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Would you buy a ULIP? Share your views

April 12, 2010

It was not the perfect weekend for investors of unit-linked insurance products (ULIP) after market regulator SEBI barred 14 insurance firms from issuing or promoting such plans, which are a favourite among investors.

But Finance Minister Pranab Mukherjee said on Monday SEBI and insurance regulator IRDA have agreed to maintain status quo on ULIPs and also jointly seek a binding legal mandate from an appropriate board.

Such products, which offer a combination of insurance and investment, were introduced in 2001 and Mukherjee’s statement came as a relief for people who invest in ULIPs to ride the stock market and also save on taxes.

But should the stock market be worrying? Media reports say local insurance firms invested close to 620 billion rupees in equities in 2009/10 of which ULIPs accounted for roughly 500 billion rupees, according to insurance industry estimates.

After SEBI’s move, sentiments were hurt which also contributed to an 80-point fall in the BSE Sensex on Monday.

But as the regulators continue to battle it out, it is the common man who would be worried about his investments.

A tweet on social networking site Twitter read – “ULIP which I invested are in ban list by SEBI, little bit worried.” Another tweet read “Irda says ULIPs are safe. Whom do you trust?”

What is your call on this product – do you have investments in ULIPs? Would you now buy these plans or wait till the issue is resolved?


i would rather wait till the issue is resolved, but what i dont understand is how can the regulator not see what impact this confusing order is going to produce. Is settling a turf war more important than investors’ confidence? And why did the finance minister take the whole weekend and a weekday to come out wiht this simple statement.

Posted by VipulTripathi | Report as abusive

I’ve always felt uneasy with it’s a no no for me…..and don’t get me started with credit cards which give insurance!!!!!

Posted by da_bet | Report as abusive

It appears that ULIPS introduced 8 to 9 yrs back,if the claims of SEBI is taken into account they have the right to control the insurance companies,where were they when the insurance companies collected billions from the public for the last 9yrs,if it is the case they can not simply escape from the responssibility,they should have control the companies yrs back.

Posted by kokkodan | Report as abusive

If SEBI did have an issue with this, shouldn’t they have said as much when Ulips were first introduced to the investors? Why wake up now? Such issues would worry investors, and the average-joe investor mostly depends on his agent for financial advice, who would always promote a Ulip. So, who do you believe then?

Posted by gogunners | Report as abusive

I have purchased few ULIP’s. One thing i observed is that every year, the charges got reduced in the new plans they introduced. This means old policy holders lost out every year, and they cannot discontinue for fear of loss of their premium paid. New features like bumper addition etc are available in New plans, is this not a unethical business. Older policy holders are left in lurch. Similarly, u will not get to know the portfolio of stocks in which your money is invested neither in print or by email. In other countries, only one policy is issued and all other additions can take place in this itself. Some thing similar should be done, so that one need not take so many policies, all having different terms etc
I agree that more transparency is needed, and the charges should be brought down to bare minimum in the interest of policy holder, and should become fee based instead of commissions.

Posted by israo | Report as abusive

SEBI has woken up, albeit a bit late. ULIP were first started by Unit Truat of India. No one ever bothered what was UTI doing with such a big corpus. Even now the ULIP holders are charged a fat comission and irelevant administrative charges through first three years. Risk factor are never discussed by the agents. They usually create a mirage and promise sky.
SEBI must propose criminal liabilities against the fund manager if they fail to give the promised returns. Now IRDA should keep away as the ULIP have more investments than insurance.

Posted by mesa | Report as abusive

Hello Readers,
Well to give u all a small shock (to a few who don’t know the story behind the screen.

Most of us feel that the agents (read it as insurance agents or financial advisors) make a lot of commission.
Infact to be honest, these guys not make anything more than 15-20% (on the higher side).
They earn only the base commission and that too for the first year only.

Year 2+ they make only the renewal commission which is very low (nothing more than 5%, it wont last more than 3yrs).

If you people have lately seen the spurge of Telemarketers calling day in and day out regarding Insurance sales. These guys represent the chunk called Corporate agents.
These corporate agents are people who make the max of ur invested money.
the number runs anything between 40%- 70%.
Reason: apart from the base commission, they get the additional commission called Marketing commission.
Which means ur hard earned sweat toiled money of Rs.1 Lac when invested, 70k goes to these guys who spent Rs.1/- on calling you and make a Hefty commission charge

Painful??? but i believe strongly that these people make so much money becoz we have been feeding them, careless enough not to check the charges before buying.

so every time u guys buy, please beaware…


Posted by iamraj | Report as abusive

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