The instances of mis-selling is significantly larger in the unit linked insurance plans (ULIPs), Mr Hari Narayan said.

“The incidence of mis-selling, however, has come down a little from 14 per cent in 2006-07 to 12 per cent in 2007-08. But still about 10 per cent of total complaints received by the authority are on mis-selling,” he said. But we cannot draw any conclusion based on this 3% drop. Misselling continues to be an issue.

Ulips are popular savings instruments as they offer protection in terms of life cover and flexibility in investments to the policyholder. A part of the premium is invested in equities or government bonds, depending on the choice made by the policyholder.

In most cases, the cost structure is front-loaded, with the bulk of the agents commission being paid in the first year. Hence, if a Ulip were to be sold to an individual with an investment horizon of only three years, most schemes are likely to result in generating returns lower than expected due to the front-end charges.

The regulator has now made it mandatory for companies to give a break up of all charges they have to pay and the exact amount that will be available for investment during the premium payment period.

Recommended posts

• Insurance Amendment Bill on its way to Approval
• Don’t confuse insurance with investment
• Why of Insurance v/s Other Savings
• Insurance & Microinsurance Sector Action Hotting Up
• Glossary of Insurance Terms: Part I