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Who Regulates ULIP In India?

Updated On Sep 26, 2023

ULIPs are investment vehicles that combine life insurance with an investment component similar to that of a mutual fund. A portion of the premium is applied to the sum assured, while the remainder is invested in the policyholder's choice of investments, based on his or her risk tolerance. The sale of ULIPs accounts for over 85% of private insurance companies' revenue on average. ULIP plans accounted for 86.74 percent of private enterprises' business in 2008-09. 

In 2008-09, ULIPs contributed Rs 90,645.78 crore in premiums to the sector as a whole, accounting for more than 40% of total sales. In a ULIP plan, the insurance owner can choose whether to pay his premiums in a lump sum (single premium) or at regular intervals (monthly, quarterly, half-yearly, or annually). The client's premium is used to purchase units in various insurance firms' funds (debt, balanced, and equity funds).

Read More: Difference Between Money Back Plans and ULIPs

Reasons Why IRDA Regulates ULIP

Following are the reasons and instances that lead the regulation of ULIP by IRDA:

1. IRDA And SEBI Are At Odds

The argument over who would control ULIPs erupted into a massive squabble, with SEBI (Securities and Exchange Board of India), the equities market's regulatory body, and IRDA, the insurance sector's regulatory agency, issuing contradictory directives. The mutual fund sector in particular was dissatisfied. 

Because ULIPs are heavily skewed toward investment, have a low insurance component, and are sold as investment products, SEBI has barred 14 major private insurance companies in India from increasing funds from the public for any ULIPs, despite the fact that the ULIPs they initiated had an investment component in the essence of mutual funds.

2. IRDA's New Guidelines

Following the end of the battle with SEBI, IRDA released new rules in May, promising to make even more changes in the future. The regulator's announcements include an increase in the risk-based insurance share and a reduction in the high upfront charges, confirming SEBI's position.

The most notable change is the increase in the lock-in period from three to five years, effectively making them long-term financial products that primarily provide risk protection. It also stipulates that connected goods, such as pensions and annuities, must have a minimum sum assured payment on death. Insurance coverage is required for pension and annuity products. Furthermore, under Unit Linked Insurance Products, no loan will be issued. All top-up premiums paid during the term of a contract must be covered by insurance.


The ordinance has given IRDA carte blanche, which had done very little to defend policyholders' interests prior to the SEBI conflict. However, while the new IRDA rules on ULIPs are helpful, more action is required.

Stop authorizing pure investment plans with a smidgeon of life insurance; take steps to develop a good, stable, and trained agency force and eliminate all dubious channels of distribution; try to comprehend that thousands of crores of rupees are pumped into the insurance industry, and strictly enforce the Act's expense ceilings without delay.

Also Read: Reasons Why ULIPs Are Secured Long Run Investment

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard. 

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