IRDAI has issued new advertising guidelines for the insurance industry in which it has asked insurers not to market ULIPs and other insurance policies based on tax arbitrage.
While long-term capital gains tax in equity funds are taxed at 10% on gains of above Rs.1 lakh per annum, ULIPs are exempted from such a tax.
However, the insurance regulator has clarified that insurer can mention tax benefits only if they explicitly state that such benefits are subject to changes.
Among other key changes to the advertisement guidelines are:
- Insurance will have to use the word ‘Conditions Apply’ every time they mention the word ‘Guarantee’ in their advertisements
- ULIPs have to disclose asset mix of underlying fund and asset allocation pattern
- ULIPs will have to disclose all the charges, reasonable return projections and other hidden costs explicitly
- If an insurer highlights past performance of ULIPs, it will have to state that the past performance is not necessarily an indication of future performance
- Advertisements should not offer discount or reward points
- Clearly disclose risks involved, limitation and exclusions
- Display independent ratings, rankings and awards along with the source of such ratings or awards
- Cannot make claims on ranking based on market position, premium income and number of policies or branches
- Insurers can no longer display group death claim settlement ratio. Instead, insurance companies can only highlight individual death claim settlement ratios based on IRDAI annual report and latest annual audited figures submitted to IRDAI
