The Insurance Regulatory and Development Authority of India (IRDAI) on Wednesday said the facility of policy loan is now mandatory for all life insurance savings products, enabling policyholders to meet liquidity requirements.
IRDAI announced that the free look period, allowing policyholders to review the terms and conditions, has been extended from 15 days to 30 days.
The insurance regulator on Wednesday issued a master circular on the life insurance business after a comprehensive review and consolidation of an array of provisions covered under four existing circulars, which now stands repealed. It has adopted a new set of guidelines to make life insurance simple, easy to understand, and enhance its transparency for a well-informed decision by a prospect/policyholder.
As per the master circular, the facility of partial withdrawal under pension products is allowed enabling the policyholders to meet their specific financial needs for important life events like higher education or marriage of children; purchase/ construction of residential house/flat; medical expenses, and treatment of critical illness.
Other highlights in the master circular are:
> Health riders for covering health related contingencies/emergencies without recourse to surrendering the policies is possible.
> Facility of partial withdrawal under pension products is now allowed enabling the policyholders to meet their specific financial needs for important life events like higher education or marriage of children; purchase/construction of the residential house/flat; medical expenses, treatment of critical illness
> In case of surrenders, reasonableness and value for money to be ensured for both surrendering policyholders and continuing policyholders.
> To facilitate financial planning and enhance the flexibility in premium payments insurers are now permitted to offer products with a range of premium payment term.
> > Variety of products and product features are now possible like:
- annuity products to have pay-out option with payment linked to publicly available benchmark
- fund-based products for non-employer-employee groups
- index linked products
> Free look period which provides time to review the policy terms and conditions is enhanced to 30 days from 15 days.
> Robust systems to be in place for Grievance Redressal.
Complainant to be informed about the escalation mechanism in place to Insurance Ombudsman, if the grievance is not redressed satisfactorily. In case the insurer does not appeal against the award of Insurance ombudsman and does not implement the same within 30 days, a penalty of Rs. 5000/- per day shall be payable to the complainant.
Pricing of life insurance products
While pricing the products insurers shall ensure:
o Premium rates/charges are fair
o Discounts offered & loadings are unambiguous and objectively defined
o Similar risks are not discriminated in terms of premium charged
o Pricing is equitable between policies sold through different channels
Measures to strengthen Governance
> Mechanisms to be put in place to improve persistency, curb mis-selling and avoid financial loss to the policyholders and also enhancing long-term benefits to them.
> Periodic training to be provided to the Intermediaries, distribution channels and employees of the insurers on their products (existing and new), TATs in policy servicing and changes in the regulations etc.
> Product clearance process simplified; Board constituted Product Management Committee empowered to deal with governance aspects of product development, pricing and design.
Nomination
a) The policyholder shall nominate the person to whom the money secured by the policy shall be payable in the event of death of the policyholder.
b) Nominee can be changed any time during the term of the policy.
c) Policyholders shall be provided with a simple and seamless procedure for registering and change in nomination in the policy.
Life insurers are required to make available products
As per the new guidelines, life insurers are required to make available products/riders to provide wider choice to the policyholders/prospects catering to:
a) the needs of the customers suitably;
b) all ages;
c) all regions, all occupational categories, persons with disabilities and any other
categories;
d) the policyholders/prospects as per their affordability;
Note: The above does not imply that the insurer shall have one product to cater to all of the
above.
B. Insurers shall allow flexibility to customers to choose products/riders as per his/her
needs.
Key features of the product shall be provided, in simple terms, which include but not limited to:
> Benefits payable on survival including maturity benefit
> Benefits payable on death
> Benefits payable on surrender of the policy.
> Other benefits payable, if any.
> Options available under the policy such as:
a. Partial withdrawal: Facility to withdraw amount partially out of policy benefits
during the term of the policy.
b. Settlement option: facility to receive the maturity or death proceeds in
instalments.
c. Top-up: Facility to pay additional premium over and above the contractual
premium payable under the policy.
d. Switches: In case of Linked Insurance products, the facility to move from one
fund to another fund, either wholly or partly.
e. Any other options available.
> Availability of policy loan.
> Lock-in period of 5 years for Linked Insurance products during which period the policy
proceeds are not allowed to be payable to policyholders except in case of death or
other covered contingencies.
Benefit Illustration for Life insurance products:
a) Every life insurer shall provide customized benefit illustrations to proposers or prospective policyholders at the point of sale for a product along with the prospectus.
b) Such benefit illustration shall be signed by both the prospective policyholder as well as the insurance agent or authorized person of intermediary or such other distribution channel / person or the employee of the insurer involved in sales process, as the case may be and shall form part of the policy document.
