Buyers of unit-linked insurance policies can now heave a sigh of relief. The insurance regulator, Insurance Regulatory and Development Authority of India has issued a standard format that will simplify things for the policyholder and arrest the rampant mis-selling.

In a circular issued on Wednesday to all life insurers, Irda has stated that from February 1, life insurance companies will have to list out charges that are being deducted from the premium, state the amount being invested and offer realistic returns of 6 per cent and 10 per cent.

The form will be a part of the policy document. The policyholder will sign both the forms with the salesperson on the day when he signs the proposal form, stating that he has understood the statement before entering into the contract. The form will also have to be signed by the marketing officials.

Life insurers will have to list out all the charges to be paid and also the amount available for investment in each policy year. The form will contain the information that is specific to the particular policyholder.

Insurers will have to give figures separately in a table about guaranteed benefits and non-guranteed benefits for each policy year, keeping in view the interest rates as specified by the Life Insurance Council.

Life insurance companies are required to conform to the format that has been standardised by the regulator, where the amount of instalment premium for every year has to be specified, list the charges deducted such as premium allocation charges, amount deducted as policy administration charges besides various other charges that are being deducted by the insurer.

Those charges are collected immediately after the allocation has been through cancellation of units, for those charges which are collected at the end of the year, insurers have to specify the rates. Besides, policyholders will also have to be given a glossary for various terms of charges used.

Ulips have assumed a significant share in the total portfolio of life insurers. For most private insurance companies, Ulips contribute more than 60 per cent to the new business premium.

The form in bold and capitals will state that in this policy the investment risk is borne by the policyholder.