Understand your Ulips' features before investing
The real difference post change in Ulip regulation will emerge not in terms of returns due to product features, but due to selling right and buying right after understanding the ulip.
Max New York Life Insurance CEO Rajesh Sud
The new Ulip regulations, undoubtedly, improve customer value proposition. However, this does not mean that every product offered before the change was bad. In fact, it would be incorrect to term any products good or bad per se.
Passing a sweeping judgment on a product category pre or post an event would be flawed most of the time. Can we say that an analog camera is worse than a digital camera? In most cases, in today's time, time you may say yes, but was that the case when digital cameras were not available? Ultimately both analog and digital photography serves the same purpose of capturing memories for posterity. The relevance of a product depends on the environment and needs of an individual.
Before we analyse the new Ulips, I would like to focus on processes, which every individual should go through to take an informed decision.
Understand your needs-Identify your short-term and long-term needs, your assets and liabilities and fund requirement at various points in your life.
Understand your risk profile-Every individual has different life conditions, which drive his risk taking ability. Understanding them would help you in choosing the right product.
Understand the product solution-It is important to understand what you are buying. Spend some time in doing research. As part of this exercise, it becomes important to understand the impact of new Ulip guidelines.
The new guidelines bring a clear focus on long term requirements and enhanced protection, exactly what a life insurance product should do. Let us now look at how these changes will affect the lives of consumers.
LOOK BEYOND THE DAY
The new guidelines have increased the lock-in period to five years from the earlier three years. In fact, today, when the average life span is 75 years and beyond, there is a need to view the tenure of financial planning within the time frame of a life span. This change makes the customer understand the need remain invested for the full tenure.
REMAIN PROTECTED, ALWAYS
This change is to reiterate the basic purpose of life insurance-protection. The minimum sum assured multiples under the new regulations have been increased. This reiterates the fact that life insurance is the only financial product that provides protection against uncertainty.
GREATER FLEXIBILITY
This new guideline stipulates the maximum net reduction in yield every year from the fifth year. This will allow you to buy the product with confidence with the maximum reduction on account of charges in the product. This change does not make any difference over the long-term but provides flexibility in case of exigency.
SUPERIOR PRE-SALES ENGAGEMENT
Irda has introduced a cap on surrender charge based on the year of discontinuance and annual premium. This has effectively put a huge value on persistency management in the industry. This leaves life insurers with no option but to sell right and appropriately communicate the features of the product to customers so that they remain invested for the full term.
However, it is also the responsibility of the customer to refrain from buying a long-term policy with the intention of surrendering it after completion of the lock-in period.
There has only been a marginal change in Ulips post September 2010. The real difference will emerge not in terms of returns due to product features but due to selling right and buying right after understanding the product and keeping it for the long term.
Rajesh Sud, CEO & Managing Director, Max New York Life Insurance
Passing a sweeping judgment on a product category pre or post an event would be flawed most of the time. Can we say that an analog camera is worse than a digital camera? In most cases, in today's time, time you may say yes, but was that the case when digital cameras were not available? Ultimately both analog and digital photography serves the same purpose of capturing memories for posterity. The relevance of a product depends on the environment and needs of an individual.
Before we analyse the new Ulips, I would like to focus on processes, which every individual should go through to take an informed decision.
Understand your needs-Identify your short-term and long-term needs, your assets and liabilities and fund requirement at various points in your life.
Understand your risk profile-Every individual has different life conditions, which drive his risk taking ability. Understanding them would help you in choosing the right product.
Understand the product solution-It is important to understand what you are buying. Spend some time in doing research. As part of this exercise, it becomes important to understand the impact of new Ulip guidelines.
| The real difference post change in Ulip regulation will emerge not in terms of returns due to product features, but due to selling right and buying right after understanding the ulip. |
LOOK BEYOND THE DAY
The new guidelines have increased the lock-in period to five years from the earlier three years. In fact, today, when the average life span is 75 years and beyond, there is a need to view the tenure of financial planning within the time frame of a life span. This change makes the customer understand the need remain invested for the full tenure.
REMAIN PROTECTED, ALWAYS
This change is to reiterate the basic purpose of life insurance-protection. The minimum sum assured multiples under the new regulations have been increased. This reiterates the fact that life insurance is the only financial product that provides protection against uncertainty.
GREATER FLEXIBILITY
This new guideline stipulates the maximum net reduction in yield every year from the fifth year. This will allow you to buy the product with confidence with the maximum reduction on account of charges in the product. This change does not make any difference over the long-term but provides flexibility in case of exigency.
SUPERIOR PRE-SALES ENGAGEMENT
Irda has introduced a cap on surrender charge based on the year of discontinuance and annual premium. This has effectively put a huge value on persistency management in the industry. This leaves life insurers with no option but to sell right and appropriately communicate the features of the product to customers so that they remain invested for the full term.
However, it is also the responsibility of the customer to refrain from buying a long-term policy with the intention of surrendering it after completion of the lock-in period.
There has only been a marginal change in Ulips post September 2010. The real difference will emerge not in terms of returns due to product features but due to selling right and buying right after understanding the product and keeping it for the long term.
Rajesh Sud, CEO & Managing Director, Max New York Life Insurance
