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IRDA not to change ULIP norms

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August 11, 2010 16:37 IST

Insurance regulator IRDA on Wednesday said it will not tweak its proposed guidelines on unit-linked insurance products (ULIPs) even as the industry fears that the norms, to be effective from next month, could squeeze their profits in short term.

"We have considered all that (the proposed guideline) and we do not see any need for vary from the regulations already there. We will have to balance the profits of insurance companies with what is right and proper," IRDA chairman J Hari Narayan said.

The regulator, in June, had come up with new guidelines for ULIPs under which the investments would be locked in for five years, up from three years now. Also, the agents' commission would be reduced and even if investors opt out earlier, the discontinuance charges will be lower than they were before.

Insurance companies are of the opinion that the capping of surrender charges and the even distribution of charges over the lock-in period of five years will adversely impact the profitability of companies.

When asked whether the profitability of the insurers would be impacted, he said, "I do not think that the performance would be significantly impacted in this fiscal or next fiscal." He said the insurance companies will have to contain expenses to maintain revenue in the long run.

"The insurance companies require to get back to a much reasonable expense pattern for sustainability. We do not want to spin the industry to a high cost sector," Hari Narayan said.

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