Irdai News Update:
prevent the mis-selling of life insurance policies as pure investment products, the Insurance Regulatory and Development Authority of India (Irdai) has prohibited insurance companies from advertising unit-linked insurance plans (Ulips) as investment plans.
Irdai has mandated that insurers must advertise Ulips by emphasizing the underlying life insurance coverage and associated products. The regulator stated, “No press release or statement shall be issued by the insurer without referencing the life insurance coverage and associated products,” as detailed in the master circular.
This decision follows a trend where insurers have launched mid-cap and small-cap Ulips over the past few years, capitalizing on the rising indices. Industry players noted that these products were often mis-sold as pure investment options.
Moreover, Irdai requires all advertisements to disclose that past performance does not guarantee future returns, similar to the Securities and Exchange Board of India’s guidelines for mutual funds.
“This is a progressive move. It could have come earlier,” commented Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services. He added that this step was necessary given the stock market’s strong performance in recent years, which led to a tendency to sell Ulips based on investment returns rather than protection.
Insurers must clearly state that market-linked insurance plans differ from traditional endowment policies and carry risks. Likewise, participating endowment policies must clarify that projected bonuses in benefit illustrations are not guaranteed.
Additionally, the regulator emphasized that advertisements should not focus solely on potential benefits without fairly indicating associated risks, compare rates or discounts with previous tariffs, or exaggerate product benefits.
Parekh also highlighted the importance of monitoring compliance, noting that intermediaries like insurance agents might still sell these products as investments, especially during stock market booms.
Life insurers are also required to post public notices on their websites, cautioning against spurious calls and fictitious offers promising bonuses or premium investments.
For unclaimed amounts over 10 years old as of September 30 each year, insurers must transfer these funds to the Senior Citizens’ Welfare Fund by March 31. Policyholders can claim their dues up to 25 years from the transfer date. After this period, unclaimed amounts will be transferred to the central government.
