The controversy surrounding the regulation of unit-linked insurance policies (Ulips) has failed to deter investors from holding on to their products or even getting new ones. At least the service tax collections from the product during April-May this fiscal bears testimony to the Ulip’s undeniable popularity. Service tax collections during the April-May is almost double the amount realised during the same period last year.
The government has collected almost Rs 70 crore from the hybrid insurance cum investment product in April-May period of the fiscal—when there were questions over Ulip’s identity (insurance or investment) and regulation. The issue has now been put to rest after the government issued an ordinance that it is an insurance product and will be regulated by insurance regulator Irda. The collections on this count during last fiscal was only at Rs 241 crore, a finance ministry official told FE.
Now that the controversy over Ulip has also been put to rest, Service tax collections for the fiscal can go up to Rs 400 crore from the product. Service tax collections from Ulips even in the last financial year (2009-10) was at Rs 241 crore as compared to 2008-09 when the product gave only Rs 43 crore. This happened despite the service tax rate being reduced from 12 to 10% in the last fiscal. This financial year also, the figures can be called good as the service tax is still not rolled back to 12%.
Insurance regulatory and development authority (Irda) changed the guidelines for Ulips where they have put a cap on overall charges that life insurance companies can levy on subscribers of their Ulips.
Customers insurance firms feel the new norms will have a positive impact. “The impact of these guidelines on customers is favourable, with lower charges, guaranteed returns,” Deepak Sood, MD & CEO, Future Generali India Life Insurance Co said.
Rajesh Relan, managing director, MetLife India Insurance said, “ More value will be added for the policy holder and make the products more transparent. It will further demystify these products, thereby helping the customer make an informed decision.