Enforce transparency!

A common grouse of financial planners is that unit-linked insurance plans (Ulips) fall short on transparency, but the insurance regulator doesn’t think so. Says Insurance Regulatory and Development Authority (IRDA) chairman C.S. Rao: “The idea of Ulips was more transparency than traditional plans, which is why every charge is spelt out and the investor knows where his money is being invested.”

Financial planners, however, feel the disclosure of charges is not user-friendly, both in the number of charges that are levied and the format in which they are disclosed. Says Surya Bhatia, a Delhi-based financial planner: “The charges are mentioned in the brochures. But if I were to use them to make an illustration, I feel at a loss. The year-to-year break-up of charges is never spelt out; sometimes, the mortality charge is not even mentioned. Also it is not clear whether the charge is being deducted monthly, quarterly or annually.”

The same problems are endemic to the policy illustrations that insurers and agents hand out to insurance buyers. Rao says he is open to critique and suggestions. “If the illustrations are not clear, they will have to change. Although I can put my men to work, I would like financial advisors to tell me what needs to be done,” he says. Insurers too are adopting a similar stance. Says Sam Ghosh, chief executive officer, Bajaj Allianz Life Insurance: “Any body reading the brochure or seeing the illustrations should be able to make out what charge was deducted where and on what grounds. If illustrations are confusing in this regard, we will have a look at it and change accordingly.”

(Detailed report in today’s Express Money)