Unit-linked insurance plans (Ulips) have never quite managed to win over the true blue-blooded financial advisors. No wonder, theseSEBI-IRDA ULIP Row, Advisors are firmly on the side of SEBI in its tug-of-war with the insurance regulator (IRDA) to reign in Ulips. According to them, the outcome of the tussle - most likely a long-drawn affair - may actually make Ulips a better product, as, in their current avatar, Ulips fall short on cost-effectiveness , transparency and flexibility. SEBI has already benefitted customers of mutual fund by abolishing entry load last year.
Ulips are insurance plans with disparate investment options and have captured the buyers’ imagination in the last few years.
They also hold the dubious distinction of being one of the most grossly mis-sold financial products in the country.
ULIP's are not thebest way to buy insurance. It is definitely not the cost-effective way of buying insurance. Higher first-year charge of 15-20 %, an investor has to continue with the scheme for a long period to make up for the charges. “This is especially crucial for people who have opted for the higher equity allocation and witnessed a market crash.’’
Experts say despite IRDA’s efforts to bring down the cost, these products are “not inexpensive by any means’’ .
Ulips fail on transparency, too. The portfolio disclosure could be more frequent. Also, experts believe Ulips don’t offer much of an exit choice to investors. Once you buy them, you can’t get out of them even if the scheme performs badly. You are stuck with it as it also has an insurance component.
This Ongoing tussle would bring ULIP malpractices in focus and would eventually help in making it a much better, low on cost and transparent product.
