IRDAI has toughened the regulations for insurance intermediaries like agents and brokers to sell ULIPs. In fact, from December 1, 2019, insurance agents will have to become eligible to sell market-linked products like ULIPs.
In its latest circular, IRDAI has clarified that insurance agents will have to attend an additional training session apart from mandatory hour trainings to become eligible to sell ULIPs. Such a training session has to be conducted on continuous basis. The market regulator has asked insurance companies to maintain a list of agents who have undergone this specific training.
This training would cover topics like development of capital markets, basic knowledge and concept of ULIPs, suitable market segments and so on.
Agents selling ULIPs will also need to ensure that their clients understand risks related to ULIPs. Agents will be required to disclose development in other market-linked products like mutual funds.
Also, the insurance companies will have to disclose the commission in absolute terms paid to agents in ULIPs.
Other key developments are
- Agents will have to clearly indicate how the premium amount will be segregated towards various heads such as commission, fees, expense ratio and mortality charge
- Agents will have to disclose heavy upfront charges in the initial years
- Agents and insurance companies can give benefit illustration by taking 4% and 8% return into account
- Life Insurance Council and insurance companies will have to run a campaign to spread awareness about ULIPs to help investors take an informed decision
- All ULIP advertisements should contain adequate, accurate and updated information in simple language
- Such advertisements will have to disclose risk involved, difference between ULIPs and other traditional policies, corresponding benchmark returns and so on
- Among other warning statements, all ULIP advertisements should carry these warning statements, ‘ULIPs are different from traditional insurance products and are subject to the risk factors’, ‘NAV may go up and down based on performance of fund and factors influencing capital markets’ and ‘please know the associated risks and the applicable charges from your insurance agent’ and so on
