrawal be allowed only after five years of theexistence of the policy. However, new rules say partial withdrawal will not beallowed for ULIP pension or annuity products.The new rules alsostipulate that every top-up premium shall have a lock-in period of three yearsfrom the date of payment of that top-up premium, but no top-ups will be allowedduring the last three years of the policy's existence. All these rules will beeffective July 1, 2010, a circular on the IRDA website said.Thechanges in rules were made "based upon the insurance-related data as of yearending March 31, 2010 and related discussions," IRDA said.Atpresent, IRDA and Sebi are engaged in a bitter battle over who should regulatethe investment portion in ULIPs.Late in 2009 and earlier this year,market regulator Sebi had issued showcause notices to 14 life insurancecompanies and subsequently on April 9, had passed an order banning theseinsurers from selling ULIPs without registering themselves with the marketregulator. IRDA, on the other hand, asked the insurance companies todefy the Sebi order and continue to sell Ulips since they were all registeredwith the insurance regulator.