Calcutta, May 3: The Insurance Regulatory and Development Authority (IRDA) seems to be gradually losing ground to capital market regulator Sebi in their bitter tiff over the control of unit-linked insurance plans (Ulips).

In a circular issued today, the insurance regulator stated that partial withdrawals in Ulips can be made only after five years of buying them, effective from July 1, 2010.

Till now, policyholders can redeem part of their investment units in Ulips after three years at the net asset value prevalent on the day of redemption.

In other words, the IRDA has increased the lock-in period to five years from three years.

In unit linked pension or annuity products, no partial withdrawal will be permitted and the insurer will be allowed to convert the accumulated fund value into an annuity only at maturity.

Less than a month ago, the Securities and Exchange Board of India (Sebi) had barred 14 life insurers from selling Ulips, making references to “partial withdrawal” options in Ulips.

“The attributes of the investment component of Ulips launched by these entities are akin to the characteristics of mutual funds, which issue units to the investors and provide exit at net asset value of the underlying portfolio,” the Sebi order of April 9 said.

The insurance regulator today also said that all Ulips must provide for a minimum insurance benefit in case of death of a policyholder.

“All linked products (Ulips), including pension/annuity products must have a minimum sum assured payable on death.” The regulator clarified that the provision of death benefit will not be mandatory in Ulips providing health insurance cover.

It also clarified that Ulips cannot be used to obtain loans from any sources. “No loan shall be granted under unit linked insurance products.”

The IRDA further said that the minimum policy term would be five years in individual products, while group products would continue to be renewed annually.

Every top-up premium will have a lock in period of three years from the date of payment of that top-up premium, it said, adding they would not be allowed during the last three years of the contract.

Last week, the IRDA had asked life insurers to spell out the commission that they pay to agents on each policy under the “benefit illustration” column — a document that illustrates the benefits the policyholder is likely to get on maturity or on death. Unless a prospective policyholder reads and signs the “benefit illustration” document, the policy proposal should not be accepted.

Earlier in October, the IRDA capped various charges on Ulips after Sebi banned entry load in mutual funds from July.

“Only the unit-linked products that which conform to these revised guidelines shall be permitted to be offered for sale from July 1, 2010,” said the IRDA circular issued today.

This means that insurers will have to change the lock-in period clause in all their existing Ulips as well.