SLIDE 16

Other functions of insurance

• Is a savings and investment tool – Insurance is the best savings and

investment option, restricting unnecessary expenses by the insured. Also
to take the benefit of income tax exemptions, people take up insurance as a
good investment option.
• Medium of earning foreign exchange – Being an international business, any
country can earn foreign exchange by way of issue of marine insurance
policies and a different other ways.
• Risk Free trade – Insurance boosts exports insurance, making foreign trade
risk free with the help of different types of policies under marine insurance
cover.
SLIDE 24

In a ULIP, the invested amount of the premiums after deducting for all the
charges and premium for risk cover under all policies in a particular fund as
chosen by the policy holders are pooled together to form a Unit fund. A Unit is
the component of the Fund in a Unit Linked Insurance Policy.

http://www.youtube.com/watch?
v=UQgGRBYaLMc&feature=player_embedded

ulip complete

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ULIP charges restricted to 3% by IRDA

July 27th, 2009
by Manish Chauhan on July 27, 2009

Does God Exist ? I don’t know, but IRDA exists !! and hence finally
it has acted as GOD to the investors . On 22nd July, IRDA capped the ULIP charges at
3% . Let us see in this article how this will affect Investors and how will it impact investors
and what will be the implications of this on Investments and Insurance Sector . The
decision will be effective from Oct 1 2009 .

IRDA rules for ULIPS

Gross yield: This is the yield generated by the ULIP before all charges are deducted.
Net yield: This is the yield generated by the ULIP after all charges are deducted.
1. “ULIP charges” here would include allocation charge, administration charge, mortality
charge and all such charges by any other name.
2. For Products whose Maturity is less than 10 years
• “The difference between gross yield and net yield cannot
exceed more than 300 basis points” (100 basis points = 1%) .
• “In this case , fund management charge cannot exceed 150
basis points”
3. For Products whose Maturity is more than 10 years
• “The difference between gross yield and net yield cannot
exceed more than 225 basis points” (100 basis points = 1%) .
• “In this case , fund management charge cannot exceed 125
basis points”
4. The IRDA has made PAN card mandatory for all policies where annual premium is
more than Rs 1 lakh OR there is investment in Capital Markets . IRDA said this norm is to
be implemented with immediate effect and all insurers are to comply not later than August
1.

Look at this Video

What will be the Implications
• Ulip products will see a decline in commission paid to agents.
Its very logical , IRDA is giving nightmares to Agents for some
 time . First it was abolistion on Entry load from mutual funds
and now its capping the charges on ULIP . Agents are now
going to get commissions which will be very very less
compared to what they used to get earlier (like upto 35-40% in
first year) . Bad month for Agents in India .
• Now Agents would really be confused on whether to work hard
on Selling Mutual Funds OR ULIPS ? Both are going to provide
them almost same kind of Commissions now ! .
• This move will help in investments in ULIPS , as the hardcore
Mutual fund investors can think of Investing in ULIPS too . But
still dont forget to ask him the most important questions
before buying the ULIP .
• Mis-selling will be reduced in ULIPS as the primary motive of
“High Commission” is crushed by IRDA .
• Though ULIPs are still long term Products , I don’t recommend
common man for short term investments in ULIP , Investors
who think they are smarter than average investor can invest in
ULIPs for short term , considering you know how to manage
ULIPS well and reap the potential of switches (this mainly to
churn the portfolio fast and save the short term capital gains
tax) . Read how to use losses to save your tax .
• This Rule does not apply to traditional Policies, so its not a
very good news for all considering Traditional Policies from LIC

still dominate the Insurance Market .

What will happen to Existing Polices ?
As per IRDA , All existing products that do not meet the requirements of this circular
should be withdrawn or modified by December 31, 2009 . I can only imagine the state of
Agents and Insurance companies which created ULIP mess all these years . IRDA really
nailed them hard this time . Many agents which were getting fat commissions from so
many months will be sad on this .

How much will this help Investors in reaping benefits from ULIPS
This is a good move from IRDA , and investors will be benefited , But how much !! ?
Earlier most of the ULIPS charged heavily in First and Second year and then reduced the
charges to NIL or very very less in later years . Because of which the charges were heavily
skewed in Initial Years, but the long term average charges were still in range of 3-5% .
Now after this new Rule from IRDA , Almost all the ULIPS will charge for every financial
year (that what i think) . Hence the long term charges will now be evenly distributed over
long term , but still the average charge over long term wont come down drastically !! .
Read a nice article from Deepak Shenoy on “Tactics used by ULIPS to hide the charges”

Can you Invest in ULIPS now !!

ULIPS for me has changed its status from “Ugly” to “Average” product now . For long
term Investors , ULIPs can now serve as a good product. Charges wise its much better in
long term now ( 2.25% max) and the best thing is if you need immediate money and want
to close the policy , you will not he hit hard like earlier . Take the policy after Oct 1.
Some Internal Information
Just before writing this Article, I was chatting with Pradeep (name changed), an internal
source who is himself an ULIP agent. See what he has to say
Guest_7FF767C0: attened a sales talk by XXX for their new ulip …
XXX which guarantees highest nav for the next 10 years !!!!

Guest_7FF767C0: all ptvt. life companies are worried about mandatory PAN for annual
premiums of rs one lac. and above.today smart money(black) is routed through ulip cash
payments on binami names.
Guest_7FF767C0: but sir! IRDA may kindly look at the very very high incentives to the
sales team(policy expences).sebi from aug 1 st declared no entry load for mutual funds so
no early commissions to agents which is only 2.25% where as 40% plus in life!
So according to him , Due to the mandatory PAN for more than 1 lac premium . Lots of
black money is coming through Benami Accounts now. see The Benami Transactions
(Prohibition) Act, 1988 High Net worth Clients do not want to share there investments with
Govt to save tax , but because of the “mandatory PAN” rule , the money is being diverted
through “Benami Accounts” . This is totally unethical and unprofessional , but this
happens at the top ladder, Looks like IRDA still has some more work on this plate .
Conclusion
This move will help investors and it will check the mis-selling going on for last many years .
It will also help in making Insurance sector more mature in India . IRDA is coming up with
solutions now and Jagoinvestor sees this move as a friendly move which will help in
achieving the goals of “Making each Indian an Informed Investor” . Thanks IRDA .

Readers , what are your views on this Rule by IRDA , How do you think investors will take
this ? And Is it helping you in any way. Please leave your Comments on this .
Liked the post , Subscribe to Get Posts in Email or RSS Reader
Related Posts:
• How to make use of Top up facility in ULIPS
• Most important questions you should ask a ULIP agent
• Implications of the SEBI & IRDA issue for Financial Planning
• What happens if you stop your ULIPs before 3 years
Tagged as: irda, News, ulip

{ 56 comments… read them below or add one }

1 Yogi July 27, 2009 at 10:01 am

Wow, that was some news.

At last, I dont have to convince my friend to switch to a mutual fund. I have come
across people with ULIP only mindset..due to excellent marketing ways of
ULIP(they refrain from accepting that ULIP is just another mutual fund with hint
of insurance).
Anyways, IRDA's move will help such people to get ULIPs but with reasonable
charges.
What happens to existing policies? Do there charges change too?
Regards
Yogi
Reply

2 MONEYMANAGER July 27, 2009 at 4:17 pm

manish
same question as above
existing policies ka kya??
by the way nice blog design
Reply

3 MONEYMANAGER July 27, 2009 at 4:18 pm

manish
same question as above
existing policies ka kya??
by the way nice blog design
Reply

4 MarketBuzz July 27, 2009 at 11:22 pm

Hi Manish,
The ulip fees now depends on the yield.
Does that mean that every year the ulip company will calculate the returns it
generated for the customer, then it will deduct lets say 3% of it?
Reply

5 Manish Chauhan July 28, 2009 at 1:37 am

@Yogi and @MONEYMANAGER

All existing products that do not meet the requirements of this circular should be
withdrawn or modified by December 31, 2009 , as per IRDA .
@MarketBuzz
Most of the ULIPs show you the caluclations (predictions) , So if they tell you that
you pay a premium of 10k , There plan have to make sure that your 9.7k is invested
for sure (in debt instruments) , for equity no one can guarantee
manish
Reply

6 Anonymous July 28, 2009 at 3:51 am

I read your article and i found it interesting. There was a mistake you can correct In
policy of more than 10 Years of tenure, the FMC will be 125 basis and not 225 as
written in your article. Get that corrected. Throw light on what will be the effect if
the client breaks the policy in between. Would there be huge surrender charges.
Varoon
Reply

7 Manish Chauhan July 28, 2009 at 4:05 am

@Varoon
Hey thanks , i made the changes . ULIPs will still have lock in period of 3 yrs, Even
if you break it in between , 3% rule still applies, but we need more clarity on this
from IRDA .
Manish
Reply

8 Bingo July 29, 2009 at 1:37 pm

Nice start by IRDA, but it would have been best to transparently segregate
investment part and insurance part of any policy/plan. SEBI should regulate the
investment part as SEBI has the knowledge, correct mindset and experience
required to regulate financial products. IRDA would inadvertently leave some
loopholes for insurers to exploit.
A good example of IRDA incompetence is this announcement itself which raised
more questions than it answered. Sometimes it is best to accept one's own inability
than keep repeating the mistakes. Read this for details:
http://new.valueresearchonline.com/story/h2_storyview.asp?str=100611
Reply

9 Anonymous August 4, 2009 at 6:58 am

dear all,
welcome and thanks for this service.reg. ulip re.structered charges, all pvt. life
insurance co.lobbied again as usual through life insurance counsil, to remove
charges from max. limit are mortality, raiders and term of the policy. ex. less
charges for 20 years term more for 10 years are less. these guidelines applicable only
polices issued after i st oct…
when sebi took mutual fund industry very seriously, the counter part IRDA never
shown any precautionary measures against mis selling.
recently our freiends are inviting all mutualfunds agents into life companies!!!
Reply

10 ulip agent August 8, 2009 at 1:02 am

dear all,
welcome back!
penssion or annuity ulips from life companies are not truly useful due to its TAX
impact. only 1/3 rd maturity benefit is tax free rest is treated as income.
thanks
Reply

11 Abhishek Aggarwal August 17, 2009 at 10:30 pm

Hi manish..
Nice info…Reliance has recently come out with a ULIP where they are charging 6%
FMC for the first year and then none.
Also, Premium Allocation charges are 1%. Plan is valid till 30th Sept.
I am looking for a long term investment of around 20 years. Would it be advisable
for me to go for this plan or wait till 1ST Oct.
Reply
12 Manish Chauhan August 18, 2009 at 1:03 pm

@Abhishek
This is not a complete information to judge if one should go for it or not .
But as it is closing just before the IRDA rule is implemented , i sense some thing bad
there and hence advise you to evaluate and go for it later.. anyways .. what is
stopping you to take something later .
manish
Reply

13 Anonymous August 21, 2009 at 8:55 am

Manish
Can you throw some light & views on the UTI ULIPS 71 an special fund Hybrid:
Debt-oriented
Multiple benefits Plan which combines the basic benefit of life insurance with
returns. Tax benefits and accident insurance cover. A multiple tax-saving plan for
10 to 15 years.
with Assured Returns:-On maturity of chosen plan a bonus of 5% and 7.5% of
target amount is paid
what make it different from other ULIPS
Regards
Shekhar
Reply

14 Anonymous September 2, 2009 at 12:23 pm

What will be the impact of this ruling on the Commissions of Life Insurance
Agents?
Will this ruling give a BOOM to industry sales.
Reply

15 MANISH YADUWANSHI September 2, 2009 at 12:25 pm

What will be the impact of this ruling on the Commissions of Life Insurance
Agents?
Will this ruling give a BOOM to industry sales.
Reply

16 Manish Chauhan September 5, 2009 at 2:06 am

@Shekhar I cant review it individually .. it should be same as others with some

differnce .
@MANISH YADUWANSHI
Its a positive move , but i dont think it will affect drastically
Manish
Reply

17 MONEYMANAGER September 10, 2009 at 5:16 am

hi manish, me again.
i have a icici pension plan,
recently,when thinking about topping it up,
'i was told that top up attract only 1%charge,as usual,ididnt believe the agent n
called up callcentre.
they also confirmed the same,any idea?
whats the catch?
say for example,i wanna invest 1 lakh yearly,
so i incur 30%charge or 30000rs first year.
now intead of that i just take the least possible amount that is,10000/year policy, and
later top it up with 90000 every year,
this way i end up saving as much as 90%,
well,what do you say
Reply

18 Manish Chauhan September 14, 2009 at 8:28 am

@MONEYMANAGER
See this :
http://www.jagoinvestor.com/2009/09/how-to-make-use-of-top-up-facility-in.html
Reply
19 Anonymous October 30, 2009 at 12:35 am

hi,
dear all !1
welcome.nothing visible from pvt. life insurance co. towards the NEW changes in
charges.
Reply

20 Manish Chauhan October 30, 2009 at 5:17 am

@Anonymous
Why not …
The new ulip from Aegon religare is a good one and as per IRDA guidelines
the existing ulips have time till this year end to make changes and comply with
IRDA .
manish
Reply

21 Purna December 23, 2009 at 1:31 am

Hi Manish
I have taken ULIP policy on June 2009 for next 20 years. My premium is 48000 per
year but they are charging 440 rupees per month. 5280 rupees per annum, but as
per new IRDA policies, how much they need to charge me and also let me know how
to complaint against insurer incase they dont abide by the new IRDA policie
charges?
Thanks in advance.
Purna.
Reply

22 manish January 8, 2010 at 6:13 pm

440 a month is too high . Ask them the cost detail . What does that 440 cost is called
as ?
manish
Reply
23 Jitendra Bapna January 7, 2010 at 9:19 pm

hello friends,
yes! its a great move by IRDA..
but i have a Questions. In the charges column we also have mortality charge which
when compared with normal term plan will not yeild any thing, which means that a
policy holder will not get anything if nothing happens to him.
now compare it with ULIPs. if nothing happens to policy holder then it should not
matter. therefore while calculating the IRR the mortality part should be set aside as
the person is not liable to get anything from that.
kindly comment as i think that the new IRR should not include the mortality as the
policy holder is not liable to get that amount.
Regards,
Jitendra
Reply

24 Manish Chauhan January 8, 2010 at 2:32 am

yup , you are correct . but with ulips the mortality charges are cut in the same way
as a term insurance ,so anyways you have to pay the cost for insurance . only the
rest money should be used to calculate IRR . I guess thats how its calculated
anyways
Reply

25 Manish Chauhan January 8, 2010 at 2:36 am

You thats how ulip irr is calculated, after removing the mortality charges .
manish
Reply

26 Jitendra January 8, 2010 at 4:14 pm

Thanks for your comment,

I am a insurance consultant and because of this IRDA move the commission
struture has been hit very badly.
and now the company is coming up with plan which does not give good insurance
cover as due to mortality the IRR is going down ending making the ULIP with
negligible insurance.
Its my message to IRDA to kindly Calulate the IRR after deducting the mortality.
Regards,
Jitendra
Reply

27 Manish Chauhan January 8, 2010 at 6:11 pm

Jitendra
I also agree that IRR should be calculated only after deducting mortality charges as
it has nothing to do with the investment part . Why dont you compain to IRDA at
their site .
Manish
Reply

28 Anupam January 10, 2010 at 10:25 am

Hi Manish,
I discovered your site yesterday and was hooked. Very nice articles and analysis.
Q1: Question is same as above: do the charges on existing ULIP polices also come
down? I haven’t received any intimation in this regards from my company, so am
planning to follow up with them.
Q2: IRDA has removed surrender charges 5 year onwards, Is this applicable for
existing polices also and has any company communicated this to its unit holders?
Request: If any one who has an existing policy and has received any communication
on the new charges and removal of surrender charges etc. please post here, so that
we can put a question to our companies also.
Request 2: Manish, the twitter etc. icons on the left cover content. if would be great
if you can put them on the top of the page or on the right side.
Thansk for all the info.
Anupam
Reply

29 manish January 12, 2010 at 3:19 am

Anupam
Ans 1 : You have to understand the new rules . New rules does not say any thing
about the allocation charges . It only restricts the gap between the net yeild and
gross yield of the policy . So what it means is that if your policy is for 10 yrs, and
your over all money makes a return of say 10% (means every penny your invested
grows by 10%) . then the charges they will take should not be more than 2.25% .
which means that your return should be atleast 7.75% (10-2.25%) . First year
charges can still be 20% or 50% . But the return you get at the end should be just
less by 2.25% of gross return .
Ans 2 : As per the general rules , almost all the ULIP’s dont have surrender charges
before the 5 yrs . There is nothing to be communicated from ULIP side , its always
there in Policy documents . Company never hides anything from customers , they
cant .. Its consumer reponsibility to read the documents which they dont .
Which ULIP do you have ? Are you planning to stop it ?
Manish
Reply

30 Anupam January 15, 2010 at 8:29 pm

First let’s talk about Cap on Charges:

If understand correctly Gross Yield means:
GY%= % IRR [expected return (i.e. U1 + U2 .. Un)*NAVc – Total premium paid
(P1+P2 … Pn)], where Pn is the premium paid till date, Un is the no of units
purchased on paying premium Pn and NAVc is the NAV on day on which IRR is
being calculated. IRR is also the % rate at which your money will grow.
Net yield means:
NY% = %IRR [Total no of units on Uc * NAVc -- total premium paid (P1+P2 …
Pn) + sum of all mortality charges + service taxes)
As per IRDA, GY% - NY% <=2.25%
I hold a AVIVA ULIP, (20 year policy) on which the following charges apply:
1) Allocation rate: 96% i.e. only 96 out of Rs. 100 premium invested in units
2) Initial Management Charge: 7% of initial units (i.e. U1) per year for 20 years
3) Fund Management Charges: Growth Fund: 1.5% per annum (equity fund)
4) Policy Administration Charges: Rs 45 per month (increasing 5% per year)
5) Mortality Charges
6) Service Charges on mortality charges
As I understand, under IRDAs new guidelines, 5 & 6 are out of perview, and since
the policy is 20 year policy, the Cap on charges (i.e. item 1, 2,3 and 4) is 2.25%.
Presently, it is over 12.5%.
Now all these charges are deducted by cancelling units (except the item 1), so in any
case I feel the gap between net yield and gross yield will be more than 2.25%? What
say. Let me know if I am missing anything.
Now coming on surrender charges, my policy has 2 components:
Surrender Charge 1= [1-1/(1.07)^N)] * no of initial units * NAVc (where N is ULIP
term remaining and NAVc si the date of redemption request)
Surrender Charge2= [1-1/(1 + x)^N)] * no of initial units * NAVc (where N is ULIP
term remaining, x is 1% for a term of 4-10 years and NAVc is the date of
redemption request)
So the surrender charge in the 5th year, i.e after I have paid 5 premiums is:
S1 = 63.76% of first years initial units
S2= 13.86% of the net of ( total accumulated units till date – first years initial units)
As per IRDA guidelines these charges should be ZERO …..
Next, yes I agree, that all these charges are mentioned in the policy documents, and I
should have read them, but I used to think that my relationship with my bank is of
trust. What I have realized that trust is the most abused thing in this world.
Final question on stopping the ULIP, no I am not planning to stop it right now. I
was planning to stop it post 5 years due to the IRDA guideline and the heavy
charges and very little returns.
I wrote a general email to my ULIP customer care and they replied that both these
IRDA notifications are for new polices only and not for existing polices. I have
written back to them quoting the relevant notifications and IRDA circular numbers.
Will update jagoinvestor readers on what reply I get.
Please correct me if I have made any wrong assumptions or calculations.
Once again thanks for all the inputs.
Reply

31 manish January 15, 2010 at 8:39 pm

I think the formula you have put for GY% is fine .. However
You should , now NY = GY – mortality charges – other charges .
and GY – NY <=2.25%
IRDA rules apply on all the policies including existing one’s . please share what they
say .
Its ULIP company responsibility to make sure that the gap remains 2,25% . Also in
future the charges may keep changing .
Manish
Reply

32 Anupam January 15, 2010 at 10:15 pm

IRDA sent out a correction keeping mortality and morbidity charges out of the
2.25% cap.
Surely, I will keep everyoen posted.
Again, if any other company has made these changes for existing ULIP policy
holders, please post your experience.
Reply

33 manish January 16, 2010 at 3:56 am

Sure Anupam
Thanks for your involvement .
Manish
Reply

34 Anupam January 18, 2010 at 9:02 pm

Aviva CC says , new rules applicable only for new polices / products approved/sold
after Jan 1, 2010 only and no changes to my ULIP policy.
Regards
Anupam Kansal
Reply

35 manish January 18, 2010 at 9:17 pm

The new regulation will be effected from October 1, for all products approved by
the regulator after this date and all the existing products that do not meet the
requirements should be withdrawn or modified by December 31.
see : http://www.blonnet.com/2009/07/23/stories/2009072351790600.htm

May be your policy complies with the rules , demand explaination

Manish
Reply

36 Anupam January 18, 2010 at 9:52 pm

I have quoted exact circulars & paragraphs to them, and their response is: IRDA
circular has target date of 1 Jan 2010 and is applicable to polices sold after that date
only, so my policy has no changes in T&C.
Again, even I am confused: I quote “The new regulation will be effected from
October 1, for all products approved by the regulator after this date and all the
existing products that do not meet the requirements should be withdrawn or
modified by December 31.” This can mean that all products that are not compliant
cannot be sold any further without any modifications to make them compliant, but
nothing is mentioned anywhere about current policy holders.
An analogy can be, on implementation of bharat stage 4 pollution norms, car
companies can either make their models compatible or stop selling them, they are in
no way obliged to make older models complaint to the new norms. Right.
Now the IRDA circulars are not clear on this aspect and on the changes to be made
for existing customers who are paying heavy charges.
I have dropped an email to IRDA, regarding this and will keep everyone posted.
Once again, I am requesting all the readers to check with tier insurance companies
on the two circulars and update the group.
Regards
Anupam
PS: in the newspaper article Aviva’s CEO is quoted …
Reply

37 manish January 19, 2010 at 12:06 am

Anupam
Anyways the older policies will not get back the money they have already paid , but
the rules should be applicable to old + new ones , this is my understanding. Lets see
what IRDA has to say .
Manish
Reply

38 Tanuj February 3, 2010 at 3:16 pm

Hi Anupam,
Appreciate your understanding & interprations skills. As rightly pointed out by
you, even i interpret the new regulations as applicable to new policies and existing
policies for any new sale. Existing policy holders have signed a contract (the policy)
and IRDA is not insisting on amending the SIGNED policies. Only draft of new
policies under same scheme will change.
Since i have already invested 2.4lacs in Aviva ULIP, I still am hoping to be wrong in
my interpretations. Still waiting for IRDA’s response to your mail which might just
say that cost apart, surrender charge regulation will apply to all policies (existing
and new) under any ULIP scheme. Hence, when i will complete 5 years of policy
term next January (2011), i will be able to withdraw atleast my principal amount.
(we can forget about the returns part- as on date, my 2.4 lacs have earned 5K in 4
years). I really needed this money now to finance my first home
How come IRDA is not doing anything about investors who are already caught in
this KNOWN trap. If it cant help us get us a fair deal, atleast it can enforce an
optional exit wherein we get our principal back with 3% interest (which they can
again deduct in name of whatever charges)
Would appreciate if you can keep us posted about IRDA’s response (i wonder if this
body will respond). But i do appreciate your logical approach and patience- really

Regards,
Tanuj
Reply

39 Manish Chauhan February 3, 2010 at 4:39 pm

Tanuj
thanks for your long comment , Didnt you knew about the 5 yrs lock in and how
come you have locked in this money when you know that home payment is coming
on the way . thats poor planning or am i missing anything ?
Anupam , please follow up with IRDA and let us know the update if any .
Manish
Reply

40 Anupam February 5, 2010 at 11:26 am

My emails to the IRDA contact email id bounced repeatedly, so today I called up

IRDA office and was suggested that I drop an email to the chairman sir. I have done
that.
Regarding getting a response form IRDA , I am very hopeful as my experience with
them is that they are very responsive. I had an issue with my Car Insurance
company and when they did not respond despite repeated follow-ups, I dropped an
email to IRDA CCing the customer care of the company. And I got a reply email
from IRDA in 2 days, and a follow-up letter from IRDA arrived yesterday
PS: my ULIPs lockin period is 10 years. I was ok with it initially as I believe that
that ULIPS are long term investments, but with the pathetic performance of my
ULIP, I am inclined to close the ULIP ASAP.
Will keep the group posted on the updates.
Anupam
Reply

41 Manish Chauhan February 10, 2010 at 8:52 pm

Anupam
A little threat works sometimes , SO cc’ing to the IRDA person was of great help .
Nice tactic
Which ULIP you have ?
Manish
Reply

42 Anupam February 11, 2010 at 8:47 pm

He He .. I did not CC him, I complained to him and CCed Insurance companys CC

email and their CEO’s ID too ….
My ULIP is Aviva ….
Anupam
Reply

43 Manish Chauhan March 5, 2010 at 7:06 pm

Anupam
Nice , try CC’ing him next time, atleast put some fake id like
anupam.sinha@irda.com and see if it works
Manish
Reply

44 Subham February 19, 2010 at 4:04 pm

Can I surrender the ULIP policy with in 1year.Is there any new rule from IRDA
that before the locking period policy can be serrendered??
Please help me on this…
Reply

45 Manish Chauhan February 20, 2010 at 1:48 am

Subham
You should look at this article : http://www.jagoinvestor.com/2009/11/what-
happens-if-you-stop-your-ulips-before-3-years.html
Manish
Reply

46 vivek khadse February 22, 2010 at 7:03 pm

can anyone tell me what will happen if old policies are not modified or closed.??
Reply

47 Manish Chauhan February 24, 2010 at 6:17 pm

Vivek
If you dont continue the policy , it will become a paid up policy .
Manish
Reply

48 Srinivas March 1, 2010 at 5:12 pm

Hi Maneesh,
I have a ULIP, max newyork life. And I still see the same administrative charges
levied as before. It is not clear from IRDA circular, about Cap on charges, if existing
policy holders will get the benefit atleast from Jan 1,2010. Can you please elaborate
on this.
Srinivas
Reply
 49 Manish Chauhan March 1, 2010 at 5:45 pm

Srinivas
which charges you are talking about ? If you are talking about the 3% and 2.25%
thing , then you are not understanding it well .. it only means that If the fund earns
X% over long term and you get Y% in hand then X-Y cant exceed 3% .
manish
Reply

50 Srinivas March 1, 2010 at 6:24 pm

Yes Manish, i am talking about 2.25% charges. As of now, for my policy, i see
(0.42% sum assured)+(mortality charges) are deducted every month. I paid rs.
50000.00 as 1st year premium last year, sum assured being 5 Lacs(20 yrs term).
Fund value was 38970.00 very first month (Feb 2009). After that they are deducting
Rs 2464.00 as Administrative charges. Thats almost rs. 29568.00 for one year as
charges. Present fund value is just 26775.00. I dont know how to calculate that
2.25% but I am sure I am paying huge amount as charges and the difference is quiet
higher than 2.25%. I am planning to stop paying any more premiums. what do u
suggest after seeing these figures?
Reply

51 vivek March 6, 2010 at 9:34 pm

hi manish
There are new ULIP policies in the market, which they claim is the lowest cost
ULIP, these are ICICI Pru ACE. It has no premium allocation chargesduring the
entire term of the plan. but there are three charges altogether in this policy.
1) policy administration charges-Rs. 60/-per month through out the term of the
plan.
2) fund management charges of 1.35% in all equity oriented funds.
3) mortality charges.
Another poluicy is from LIC that is wealth plus.
can you review these policies.
i think icici ACE is worth taking it. wat do u think?
Reply
52 Anupam March 9, 2010 at 9:44 pm

Guys,
My faith in IRDA has been boosted as today I got a reply form them regarding the
Cap on Charges and 5 year rule on surrender charges. The news is not good (as
expected), as they have informed that since the contract was purchased prior to the
notification, the notifications are not applicable to old existing polices.
Only if the ULIP provider includes a new fund with fewer charges and you shift to
it, then you get a little bit of benefit.
Still a clarification is a clarification.
Next Steps: understand the Paid up part of my policy. What are the pros and cons.
What will eb my sureender value etc. If I understand correctly, on making my
policy paid-up, I don’t have to pay my premium and my life insurance cover
continues by way of deduction of charges from my fund. Since my policy is over 3
years old, this is an option. If anyone has exercised this option, please post your
experience here. I will keep on updating the group on my experience
Anupam
Reply

53 Manish Chauhan March 10, 2010 at 8:53 pm

Anupam
thanks for the update , the best thing I can think is to close the policy , just being
associated with it for insurance cover that too so small does not make sense to me .
Take a term plan instead .
Manish
Reply

54 SJ March 10, 2010 at 1:54 pm

Hi Anupam,
Thanks for taking initiative and sharing the information.
I’ve also have one five year old AVIVA’s ULIP with similar formula for surrender
charges, I guess such products are called Acturial products which dig a hole in our
pockets if we dare to surrender before maturity.
I was also thinking of contacting IRDA about their recent guidelines and their
applicability on existing policies.
 Now based on their reply I’ll also have to think whether to continue with it (till
maturity) OR convert it into paid-up OR ask CC about any possibility of
transferring these funds to new policy OR surrender it. I’ll consult with few before
taking any action and would post their thoughts/suggestions.
-SJ
Reply

55 Manish Chauhan March 10, 2010 at 7:20 pm

SJ
thats the problem with these trapping funds . Better close it and start fresh with
simple products .
manish
Reply

56 Anupam March 10, 2010 at 11:29 pm

Closing is not an option as the surrender charges will be way high ….. one option is
to withdraw your money intermittently , if permitted, and move into paid-up plan.
If I cancel and withdraw my policy now, i.e. after 3 years, I end up loosing close to
70% of my fund value. Right now I am assessing that what is the best course of
action.
Transferring to a new policy , that is an option that never struck me. May be even I
can explore it.
Anupam
PS: had one more update and realized one more way ULIP Companies are cheating
investors. Each ULIP Product is associated with several funds which you can
choose, now what companies do is that they launch new funds and aggressively
manage them, and lure new customers into the web. Once sufficient customers have
been netted, new funds are started and old funds are allowed to wither away, thus
eroding customer wealth. And the old customers do not have the option to move to
new funds at their will.
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