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IRDAI proposes changes to insurance product norms

IRDAI proposed a guideline for non-linked insurance products, the revival period has been extended to five years from the current two years

New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has proposed new draft product guidelines for linked and non-linked life insurance policies. One of the key changes made by the IRDAI includes increasing minimum death benefit seven times for regular premium products and to 1.25 times for single premium products for all ages. The new guidelines have also brought in new criteria for the appointment of an independent actuary(s) by life insurance companies.

Changes in death benefit over the years

Earlier, the minimum death benefit was 10 times the annual premium for those less than 45 years and seven times the annual premiums for those above 45 years. Even for unit-linked insurance products, age-wise diversification of death benefit has been removed and it is standard across all ages. For non-linked insurance products, the revival period has been extended to five years from the current two years. Explaining the rationale behind the move, the IRDAI said that for the past few years industry executives had provided various suggestions to improve current product regulations, so as to be in the line with the dynamics of today’s insurance market, which invariably includes global insurance market dynamics. “There were significant changes in the trends in product structures driven by the customers’ needs, wants and preferences...Apart from this, innovations in the methods of placing the products in the market, coupled with innovations in product benefits and structures is the main driving force which necessitated a review of the existing product regulations,” the notification stated. Unit-linked insurance product (ULIP) holders will be allowed to switch their asset allocation(s) during the settlement period, “to manage their funds better in a volatile market situation,” the IRDAI said.

What else is on the table?

Insurers will not be allowed to design individual term, group term and credit and micro-insurance products across a range of policy terms, while in the case of group products, the regulator will modify some guidelines so that they can be based on the customers (company or corporate) requirements. The category of Variable Insurance Products has been removed and the provisions for non-linked variable products have been simplified. Other changes include allowing customers to commutate up to 60 per cent of the policy sum assured for pension products, and those with market-linked pension products to partially withdraw their corpus. Companies can file send their comments and suggestions on the draft regulations for linked and non-linked products, respectively, by November 15.