IRDA to standardise ULIPs, put cap on charges

The Insurance Regulatory and Development Authority (IRDA) has cracked its whip again and this time it plans to standardise Unit Linked Insurance Policies (ULIPs) and put a cap on charges. The new charge structure is likely to be implemented in July. CNBC-TV18's Avni Raja reports.

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The regulator has said that not only are they looking at standardizing all the charges in a systematic format but also they are going to cap these charges and this would apply to all ULIP products across the board. If we look at the chart structure currently, there are nine different charges that are for various ULIP Products. The chart structure for ULIPs even within the same company differ to a great extent, there is a lot of disparity even in the amount of charges, for example, the premium allocation charge could take anywhere between 5-60% in some cases.

The fund management charge could be raised from 0.2% to 3% and the policy servicing charge could range between Rs 400-800 per year. Apart from this there are also switching charges, surrender and mortality charges and partial withdrawal and revival charges. So it is because of these discrepancies and bunch of disparities in charges that investors find it very difficult to compare the products. This is why the regulator has taken the step to standardize all charges and the new charge structure is likely to be implemented in July.