Come January 1, 2004, and life insurance companies can no longer market their policies illustrating more than 10 per cent returns.

The Insurance Regulatory and Development Authority has capped the minimum illustrative return at six per cent and the maximum at 10 per cent on all marketing illustrations (or publicity material).

This means that life advisors and sales illustrations can only demonstrate returns within this minimum and maximum benchmarks.

Earlier promises of returns as much as 16 per cent plus was used by some companies and insurance agents as a marketing gimmick to push sales.

The implementation of capping the illustrations was to have commenced from Saturday.

However, the Irda has deferred the date of implementation to January 1, 2004 as many insurance companies have yet to get their IT systems in place to commute these illustrations, said official sources at Birla SunLife Insurance Company.

This was decided at the life insurance council meeting on August 14, as players felt that the August 23 deadline could not be met for want of proper IT systems.

The illustrative returns will be reviewed every six months based on the movement in interest rates and other investment options.

Said Birla Sun Life Insurance associate director (business development) Anjana Grewal: "As markets are looking up the 10 per cent upper cap is fine."

Birla Sun Life's unit-linked policies have in the past one year given returns varying between 12 to 16 per cent plus.

In addition to capping the minimum and maximum illustrative returns, the IRDA has also stated that the illustrative text will have to be accompanied by a note stating that the same is authorised by the appointed actuary and approved by the company, said official sources at Birla Sun Life.

This simply ensures that the company stands by its illustrations, even as it also makes it apparent that illustrations cannot be classified as guarantees.

This is all a part of the code of conduct for the industry, as many companies and their agents have been over-enthusiastic in selling policies.

By capping illustrative returns, this will bring about uniform and realistic projections to be made by the industry players.

Many agents have in the past duped policyholders into buying risk covers based on high projected rate of returns, which are not guaranteed but simply illustrative.