hyderabad unitlinked insurance plans ulips one of the hottest products in a bull run could become more attractive for retail investors insurance regulatory and development authority irda is looking at a 500 basis point cut on the charges levied by insurance companies on ulip investments this will make the product more attractive by increasing returns the regulator is likely to fix a ceiling on charges in such a way that average charges come down by 500 basis points a ceiling on overall charges will give insurers the leeway to distribute the charges across various expenses and at the same time protect policyholders a panel is working on the cap and we will make an announcement soon said irda chairman j hari narayan besides commission investors pay a host of charges to the insurer in the beginning of the year including premium allocation charge policy administration charge mortality charge and rider charge the difference between the premium payable each year and total charges is the money that is available for investment any reduction in charge should be made effective in the first three years as this will enhance the return for the policyholder said the chief executive of a life insurance company on condition of anonymity he added that there was also a need to legalise rebating commission on life insurance as this would allow the buyer to bargain for the best deal with his agent total charges on ulips with an average term of 1720 years ranges from 2830 of the total premium the charges could now be capped at 25 with a 500 basis point cut the insurance regulators move needs to be viewed against the backdrop of a spate of complaints from the mutual fund industry on hefty commissions being paid to insurance agents selling ulips and other traditional products the securities and exchange board of india on the other hand has capped the expenses of the mutual fund industry it has also scrapped the entry load on mutual funds and the commission payable to distributors will now be mutually agreed upon by the distributor and the investor the commission structure for insurance agents is frontloaded as a large chunk of the money is paid in the first year irda will however not get into micromanagement of various charges as ulips are positioned as longterm investments we need to make the product attractive to retail investors at the same time we want to ensure that insurers have the freedom to take a decision on the distribution of charges across different heads including the commission payable to agents said a senior irda official a part of the premium in ulips is invested in equities or government bonds depending on the choice made by the policyholder the returns are reflected in the increase in the value of the unit mirrored by the net asset value nav declared by the company private insurers garner over three quarters of their new business premium from ulips