IRDAI bars Insurers from Advertising ULIPs as Investment Products

The Insurance Regulatory and Development Authority of India (IRDAI) has prohibited insurers from promoting unit-linked and/or index-linked products as ‘investment products’ in a master circular dated June 19, 2024.

It has provided clear guidelines for insurers to follow while advertising insurance products.

According to the circular, insurers will not advertise:

• On services unrelated to insurance,
• In the comparison of rates/discounts to the previous tariff, in the case of a general insurance policy,
• Highlighting the possible benefits of an insurance policy without a fair representation of any associated dangers,
• Disclosing, the benefits in part without matching constraints, conditions, or consequences.
• Exaggerating, the product’s benefits.
• Deteriorating, the reputation of a competitor or the industry.

What did IRDAI say about advertisements for linked products and variable annuity payment options?

IRDAI said in a Circular, “An advertisement for a unit-linked insurance policy, an index-linked product, or annuity products with a variable annuity pay-out option must include adequate, accurate, explicit, and up-to-date information in simple language.”

According to the circular, the information may contain, but is not limited to the following:

• A factual illustration of the risks involved.
• Risk factors are connected with fluctuating investment returns.
• Charges associated with the fund or premium, including potential increases.
• The contingency under which the guarantee, if any, is payable, as well as the exact amount of the guarantee.
• The results of the funds, accompanied by relevant numbers, shall only be reported in advertising and other promotional materials such as benefit illustrations, sales brochures, etc. The emphasis on past performance must be decreased in advertisements, but prior performance must be included wherever it is intended to be reported.
• Compounding annual returns (using standardized computations) during the past five calendar years, presented as a percentage rounded to the nearest 0.1%.
• If the last five calendar years of data are not accessible, as many years as feasible must be shown.
• Where data is not available for at least one calendar year, previous performance will not be displayed.
• It must clearly mention, in the same font and size, that past success does not always predict future performance.
• Corresponding benchmark index performance, if any, must be included.

According to the circular, advertisements for linked insurance products and annuity products with variable annuity pay-out options must include the risk factors and the following:

• Linked insurance products/annuity products with variable annuity payout choices differ from regular insurance products and are prone to risk factors.
• The premiums paid in linked insurance policies, as well as the annuities offered under annuity policies with variable annuity payout options, are exposed to investment risks associated with capital markets and publicly published indexes. The annuity amount NAVs of the units may increase or decrease depending on the fund’s performance and variables impacting the capital market/publicly available index, and the insured is solely accountable for his or her actions.
• Please consult your insurance agent or broker, as well as the policy documents supplied by the insurance provider, to learn about the associated risks and costs.
• The names of the numerous funds supplied under this contract are not indicative of the quality of these plans, their future prospects, or returns.