ULIPs cannot be sold as 'investment products', insurance regulator issues circular
ULIPs combine insurance coverage with investment opportunities in equities and bonds. Policyholders pay regular premiums, part of which covers the insurance while the remainder is invested in equities, bonds, or a combination of both.
- Jun 21, 2024,
- Updated Jun 21, 2024 8:09 AM IST
The Insurance Regulatory and Development Authority of India (IRDAI) has issued a master circular on June 19, barring the promotion of Unit Linked Insurance Plans (ULIPs) as ‘investment products.’
ULIPs combine insurance coverage with investment opportunities in equities and bonds. Policyholders pay regular premiums, part of which covers the insurance while the remainder is invested in equities, bonds, or a combination of both.
These products have a mandatory lock-in period of five years, and withdrawals, either partial or complete, are only allowed after this period.
Following reports of ULIP mis-selling by insurers earlier this year, IRDAI's latest directive explicitly states that ULIPs cannot be marketed as ‘investment products.’ This follows concerns raised by the Securities and Exchange Board of India (SEBI) about insurers misrepresenting ULIPs as investment offerings. Insurers had been advertising new ULIPs as New Fund Offers (NFOs) to policyholders and investors.
The circular also mandates that all advertisements must disclose the associated risk factors of linked insurance products. Advertisements must clearly state that bonuses or past performance should not be seen as guarantees of future returns.
Additionally, advertisements for all linked and annuity products with variable payouts must comply with the standards set by the Advertising Standards Council of India.
The Insurance Regulatory and Development Authority of India (IRDAI) has issued a master circular on June 19, barring the promotion of Unit Linked Insurance Plans (ULIPs) as ‘investment products.’
ULIPs combine insurance coverage with investment opportunities in equities and bonds. Policyholders pay regular premiums, part of which covers the insurance while the remainder is invested in equities, bonds, or a combination of both.
These products have a mandatory lock-in period of five years, and withdrawals, either partial or complete, are only allowed after this period.
Following reports of ULIP mis-selling by insurers earlier this year, IRDAI's latest directive explicitly states that ULIPs cannot be marketed as ‘investment products.’ This follows concerns raised by the Securities and Exchange Board of India (SEBI) about insurers misrepresenting ULIPs as investment offerings. Insurers had been advertising new ULIPs as New Fund Offers (NFOs) to policyholders and investors.
The circular also mandates that all advertisements must disclose the associated risk factors of linked insurance products. Advertisements must clearly state that bonuses or past performance should not be seen as guarantees of future returns.
Additionally, advertisements for all linked and annuity products with variable payouts must comply with the standards set by the Advertising Standards Council of India.