News Life and Health30 Oct 2018

India:Regulator issues draft for more liberal product regime

30 Oct 2018

The insurance regulator IRDAI has released a draft paper, proposing regulations to standardise life insurance products - with several changes to the benefit of customers. In particular, insurers are to be given the freedom to offer a lower sum insured, a move which will increase the savings component in the insurance policy, leading to a higher return in exchange for a lower protection amount.

Another one of the proposals is to make the minimum death benefit seven times for regular-premium products and 1.25 times for single-premium products for all ages, reports Times of India. Currently, the minimum death benefit is 7-10 times the premium paid. That is, for a premium of INR10,000 ($136), the life insurance or death claim paid is between INR70,000 and INR100,000.

There is a proposal too for policyholders to receive a specific sum if they surrender the policy after two years. IRDAI did not specify how the surrender value would be calculated. Currently, for life insurance policies, insurers pay out a lump sum only if the policy is surrendered after three years.

For pension products, IRDAI is looking at an option of up to 60% of the pension maturity amount for commutation, which is the percentage of the pension maturity income available to the policyholder before maturity and is exempt from tax. IRDAI also plans to have partial withdrawal for linked pension products. Currently, unit linked insurance products (ULIPs) provide some flexibility to policyholders by allowing them to withdraw a partial amount from their fund value before the policy ends.

To cope with market volatility, the draft paper proposes to allow customer switches in ULIPs during the settlement period and an open market option for annuities. IRDAI also said it is looking at permitting “insurers flexibility in designing individual term, group term and credit and micro insurance products which offer a range of policy terms”, and permit more group products.

The exposure draft said that “insurance products should be able to cope with the dynamism of the market”.



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