The Insurance Regulatory and Development Authority of India (IRDAI) issued a circular on June 19. The circular was related to Unit Linked Insurance Plans (ULIPs). IRDAI, in its circular, has banned ULIPs from being promoted or sold as investment schemes. The organization says customers should not sell it as an ‘investment plan’.
What is ULIP?
Along with insurance coverage, ULIPs also offer investment opportunities in equities and bonds. Policyholders pay through regular premiums. At the same time, along with insurance, the investor can also invest in equity or bonds or both under this scheme. The lock-in period of these products is 5 years. Till then no investor can withdraw money from it. Even if it is only partial.
But ULIP was being sold in the market as an investment scheme. Due to which the investors were being misled. Now the new IRDAI instructions clearly state that ULIPs cannot be sold as ‘investment products’. Let us tell you that this matter was taken up by SEBI.
Several cases came up before SEBI
Several cases came to SEBI’s notice where ULIPs were being sold as investment schemes. Companies used to sell new ULIPs to policyholders and investors by calling them New Fund Offers (NFOs).
The circular has also made it clear that all publicity regarding ULIPs will also mention its risks. At the same time, bonuses or past performance cannot be used in promotions as a guarantee of compensation.