Insurance regulator IRDAI has relaxed the repayment conditions in the case of death due to suicide. The regulator has asked the domestic life insurers to refund the premium to a policy holder or pay the surrender value of his/ her policies available in the case of his/ her death due to suicide within 12 months from date of commencement of the life insurance policy or from the date of revival of the policy, as applicable.
The new regulations will come into effect from Monday.
Earlier, there were no regulatory provisions for any refund to a policy holder, during the first year of policy issuance, in case a person commits suicide and life insurers can legitimately deny any payment of claims to the beneficiaries of such a life insurance policyholder during this period. Any death claims linked to suicide were allowed only after 12 months of the policy issuance.
In its revamped life insurance regulations, the Insurance Regulatory and Development Authority of India has said that in the case of non-linked policy, the nominee or beneficiary of the policyholder will be entitled to at least 80 per cent of the total premiums paid till the date of death or the surrender value available as on the date of death whichever is higher, provided the policy is in force.
In the case of an unit linked policy, the nominee or the beneficiary of the policyholder will be entitled to the fund value, as available on the date of intimation of death following the death of the policy holder due to suicide within 12 months from the date of commencement of the policy or from the date of revival of the policy, as applicable.
Further any charges other than Fund Management Charges (FMC) and guarantee charges recovered subsequent to the date of death will be added back to the fund value as available on the date of intimation of death, IRDAI said.
“If a person commits suicide, the family is in distress. They may be hoping to get some money from insurance. It is compassionate payment and not contractual payment of claim,’’ said Nilesh Sathe, former member, Life, IRDAI.
Aalok Bhan, director & chief marketing officer, Max Life Insurance, said in the case of a suicide by a policyholder of an unit-linked policies, the NAV on intimation of death will be paid, along with charges deducted between the date of death and date of intimation of death. According to Bhan, the new IRDAI norm have enhanced surrender value for non-linked products and increased revival period (from 2 years to 3 years and 5 years for linked and non-linked business respectively).
Further, for the linked business, policies will be treated as paid up in case of nonpayment of premium post the expiry of lock in period, up to the revival period, he said.
On the enhanced flexibility to customers in the new regulation, Bhan said it will reduce the premium up to 50 per cent after 5 years, allow partial withdrawals for linked pension products and increase in commutation amount of matured pension amount (increased from 33 per cent to 60 per cent). The purpose of the revised norms is to ensure insurers follow prudent practices in designing and pricing of life insurance products.