The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new regulations affecting insurance companies and their marketing of products like Unique Linked Insurance Plans (ULIPs).
IRDAI Circular on ULIPs
IRDAI recently issued a master circular addressing ULIPs. It explicitly prohibits insurance companies from promoting ULIPs as investment vehicles in their advertisements. This guideline aims to ensure clarity for consumers regarding the nature of ULIPs.
Guidelines for Advertisements
IRDAI’s guidelines emphasize transparency and fairness in insurance advertisements:
Prohibited Comparisons and Exaggerations: Insurance companies cannot compare previous interest rates or discounts in their ads. Moreover, they are barred from exaggerating the benefits of their products.
Restrictions on Competitor Comparisons: Companies cannot make unfair statements about their competitors.
Specific Rules for ULIP Advertisements
IRDAI has specified detailed rules regarding ULIP advertisements:
Clarity on Variable Annuity Pay-out Option: Companies must explain the variable annuity pay-out option of ULIPs clearly and in simple language.
Accurate Representation of Returns: Advertisements must accurately portray fluctuations in returns without using outdated data.
If historical data is used, it must be clearly distinguished in terms of font size and style, and the corresponding index should be mentioned.
These rules are designed to protect consumers and ensure that they receive clear and accurate information when considering insurance products like ULIPs.
Failure to comply with these guidelines could result in regulatory action against the insurance companies involved.
