Fintotal News Analysis | Insurance Reform
Insurance Reform
Ruby Jacob, 06 Jul 2010

Whats happening?

The insurance regulator, IRDA, is bringing in many rules that make unit linked insurance plans (ULIPs) somewhat better for investors. Most of these changes kick in from 1 September 2010. The aim is to improve the current free-for-all where ULIPs are disastrous for the customer due to high charges, mis-selling, lack of transparency and lax regulation.

ULIPs are investment products where your fortunes are linked to the market. They also come by many other names - pension plans, child plans, retirement solutions, xyz NAV plan, and so on.

What does it mean for me?

Currently, ULIPs investing is probably the worst decision you can make financially. You would lose heavily due to the high charges and mis-selling. Worse, due to the complexity of the product, you would not even realise how much of a loss you have been hit with. The new rules would make things slightly better, but are still far from making ULIP a great product for the customer. So, in short, stay away from ULIPs now, and stay away from them after 1 September.

The worst thing is when an agent projects the upcoming good changes as something that is bad for you, and urges you to invest before 1 September. This is fraud at its worst, and you may consider lodging a complaint if your agent behaves likewise. After all, all changes being made from 1 September are to make things a bit better for you (longer lock-in, compulsory offer of life cover, lower charges, lower commissions, etc). Do not let your agent turn the issue on its head and make hay before 1 September!

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