The Insurance Regulatory and Development Authority of India (IRDAI) in a master circular dated June 19, 2024 has barred insurers from advertising unit linked and/or index linked products as ‘investment products’.
It has laid out detailed guidelines to be followed by insurers while advertising insurance products.
As per the circular, there shall be no advertisement by insurers:
(i) On services not related to insurance,
(ii) On comparison of rates/ discounts to erstwhile tariff, in case of a general insurance product,
(iii)Highlighting the potential benefits of an insurance product without a fair indication of associated risks, if any,
(iv)Disclosing benefits partially without corresponding limitations/ conditions/ implications,
(v)Exaggerating the benefits of the product,
(vi)Denigrating the reputation of a competitor or the industry.
What did IRDAI say regarding advertisements on linked products and variable annuity payout options
In the circular IRDAI said, “An advertisement on the unit linked insurance product, index linked product and annuity products with variable annuity pay-out option shall contain adequate, accurate, explicit and updated information, in simple language.” As per the circular the information may include, but not limited to, following –
- A factual picture of inherent risks involved,
- The risk factors associated with specific reference to fluctuations in investment returns,
- The charges related to the fund or to the premium paid and the possibility of increase in charges,
- The contingency on which the guarantee, if any, is payable and the exact quantum of such guarantee,
- The results of the funds duly supported by related figures shall only be reported as regards the past performance of the funds in advertisements, as well as in any other promotional material like benefit illustrations, sales brochures, etc. The emphasis on past performance must be reduced in the advertisements, however, past performance, wherever intended to be reported, shall contain:
- Compounding annual returns (shall adopt standardized computations) for the previous five calendar years, expressed as a percentage rounded to the nearest 0.1%.
- Where last five calendar years’ data is not available, as many years as possible must be shown.
- Where data is not available for at least one calendar year, past performance shall not be shown.
- It shall clearly state, in the same font and size, that the past performance is not necessarily indicative of future performance.
- Corresponding benchmark index performance, if any, shall be included
As per the circular, all the advertisements of linked insurance products and annuity products with variable annuity pay-out option shall disclose the risk factors along with the following
- Linked insurance products/ annuity products with variable annuity pay-out options are different from the traditional insurance products and are subject to the risk factors.
- The premium paid in linked insurance policies or the annuity offered under the annuity policies with variable annuity pay-out option are subject to investment risks associated with capital markets and publicly available index. The annuity amount NAVs of the units may go up or down based on the performance of the fund and factors influencing the capital market/publicly available index and the insured is responsible for his/her decisions.
- _ is only the name of the Life Insurance Company and _ is only the name of the linked insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns.
- Please know the associated risks and the applicable charges, from your insurance agent or intermediary or policy document issued by the insurance company.
- The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.
