A working committee set up to explore the possibility of launching index funds in insurance industry has recommended IRDAI to allow insurance companies to launch Index linked Insurance Policies (ILIPs).
“The working group has the view that there is relevance for Index Linked Insurance Products (ILIP) which could be seen as a category which fits in between traditional products where features can appear the unit linked products (ULIP) where transparency is higher but the investment risks are completely borne by the policyholders,” said IRDAI.
ILIPs will mimic equity and debt market indices with the benefit of insurance cover.
The working group has recommended that ILIPs should have simple structure. To start with, the insurance regulator should look at allowing ILIPs to track fixed income, g-sec or Nifty 50 indices, which are more liquid, popular and widely understood.
“This is to ensure that the journey of onboarding ILIPs starts with a simpler version of products so that learnings from there can possibly be incorporated before moving towards more complex ILIP product designs,” said IRDAI.
Further, the group has proposed that there is no requirement of creating a separate product category to launch ILIP as it fits well with existing product categories like participating, non-participating, unit linked, annuities or pure protection plans.
