The new guidelines issued by the insurance regulator, IRDA, for unit-linked plans are likely to impact the profitability of insurers and make it difficult to sell some products, said industry officials.

The proposed commission structure will also make the agency channel unviable, they added.

Some of the major changes like lock-in period and compulsory annuitisation are quite good, said Mr Kamesh Goyal, Country Manager and CEO, Bajaj Allianz Life Insurance.

Stringent

“The capping of expenses guidelines have been made very stringent, this will have quite far reaching consequences for the industry. Small regular premium policies will become unviable; a large proportion of people who were paying premium of less than Rs 15,000 or so a year will suffer badly.

Secondly, the commission structure can't sustain an agent's income, agency channel will suffer badly. I hope we don't land up in a situation where product is very good, but no one willing to sell it,” Mr Goyal said.

Mr Rajesh Relan, Managing Director, MetLife India Insurance Company, said, “Prima-facie the circular benefits the customer. This is yet another step taken by the IRDA to add more value to the policy holder and make the products more transparent. It will further demystify these products, thereby helping the customer make an informed decision. This will also improve persistency and provide long-term and sustainable income stream for the distributors”.

Dual benefit

“We welcome the announcements today as they are in the long-term interest of the customer as well as the industry. They are aimed at further enhancing the transparency of ULIPs and will boost their attractiveness as a long-term savings product as they fulfil the dual benefit of providing prosperity and peace of mind to the policyholders and their families,” said Mr T.R. Ramachandran, Chief Executive Officer & Managing Director, Aviva India.

While industry is of the view that existing ULIP products will undergo a major change, they are yet to ascertain the full impact and are seeking further clarifications.