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Monday, August 31, 2009

Longer lock-in for Ulip funds

In an attempt to make policyholders stay invested in unit-linked insurance plans (Ulips) for a longer period, the insurance regulator may increase the lock-in period for the investment to five years from the current three.

"Yes, we are looking at increasing the lock-in period of Ulips to 5 years. In another two months, we will announce the decision," R. Kannan, member (actuary), of the Insurance Regulatory and Development Authority (IRDA), told Hindustan Times.

"In the latest circular on capping of charges, we have already asked insurers to pay the entire fund value to a policyholder after the fifth year of the policy," he added. IRDA issued a clarification two weeks ago saying that no surrender charge can be levied by an insurer after a policy completes five years.The CEO of an insurance company said, "The move is good as policyholders will earn higher return and the expenses of an insurance company will be spread over a period of 5 years." Around 80 per cent of the new business premium for insurance companies comes from Ulips and the rest from traditional plans.

source: HT

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