The Insurance Regulatory and Development Authority (IRDA) is likely to come up with separate norms for Unit-Linked Insurance Plans (Ulips) for making them a long-term contract rather than be regarded as a short-term investment instrument, a move that will end the ongoing unhealthy competition among mutual funds and insurers.

Indications are that the regulator may spell out a minimum lock-in period and sum assured limits for Ulips. Moreover, IRDA may emphasis on the need for increasing the risk cover for top-ups (premium paid over and above the stipulated amount) in Ulips.

Ulips have been hogging the limelight among investors, who are comparing it with mutual funds and using it as a short-term investment instrument. However, insurers have time and again clarified that Ulips cannot be compared with mutual funds. Mutual funds and insurers are at loggerheads over the actual gains from their respective schemes.

While mutual funds highlight the same return for annual charges ranging between two per cent, insurers say that over a long-term period (beyond five years), Ulips have a lower average charge. The competition among Ulips and mutual fund schemes also heated up after Finance Minister P Chidambaram blurred the lines on tax treatment of various savings instruments. From this fiscal, all savings instruments have been clubbed under section 80c for getting exemption upto Rs one lakh. Both insurers and mutual funds are fast to cash in on these opportunities by advising investors to put maximum amount in their schemes.

( www.indiainfoline.com)