IRDA tightened the norms for ULIP schemes by raising the lock-in period and raising the insurance cover on them. IRDA also bought in new guidelines like sale of insurance policies by unlicensed personnel and several other malpractices.
- Lock in period increased to five years – IRDA has increased the lock-in period for all Unit Linked Products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection.
- Level Paying Premiums – All regular premium /limited premium ULIPs shall have uniform/level paying premiums. Any additional payments shall be treated as single premium for the purpose of insurance cover.
- Even Distribution of Charges Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure that high front ending of expenses is eliminated.
- Minimum Premium Paying Term Of Five Years – All limited premium unit linked insurance products, other than single premium products shall have premium paying term of at least five years.
- Increase In Risk Component – All unit linked products, other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products.
- Minimum Guaranteed Return for Pension Products – All pension products, all ULIP pension/annuity products shall offer a minimum guaranteed return of 4.5% per annum or as specified by IRDA from time to time. This will protect the life time savings for the pensioners, from any adverse fluctuations at the time of maturity.
- Rationalisation of cap on charges – With a view to smoothening the cap on charges, the capping been rationalized to ensure that the difference in yield is capped from the 5th year onwards. This will not only reduce the overall charges on these products, but also smoothen the charge structure for the policyholder.
Source – irda.gov.in