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Ulips InsuranceThe new guidelines for Ulips are a mixed bag. The investors will gain from the higher insurance cover and reduced charges, but it’s not favorable for policyholders of pension plans.

The fight between insurance regulator IRDA and equity market regulator Sebi resulted in the favor of the former. The business of non-bank promoted life insurance companies is likely to be most hit by the new IRDA regulations, which made it mandatory for insurers to evenly distribute unit-linked insurance policy (ULIP) charges over five years.

This is because insurance companies will have to find ways to cutting down distributor commissions, resulting in demotivation of individual agents to sell ULIPs. While most of the big banks have their own insurance companies, these players do not have big banks as banc assurance partners to sell their policies.

According to Mr V. Srinivasan, Chief Financial Officer, Bharti Axa Life Insurance, the new changes may see, part-time agents, who constitute almost 70 per cent of the industry’s agency force, to stop selling ULIPs.

Even corporate agents exclusively selling insurance may stop doing so. Banks will continue to sell the products because for them it is not a core activity.With the new guidelines, around 40-50 per cent of the business are at risk Mr T.R Ramachandran, Chief Executive Officer and Managing Director, Aviva Life Insurance said, that first year commissions can come down by 20-40 per cent. It won’t be as lucrative for agents to sell as before.

They will have to look at volumes rather than commission The government came out with an order making Insurance Regulatory and Development Authority (Irda) the sole regulator of unit-linked insurance plans (Ulips).

However, the victory for insurance industry and their regulator is mixed as Ulips are now governed by a new set of guidelines that may change its whole story. Ulips launching after September 1, 2010, will have lower charges, guaranteed returns and larger insurance cover.