Fresh from its victory in the regulatory turf war over unit-linked insurance policies (Ulips), the Insurance Regulatory and Development Authority (Irda) is set to overhaul the norms governing these popular financial products.

Two Irda officials said on Monday the regulator will soon declare stringent norms on front-loading of commissions, surrender charges, risk cover, top-up benefits, and fixed gains or sum assured for Ulips.

The insurers were playing a trick with the policyholders by offering the benefit of Ulip charge limits only at the maturity of the product.

We will now order the insurers to maintain a difference of at least 3.3 percentage points between gross yield and net yield on Ulip investments through out the duration of the policy and not only at the maturity, said one of the Irda officials on condition of anonymity.

Our proposal should bring down the first-year agent commission from 35 percent to 10-15 percent, added the official. For pension plans, the first-year commission, will come down from 7.5 percent to about 5.5 percent.

Surrender charges, too, will be reduced to curb mis-selling. In yet another significant proposal that will not only make Ulips attractive, but also distinguish them from mutual funds, Irda intends to increase the life insurance component in Ulips substantially and make it mandatory.