All channels have gone to town saying that the IRDA has come down on mis-selling of ULIPs. Has it really done that? How?

Well most channels cannot handle it.

However what IRDA has done is simple – they have shifted the cost of mis-selling from the customer to the manufacturer. Till today if you went and told a manufacturer that there is mis-selling, they would react as follows:

1. Our company is not doing it – Complete denial

2. Partial Denial: Our employees do not, our agents maybe doing it.

3. It is not a mis-sell just that the client is not understanding it properly (I did not understand what it means)

4. Selling life insurance to a bachelor with an ageing mother is not a mis-sale Subra. Maybe the bachelor wanted it. When I spoke to the bachelor he thought he was buying a pension plan. L O L.

5. Selling an insurance to a child is not a mis-sale, client wanted it.

I could just go on and on…

However by reducing the yields and dramatically reducing the surrender charge (6% subject to a maximum of Rs. 6000) the cost of mis-selling has been shifted to the P&L of the life insurance company.

The share prices of the insurance promoters has not fallen enough to reflect this….