Thursday, February 2, 2012
by
Indian Real Estate News
The Insurance Regulatory and Development Authority (Irda) plans to ban loans by life insurance companies against unit-linked life insurance policies (Ulips). The insurance regulator is not approving any unit-linked plans with a clause of loans against policy.
Irda has rejected our new unit-linked plan and has asked us to refile it after removing the loan facility clause.
Confirming the development, Irda Chairman J Hari Narayan said, "Fundamentally, Ulips are risky products, given that they are linked with the stock market. In case the fund value drops dramatically due to negative price movement, the risk would come to the insurers. Hence, loans against such products are not advisable." Insurance officials said the move might further dent the sales of Ulips as the loan facility acted as an added feature. The facility first came into force after Irda raised the lock-in period for such plans by two years to five in September 2010.
The loan facility was one of the selling points for these long-term insurance products. So, this would impact the sales of unit-linked plans.
Ø Irda not approving any Ulips with loan facility
Ø Sept 2010 Loans against Ulips started
Ø 75% of the fund value could be the maximum loan amount
Ø Interest rate offered was benchmarked against the base rate of banks — currently around 10.75-11%
Highest loan tenure could equal the policy tenure |90% of the fund value can be the maximum loan amount for traditional policies
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