SEBI and IRDA tug of war for ULIPs

Dear Policy Holders,

A raging war is going on between the two regulators ie SEBI and IRDA . SEBI says that its going to be its own baby for nursing and looking after as ULIPs has a bigger element of stock market exposure. IRDA contends that it is primarily an insurance product. I would side IRDA for various reasons. The main reason is that the insurance is a much more tricky business. The liabilities are not easily determinable on the part of companies. Only highly qualified actuaries may do it for them. There has to specialised knowledge about how the premiums are fixed and how the eventual liabilities are going to be provided for. I do not think that SEBI can match up the requirement of being a body fit to regulate insurance.

I have come across material in press and on TV programmes which have tried to throw bad light on ULIPs on account of transparency issue and also on issue of commissions. In fact, I have been educating you all about the virtues of ULIP products. It stands absolutely transparent where every single charge and possible returns are shown separately in the illustrations (IRDA has prescribed format). Also the commission is minimal in these plans which allow only under 1% commission from second or third year on the premiums paid while the traditional plans which LIC has been selling for more than fifty years bring commissions of 5% on premiums over the life time of policy besides the first year commission is much more than in ULIPs.

There is some lobby behind the efforts at tarnishing the image of a product that has been much popular with public. It has all good features and none bad. I am ready to explain to policy holders if they let me know of the point they want to clear doubts about.

Would it not impress you that most of my ULIP holders have had a very satisfying returns which have been as high as 30% per annum and none have had it less than interest on FDs with bank. Needless to say that the returns have been tax free unlike interest on FDs.

The govt has clarified that the ULIPs already issued will stay unaffected. Whatever the regulators and courts finalise in the area of regulation of ULIPs will only be applicable to new offerings of the products.

Those interested may go for the exiting products of HDFC SLIC which I assure you are with low charges and good possibility of returns which has practically been the case with my present policy holders including you, if you hold a policy from me.

I do hope that those of you have substantial funds under your policy, are paying due attention my switching advices from time to time.

Krishna Kumar Khandelwal