IRDAI has deferred the implementation of new norms by two more monthsin which it had asked insurance agents to become eligible to sell ULIPs. With this, insurance agents will have to get mandatory certification and training to sell market-linked products like ULIPs by January 31, 2020.
Earlier, IRDAI had toughened the regulations for insurance intermediaries like agents and brokers to sell ULIPs. In fact, it had instructed insurance agents to acquire the eligibility to sell market-linked productsfrom December 1, 2019.
However, IRDAI has extended the date of implementation of these guidelines after receiving representations from Life Insurance Council and various life insurers requesting for extension of the deadline.
As part of these guidelines, insurance agents will have to attend an additional training session apart from mandatory trainings to become eligible to sell ULIPs. 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.Also, agents are required to sign the benefit illustration form along with policyholder to ensure that they have not lured investors with attractive returns
- ULIP 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
- Insurance agents will have to ensure that they sell policies based on product suitability parameters such as risk appetite and financial goals of their clients
- Agents will have to justify product suitability before selling it to clients. Such a suitability will have to be ascertained through a series of questions such as age, income, family status, life stage, financial and family goals, investment objectives, insurance portfolio already held and so on
- Agents will have to clearly state what is guaranteed and non-guaranteed benefits attached to a policy
