Norms issued for unit-linked insurance products

Independent rating agencies will now be allowed to evaluate unit linked insurance funds of insurance companies to help policyholders better assess and compare insurance products, according to the guidelines notified by the insurance regulator.

The information will give policyholders clarity on operational practices, fund management quality, and organisational strength of life insurers. The Insurance Regulatory and Development Authority (IRDA) has notified the comprehensive linked insurance product guidelines in the gazette.


IRDA has asked life insurers to disclose the reduction in yield (refers to the lowering of return of a fund on account of the various charges) on a monthly basis to customers of unit linked products.

The regulator has capped the reduction in yield at 4 per cent for policies with five-year tenure, 3 per cent for 10-year tenure and 2.25 per cent for more than 15 years. In case the limit is not adhered to, insurers will have to add more units to the policyholder’s account and maintain the fund value at the prescribed limit.

The regulator has also defined the commission structure for insurance agents and brokers. For a premium paying term of 5 years, commission for agents cannot exceed 15 per cent in the first year, 7.5 per cent in the second year and 5 per cent from the third year onwards.

If a premium payment is discontinued by the policyholder, the regulator has prescribed a minimum guaranteed interest rate at 4 per cent on such premiums parked in the discontinued fund.


Insurers can now offer variable insurance plans (VIPs) (where benefits of the product are dependent on the performance of the approved index linked). This was earlier offered for traditional products but can now be offered on linked products with a non-negative rate of return.

“The death benefit offered under VIP will include sum assured mentioned in the policy document, along with balance in the policy account,” said IRDA

The insurers have been given time till June 30 (for group products) and September 30(for individual products) to adhere to the new guidelines.