Oct 29 2008
ULIP performance report seeked by IRDA
The recent upheavals in the stock market have not even spared the unit linked insurance plans being offered by insurance companies. To take a full complete view of this situation IRDA has decided to seek a detailed evaluation on the kind of damage done by the present financial turmoil on the performance of these equity linked insurance funds. By this exercise IRDA attempts to visualize the damage caused to the stake of the investors and also gauge the margin by which the subsequent sales of the ULIP’s have slipped.
This decision by IRDA was taken after its deliberation on the global financial meltdown and its subsequent repercussions on the Indian insurance industry. If the damage found is of a higher gravity then one of the remedies which could be suggested would be to prescribe a minimum share of business from traditional policies in the overall portfolio of these life insurance companies. Traditional insurance companies are oriented towards providing protection and are aptly regulated. They majorly invest in government securities which are comparatively safer and risk free. Presently, insurance companies have full complete freedom to sell either ULIP’s or traditional insurance policies or a mix of both of these plans.
Traditional insurance plans are generally seen as a long term saving investment option while on the other hand ULIPs provide the investor to choose a mix of investments for himself which he deems to be best. the other option which could be adopted by IRDA could be to fix a ceiling on the amount that can be invested by the investor in equity funds. The drastic dip in the net asset value of some of these funds in the wake of the present conditions have proved to be a major concern for the regulators who fear that it could make the life insurance business highly unstable and insecure.
ULIP’s are popular investment tools with the investor which provide the investor the opportunity to invest in the market and at the same time get a good substantial life cover. A part of the premium deposited by the insurer goes in to government securities while the other is invested by him in the market. The risks associated with investments are entirely borne by the policy holder who also reaps benefit from an upsurge in the price of the net asset values.