Insurance Update: Insurance regulator IRDAI has banned the offering of a specific type of insurance product as an investment option. Many companies and agents used to offer this insurance product to customers as an investment option, which angered the regulator.
The Insurance Regulatory and Development Authority of India (IRDAI) has issued a major order regarding insurance products. The insurance regulator has completely banned the advertisement of a particular type of insurance product. The regulator believes that this product is not for investment, but should be sold for protection. This order of IRDA will affect the companies along with the agents selling insurance products, while customers will get clarity in buying the product.
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IRDA has issued a major notification banning the promotion of ‘Unit Linked Insurance Plans’ (ULIPs) as investment products. IRDA’s notification dated June 19 said that ‘unit-linked’ or ‘index-linked’ insurance products will not be advertised or promoted as ‘investment products’.
Clear instructions to insurance companies
IRDA said, insurance companies will have to clearly state that market-linked insurance plans are different from traditional endowment policies and they also carry risk. Similarly, participating (with bonus) endowment policies will have to state upfront that the estimated bonus in profits is not guaranteed. IRDA said that risk factors will be disclosed in all advertisements of linked insurance products and annuity products with variable annuity payment option.
Why was the ban imposed?
Actually, many insurance companies offer ULIP insurance product as an investment option. In its advertisement and promotion also, the companies and agents describe this product as an investment. IRDA is upset with the fact that insurance product should be offered only for security and not as an investment option.
What is ULIP Insurance
ULIP means Unit Linked Insurance Plan, which promises to give you the benefits of life insurance along with returns on the premium deposited. Companies invest the money of ULIP premium in various options including equity and debt market and lure their customers with returns along with insurance protection. This is the reason why many companies and agents also offer it as an investment product.
