The
working principle of such complex struc structured products is simple – make the investors feel they have got a large number of units and benefits on purchase, but then deduct charges (administration and fund management expenses) at a later date or on maturity by reducing the units, thereby ensuring the policyholder actually ends up earning less. No doubt, as per the Invest India 2007 Survey (conducted by IIMS Dataworks), out of 105 million existing life insurance customers, only 14.28% know of ULIP product options; and amongst those who know, less than 5% have actually bought them. Of course, now the Insurance Regluatory and Development Authority (IRDA) has given an ultimatum to schemes like Bajaj Allianz’s Capital Unit Gain (which is credited to have been the major contributor towards the Rs.900 million profitability of the company) and Aviva Life’s 14 acturial products, ordering them to take immediate rectifying steps or to close down. It has also decided to typically ban such actuarial funded products. [“Acturial-funded products mislead customers into feeling that they have more benefits,” asserted C S Rao, Chairman IRDA, in a press release. “Companies who sell these products have been asked to withdraw them from the market over a period of time...” confirmed IRDA].
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
working principle of such complex struc structured products is simple – make the investors feel they have got a large number of units and benefits on purchase, but then deduct charges (administration and fund management expenses) at a later date or on maturity by reducing the units, thereby ensuring the policyholder actually ends up earning less. No doubt, as per the Invest India 2007 Survey (conducted by IIMS Dataworks), out of 105 million existing life insurance customers, only 14.28% know of ULIP product options; and amongst those who know, less than 5% have actually bought them. Of course, now the Insurance Regluatory and Development Authority (IRDA) has given an ultimatum to schemes like Bajaj Allianz’s Capital Unit Gain (which is credited to have been the major contributor towards the Rs.900 million profitability of the company) and Aviva Life’s 14 acturial products, ordering them to take immediate rectifying steps or to close down. It has also decided to typically ban such actuarial funded products. [“Acturial-funded products mislead customers into feeling that they have more benefits,” asserted C S Rao, Chairman IRDA, in a press release. “Companies who sell these products have been asked to withdraw them from the market over a period of time...” confirmed IRDA].For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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