afaqs! news bureau

IRDAI bans insurance companies from advertising unit-linked policies as investment products

Insurance companies must clearly state that market-linked insurance plans differ from traditional endowment policies and carry associated risks.

On June 19, 2024, the Insurance Regulatory and Development Authority of India (IRDAI) directed life insurance companies not to advertise unit-linked plans (ULIPS) as investment products in a recent circular.

“Unit-linked or index-linked insurance products shall not be advertised as ‘investment products’. In the case of unit-linked insurance products (Ulip), index-linked products, and annuity products with variable annuity payout options, the risk factors shall be disclosed,” the regulator said.

Insurance companies must clearly say that market-linked insurance plans are different from traditional endowment policies and have risks. Similarly, participating endowment policies must clearly state that the bonuses shown in benefit illustrations are not guaranteed.

As per the circular, there shall be no advertisement by insurers:

i) On services not related to insurance

ii) On comparison of rates/ discounts to erstwhile tariff, in case of a general insurance product

iii) Highlighting the potential benefits of an insurance product without a fair indication of associated risks, if any

iv) Disclosing benefits partially without corresponding limitations/ conditions/ implications

v)Exaggerating the benefits of the product

vi)Denigrating the reputation of a competitor or the industry

IRDAI also stated that policyholders can find information about unclaimed amounts with any insurer on the Bima Bharosa portal.

Unclaimed life insurance funds are the money from insurance policies, like death or survival benefits, that have not been claimed by the beneficiary or policyholder.

According to the circular, all ads for linked insurance products and annuity products with variable payouts must show the risk factors and include the following information:

  • Linked insurance products/ annuity products with variable annuity pay-out options are different from traditional insurance products and are subject to risk factors.

  • 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 the fund and factors influencing the capital market/publicly available index and the insured is responsible for his/her decisions.

  • _ 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.

  • Please know the associated risks and the applicable charges, from your insurance agent or intermediary or policy document issued by the insurance company.

  • 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 has also told companies to use technology to set up a strong system for handling policyholder complaints quickly and efficiently, aiming for "zero grievances".

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