Misleading Ads: ULIPs not to be Advertised as Investment Products

In a move aimed at curbing misleading advertisements, the Insurance Regulatory and Development Authority of India (IRDAI) has stated that unit-linked and/ or index-linked products must not be advertised as investment products.

This development is seen as a way to prevent insurers from depicting these hybrid financial products as pure investment products thereby misleading consumers. As per the IRDAI (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations, 2024, which were notified in March of this year, a ‘misleading advertisement’ is said to have the meaning as ascribed to it under the Consumer Protection Act, 2019.

Chapter I of IRDAI’s master circular dated June 19, 2024, deals with advertisements. It requires advertisement committees and compliance officers to have a system of control in place, over the content, form, and method of dissemination of the advertisements. In case of advertisements on unit-linked insurance products, index-linked products and annuity products with variable annuity pay-out option, the same should contain requisite information.

As to advertisements mentioning the rating or awards of the insurer, the sources have to be disclosed conspicuously and legibly. Another notable requirement is the one mandating insurers and distribution channels to comply with standards as prescribed by the Advertising Standards Council of India (ASCI).

Additionally, in the said master circular, IRDAI emphasises the importance of having brick-and-mortar offices and at the same time adopting technology infrastructure. In view of this, insurers are expected to opt for a ‘phygital’ approach, i.e., physical and digital, in their presence or opening places of business. The master circular also covers other important aspects pertaining to the redressal of policyholders’ grievances, outsourcing of activities, etc.