Unit Linked Insurance Plan (ULIP) is a financial product that combines life insurance coverage and investment options. (Representative image)
IRDAI, in a master circular dated June 19, said unit-linked or index-linked insurance products should not be advertised as 'investment products'.
The Insurance Regulatory and Development Authority of India (IRDAI) recently issued a master circular prohibiting promotion of unit-linked insurance plans (ULIPs) as ‘investment products’.
ULIPs in India are regulated by IRDAI, which has laid out comprehensive guidelines to ensure consumer protection, transparency and fair practices in the marketing and management of ULIPs.
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IRDAI, in its master circular dated June 19, said unit-linked or index-linked insurance products should not be advertised as 'investment products'.
Insurers must specifically state that market-linked insurance plans differ from traditional endowment policies and involve risks.
Likewise, if you want to participate in an endowment policy (with a bonus), the benefits picture must state upfront that the expected bonus is not guaranteed.
What is ULIP?
ULIP is a financial product that combines life insurance coverage and investment options.
ULIPs offer two benefits: investment and insurance. A portion of the premium paid by the policyholder is used to provide life insurance coverage and the remainder is invested in stocks, bonds or hybrid funds as per the policyholder's choice.
life insurance: A portion of your premium will be used to provide a death benefit to your beneficiaries if you die.
invest: The remainder of the premium is invested in the market, typically a mix of stocks and bonds. The growth of this investment will depend on market performance.
Why can't I advertise it as an investment product?
IRDAI's new regulations aim to prevent misleading advertising and ensure consumers understand the following factors:
Market Risk: Unlike traditional insurance plans, ULIP returns are not guaranteed and depend on market performance.
Hybrid products: This is not just an investment. Along with investment options, you also get insurance benefits.
So what can ULIP advertising say?
ULIP advertising can still promote the benefits of a product, but must be transparent about the risks involved. It should be explained that ULIPs are a combination of insurance and investments and returns may vary depending on market fluctuations.
All advertisements of linked insurance products and annuity products with variable annuity payment options must disclose risk factors, IRDAI said in a circular.
“All insurers must advertise the launch of unit-linked funds or index-linked funds under existing or new insurance products, and this should only refer to basic life insurance coverage and products related thereto.
“Further, insurers should not issue press releases or statements without mentioning life insurance coverage and related products,” the master circular said.
It added that advertisements for all linked products and pension products with variable payouts must comply with the standards set by the Advertising Standards Council of India.