Why insurance companies charge fund management fees from ULIP holders?



In the recent economic crisis, a huge number of Unit Linked Insurance policy holders suffered heavy losses. Insurance companies deduct 2.25% on a regular basis as fund management charges. Had “fund managers” switch the money from equity to debt fund on time, ULIP holders would not have suffered such heavy losses. Is there any justification in insurance companies charging fund management fee when they cannot do the job properly?

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  1. There are several funds available within a product ranging from pure debt to pure equity. It is not insurance company’s responsibility to switch your money between funds. It’s policy holder’s responsibility to look at the market & act accordingly. So insurance company can charge fund management charge despite market conditions as they need to pay salaries.

    As per a survey , only 2% people use switch facility (which is the only advantage of ULIP) as people dont know how to use it.