investment profile. The cash value of VIPs will fluctuate according to the performance of the insurance company’s investment profile, and even the interest earned can vary from company to company.
Analysts recommend that in order to make VIPs more transparent, fund managers must mention the returns earned every year. They say that even under the new guidelines, agents’ commission and the expenses deducted are on the higher side compared with Ulips, where Irda has capped expenses at 3% of the premium for tenures less than 10 years and at 2.5% for products longer than 10 years.
All linked variable policies will have to offer death benefit, which is either the sum assured as agreed in the policy plus the balance in the policy account, or higher of the sum assured as agreed in the policy or the balance in the policy account. The minimum maturity will have to be at least equal to the balance in the policy account. Under Irda's regulations, every variable linked insurance policy will have a corresponding policy account whose balance shall depict the accrual to the policyholder. The policy account shall be credited with premium, net of charges. The guaranteed rate and variable interest rate will be applicable to the balance of the policy account.
The insurance company will have to send a statement of the policy account to the policyholder at least once a year, and it will have to issue it at the end of each financial year to the policyholder. It should have the break-up of the opening balance, premium received, deductions towards charges, minimum floor interest earned, variable interest earned, non-negative residual interest rate credited and closing balance in the manner prescribed by the regulator.