A new rule of Insurance Regulatory and Development Authority of India (IRDAI) stops insurers from selling ULIPs and index-linked products as investment products.
The IRDAI’s rule comes after reports of rampant misselling of ULIPs and index-linked products by naming them as mutual fund products.
In its ‘Master Circular on Operations and Allied Matters of Insurers’ dated June 19, the regulator said, “Unit linked and/or index linked products shall not be advertised as ‘investment products'”.
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The regulator further said that all the advertisement of linked insurance products and annuity products with variable annuity pay-out options shall disclose the risk factors along with the following warning statements:
1. Linked insurance products/annuity products with variable annuity pay-out option are different from the traditional insurance products and are subject to the risk factors.
2. The premium paid in linked insurance policies or the annuity offered under the annuity policies with variable annuity pay-out option are subject to investment risks associated with capital markets and publicly available index. The annuity amount/NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market/publicly available index and the insured is responsible for his/her decisions.
3. __ is only the name of the Life Insurance Company and __ is only the name of the linked insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns.
Also Read: IRDAI’s Special Surrender Value (SSV) Rule: Get Some Premium Back Even After 1 Year!
4. Please know the associated risks and the applicable charges, from your insurance agent or intermediary or policy document issued by the insurance company.
5. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.
The regulator also told insurers not to compare funds offered by one insurer with funds offered by another insurer, implicitly or explicitly.
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