Tough competition could take place among insurers after IRDA relaxes minimum guaranteed returns for ULIPs
IRDA has relaxed the norms for ULIP. Now the companies are not bound to give 4.5% returns on ULIPs but have been given the flexibility to fix guaranteed returns on the product. This new twist in the norm could lead to tough competition among insurers.
“We expect a healthy competition among insurers as they will vie to give the best possible guaranteed return,” said an official from ICICI Prudential Life Insurance.
The new norms have customer friendly features. For instance, assured benefit in the form of minimum guarantee on premium paid on surrender of the policy, death or maturity, which assures downside protection.
The norm would be presumably operational by next month and guaranteed returns will have to be clearly stipulated by the insurance companies on all pension products like ULIPs, individual and group plans. The regulator will be strict about pension products that do not meet the new guidelines.
Insurers will have to specify an amount in absolute terms that they will pay on vesting date. “Insurers are already struggling to sell traditional pension plan, and now after the relaxation of the norms we feel that there will be decline in sales figures in traditional plans. We also do not expect a lot of fund options for the policyholders to choose from since the insurers will have to guarantee returns,” said GN Agarwal, chief actuary, Future Generali India Life Insurance.
IRDA has limited the scope of riders (attachments with base policy) in pension plans. Premium on riders in pension plans cannot exceed 15 per cent of the total plan amount against 30 per cent earlier.