Since opening up of insurance industry to private players, unit linked insurance products (ULIPs) have undoubtedly been the most popular type of products among the flourishing private life insurers.
In December 2005 IRDA issued set of guidelines (effected from June 2006) to be adhered to in the structure of ULIPs to ensure comparability among products offered by various companies and to reduce then-prevalent short-termism in ULIPs. These guidelines have now come to be known as ULIP Guidelines and mark a milestone in product cycle of all companies.
Since then, insurance industry has only grown larger and ULIPs have particularly been coming under attack by mutual fund industry and financial press for high charge structure.
On 22nd July 2009 IRDA issued another set of guidelines, which are popularly known as ULIP Guidelines II. This time around, the focus has been on the returns achieved by the policyholder. The core principle is that the net return to the customer should not be less than a particular pre-charge return.
These guidelines are expected to affect most, if not all, products currently in the market and will undoubtedly usher in a new era of unit linked products. It remains to be seen what direction do the insurers choose and how their product decisions are met by two of the other important parties in the sale, customer and the intermediary.