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Soon, customers buying life insurance products will be required to sign an affidavit attesting that they have understood the product and its risks. The affidavit will be in the form of a hypothetical illustration that demonstrates the assumptions made to calculate policy returns. The Insurance Regulatory and Development Authority (IRDA) has issued a ruling that insurance companies can sell products with returns illustrated for two rates—6% and 10%.
The Mumbai-based Life Insurance Council has said the measure would reduce the problem of misrepresentation of products while closing a sale that has shaken the business of late. The problem mostly had to do with unit-linked insurance plans (ULIPs) and actuarial-funded products.
In addition, the industry representative body has said it will work on generating more data on the business metrics, such as lapsed policy ratios and investments in equity markets quarterly and annually. Council officials say that measure will be put in place by 1 October.
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