Irdas draft guidelines standardise insurance products and make it easier for customers to choose from a plethora of policies All individual non-linked insurance policies may soon have a minimum tenure of five years. According to the Insurance Regulatory and Development Authority's (Irda) draft regulations on standardisation of 18 products in linked,non-linked and group categories,insurers will also have to offer policyholders flexibility to alter the premium payment term. All unit-linked insurance products (Ulips) will have to provide a minimum death benefit,which will have to be at least equal to the guaranteed minimum sum assured,plus the balance in the unit fund or policy account. Insurers will have to give a minimum maturity benefit,which will be at least equal to the balance in the unit fund or policy account. All non-linked products will have to be classified as participating and non-participating products and all benefit accrual will be either at the beginning of every quarter or half-yearly or at the end of the financial year as specified in the policy. The benefits accrued cannot be linked to any index and the terminal bonus will be declared and payable at the end of the term. Even the benefits or interest rates for fund-based group insurance policy cannot be linked to any index. The insurance regulator has underlined that except for variable insurance products,the death benefit for all non-linked individual product cannot be less than the basic sum assured. Insurers can pay death benefit in installments over a definite period of time and at a defined rate of interest,as approved under the file and use procedure on the declining balance if such an option is provided at the inception of the policy. As a part of the standard kit,Irda has proposed a standard proposal form,standard sales literature and benefit illustrations,except details of the insurer. Analysts say the draft guidelines will standardise insurance products and will make it easier for a customer to choose a policy. In fact,Irdas draft norms on standardisation of products,which is now circulated to the Life Insurance Council for suggestions,were prepared after the finance minister had suggested a list of standard products that will be a part of the use and file procedure for simple and easy understanding of products. After the standard products are approved,insurers can launch new products after 15 days of the filing with the Irda. Products with a premium paying term of 10 years will acquire a guaranteed surrender value,provided premiums have been paid for at least three consecutive years. For products with a premium paying term of less than 10 years,the guaranteed surrendered value will be given,provided premiums have been paid for two consecutive years. In case the policy is surrendered between the second and third years,the draft norms specify that the guaranteed surrender value will be 30% of the premium paid minus any survival benefit already paid. If the policy is surrendered between fourth and seventh years of the policy,50% of the total premium paid minus any survival benefit paid will acquire as surrendered value. Similarly,if a policy is surrendered during the last two years of the policy,90% of the total premium paid minus any survival benefit already paid will be the surrender value. Standardisation of Ulips For Ulips,the lock-in period will continue to be five consecutive years from the date of commencement of the policy. Also,during this period,the proceeds of discontinued policies cannot be paid by the insurer to the insured,except in the case of death or any other contingency covered under the policy. Insurers will have to provide a statement of policy account to the policyholder at least once at the end of each financial year to the policyholder,which will give the breakup of the closing balance,premium received,deductions towards charges,minimum floor interest earned,variable interest earned and closing balance. Moreover,the sum assured payable on death will not be reduced at any point of time during the term of the policy except where partial withdrawals have been made during the two-year period immediately preceding the death of the life assured. Also,at no time the death benefit under a life insurance product or a pension product or a benefit under a health insurance product shall be less than 105% of the total premiums,including top-ups paid. The Irda draft norms also underline that except for pension products,all Ulips will have either a guaranteed sum assured payable on death or a guaranteed sum assured to meet the health cover. The guarantees provided will have to be reasonable,consistent in relation to the current and long-term interest rate scenario and priced appropriately. In products where a guarantee charge is levied,the insurer will have to submit a comprehensive documentation on such guarantee charge and demonstrate in their application under the file and use about the purpose of such charge and pricing and reserving methodology.
