Insurers also need to issue a certificate with all the details of various charges levied on the customer.
Customers will now receive monthly statement from insurers stating the reduction in yield in their ULIP accounts. According to IRDA’s new guideline on ULIP, insurers must also issue annual certificates detailing the contributions, charges and taxes deducted from the fund value, and the final payments made.
‘Reduction in yield’, is the difference between gross and net yields (expressed in percentage) and refers to the lowering of investment growth within a fund on account of the various charges. The net yield can be arrived at after deducting all prescribed charges from the gross yield. The regulator has capped the reduction in yield at 4 percent for policies with five-year tenure, 3 percent for 10-year tenure and 2.25 percent for more than 15 years. In case the limit is not adhered to, insurers will have to add more units to the policyholder’s account and maintain the fund value at the prescribed limit.
According to a senior official from ICICI Prudential Life, most insurers are not adhering to any limit and they inform customers about the reduction only at the time of maturity. The new rule will help to bring in some uniformity in reduction in the industry.