It is almost a year since the Insurance Regulatory and Development Authority (IRDA) issued its new guidelines on unit-linked insurance plans (Ulips) on June 28, 2010, forcing an overhaul of the product offerings. Ulips, which bundle insurance protection with investment, were muchmaligned instruments in their previous avatar since they were heavily loaded against the policyholder. Not the case any longer.
Critics have been silenced with the new norms resulting in moderation of commissions and charges, thereby leaving more to be invested. Minimum insurance covers have been stipulated and caps placed on penalties on premature surrender. The norms that came into effect from September 1, 2010, also altered the overall insurance landscape of the country forcing a clear shift towards non-linked products.
During 2010-11, the new premia flowing into Ulips were lower at Rs 52,600 crore compared to Rs 59,000 crore in the previous year, while new premia in non-linked policies were substantially higher at Rs 73,000 crore compared to Rs 50,000 crore in the previous year. Part of the reason is that the regulations disallow frontloading of commissions which, instead, have to be spread over a five-year period.
This has made it less attractive for intermediaries to sell Ulips compared to traditional covers, such as endowment and term plans. On another front, Ulip offerings across vendors have been more or less standardised in terms of features making it that much more difficult for investors to choose.
However, if you are looking to purchase a Ulip, subtle variations from providers might help clinch the issue. In our cover story, we try to guide you through the parameters that you should look at while deciding on a Ulip buy. We also bring to you the first glimpse on how the new Ulips have been performing during their initial days in the market.
However, Ulips, like most insurance products are long-term plays and if you are already locked in, relative underperformance at this stage should not be a cause for concern. New investors, though, can get a sense of where to put their money.
Staying on the insurance theme, we tell you how the upward revision of premium rates allowed by the IRDA on third-party motor liability will impact you and the ways through which you can reduce your premium outgo while shopping for a motor cover.
The spate of revisions of the benchmark rates by the Reserve Bank of India will have a definite impact on lenders' business. Our story on bank stocks updates you on how the sector is likely to perform and gives you a selection of top banking stocks for the future.
SARBAJEET K. SEN,
Executive Editor
