In September 2010, the Insurance Regulatory and Development Authority (IRDA) issued guidelines restricting the design and pricing of unit linked insurance plans (ULIPs) with the introduction of caps on charges (including surrender penalties). The IRDA followed this up with restrictions on the product design and pricing of universal life plans (known as Variable Insurance Plans or VIPs) through a circular issued in November 2010.
It is still too early to assess the longer term impact of these changes. However, severe reductions in new business volumes and the depressed mood in the industry in the face of these challenges are a stark contrast to the excitement of the initial growth phase of the market.
This article, first published in the March 2012 edition of the Asia Insurance Review, highlights some of the more noticeable developments that have emerged over the past year and discusses how the industry may evolve in the near future.