New Ulips to the market after the New Ulip Guidelines
New Ulips came to the market after the New Ulip Guidelines from IRDA
There were some malpractices existed in the ULIP sector up to Sep 1, 2010. The guidelines issued by IRDA on Sep 1, 2010 stopped the malpractices and gave a relief to the ULIP customers. There was ULIP selling practice, without fully disclosing the charges on ULIP. That prompted IRDA to issue certain guidelines.
The new guidelines brought big changes, in the ULIP marketing. By the effect of those guidelines about 200 ULIPs withdrawn and a newly 50 ULIPs come to the market. There are only 4 or 5 ULIP products for each company instead of 15-20 policies earlier.
The commissions to the agents reduced by the new guidelines may decrease the interest of selling. They may be concentrated in the traditional policies. But it is beneficial for the customers who are seeking for good ULIP products. The 75% of premium income of insurance companies from ULIP products may fall to 50% by the new guidelines.
The change in charges is a notable case. As a result of the new guidelines it is supposed to receive comparatively small charges from customers. It results in the integration of charges in ULIP. It may become a defensive product from an aggressive one. But it increases the profitability of ULIP. The difference between Gross yield and Net yield of fifth year will be 4%. It will be 2.75% in 10th year and 2.25%in the 15th year. It will assist the process of wealth creation. It may become an effective tool for long term investors.
It will result a situation where the lack of variety of ULIP products. So the brand value and the service quality of insurance companies may be the driving factors for the customers to choose the right policy. It will push the insurance companies to improve their quality of services.
But the insurance companies are very reluctant to support these guidelines because it affects their profitability. According to them, the new lock in period conditions and the decrease in the insurance charge will make negative impacts. There is a special situation that the most of the insurance companies are entering to the capital market where their valuation may be affected.
The attitude of the customers towards ULIP products is important. ULIP was a Money tree for insurance companies up to the new guidelines. But the situation has changed and become a two in one method for investors with long term view. Let us hope that the new guidelines will help the investors to be part of the capital market without pain.