To
All Life Insurers
Sub: Benefit illustrations for Unit Linked Products
Please refer to our earlier letter dated No.2/IRDA/ACTL/DC/
2007-08 dated 17th December, 2007, requesting comments on the
captioned draft circular. We are thankful to those who were kind
enough in sending their responses.
The purpose of this circular is to provide the prospect /
policyholder all relevant information regarding amounts deducted
towards various charges for each policy year so that the prospect
/ policyholder can take an informed decision. The present step
will no doubt pave the way towards standardizing the disclosures
which would result in greater transparency and enhanced
policyholders’ confidence. You all will agree that this is crucial
at this hour as unit linked products are assuming significant share
in the total portfolio. In this context, the following are to be
ensured:
a) Life insurance companies are required to confirm to the
format (Table-A) enclosed which lists out all charges to
be paid and also the amount available for investment in
each policy year.
b) Information specific to the particular policy holder only
shall have to be used.
c) Insurers must also give figures separately in a table about
guaranteed benefits and non-guaranteed benefits for
each policy year (Table-B) keeping in view the interest
rates as specified by the Life Insurance Council’s circular.
At present the interest rates used for benefits illustration
are 6% p.a. and 10% p.a. respectively. This table (Table-
B) is already in practice.
d) The policy holder must sign both Table-A and Table-B
along with the sales person on the day when he she
signs the proposal form. These tables shall become part
of policy document and a copy must be sent to the policy
holder along with the policy document.
e) The circular is applicable to all unit linked products (both
new and existing) and shall come into force with effect
from February 1, 2008.
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