IRDAI bans advertising ULIPs as investment products

The Insurance Regulatory and Development Authority of India (IRDAI) issued a directive to life insurance companies, instructing them to refrain from promoting unit-linked plans (ULIPs) as investment products on June 19th 2024, The circular stated, ‘Unit-linked or index-linked insurance products shall not be advertised as ‘investment products’.’ For ULIPs, index-linked products, and annuity products with variable annuity payout options, companies must disclose the associated risk factors.

According to the report, insurance companies are required to clearly state that market-linked insurance plans are different from traditional endowment policies and carry risks. Participating endowment policies must also explicitly indicate that bonuses shown in benefit illustrations are not guaranteed.

The circular specified that insurers are not allowed to advertise:
i) Services unrelated to insurance
ii) Comparisons of rates or discounts to former tariffs for general insurance products
iii) Potential benefits of an insurance product without adequately indicating associated risks
iv) Benefits partially without corresponding limitations, conditions, or implications
v) Exaggerated benefits of the product
vi) Content that tarnishes the reputation of a competitor or the industry

IRDAI also informed that policyholders can access information about unclaimed amounts with any insurer on the Bima Bharosa portal. Unclaimed life insurance funds refer to money from insurance policies, such as death or survival benefits, that have not been claimed by the beneficiary or policyholder.

Additionally, according to the circular, all advertisements for linked insurance products and annuity products with variable payouts must include risk factors and provide the following information:

• Linked insurance products and annuity products with variable annuity payout 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 annuity policies with variable annuity payout options is subject to investment risks associated with capital markets and publicly available indexes.
• The NAVs of the units may fluctuate based on the fund’s performance and factors affecting the capital market/publicly available index, with the insured being responsible for their decisions. 

Additionally, the regulator advised companies to use technology to create an efficient system for handling policyholder complaints quickly, aiming for “zero grievances.”