IRDA has, from time to time, taken various initiatives for protecting the interests of policyholders by bringing out Regulations, Guidelines, Circulars etc applicable to insurers and intermediaries covering the various stages in the lifecycle of an insurance product, commencing from solicitation, sale, policy servicing, to claims servicing and grievance redressal. With expansion of the insurance sector and more and more innovative insurance products, in particular the Unit Linked Insurance Products coming into the life insurance market, IRDA has been sensitive to the changing scenario and the challenges that go with it. In particular, IRDA has been conscious of how these changes have been impacting the policyholder and has taken several steps to bring in changes in the regulatory framework to address various concerns of the policyholder. The prospect was required to sign on the illustration while signing the proposal form. This was done to ensure transparency and proper disclosures by the insurers.
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IRDA has, from time to time, taken various initiatives for protecting the interests of policyholders by bringing out Regulations, Guidelines, Circulars etc applicable to insurers and intermediaries covering the various stages in the lifecycle of an insurance product, commencing from solicitation, sale, policy servicing, to claims servicing and grievance redressal. With expansion of the insurance sector and more and more innovative insurance products, in particular the Unit Linked Insurance Products coming into the life insurance market, IRDA has been sensitive to the changing scenario and the challenges that go with it.
In particular, IRDA has been conscious of how these changes have been impacting the policyholder and has taken several steps to bring in changes in the regulatory framework to address various concerns of the policyholder. The prospect was required to sign on the illustration while signing the proposal form. This was done to ensure transparency and proper disclosures by the insurers.
Responses received by the Authority are under examination and the initiative will be taken forward further. An exposure draft on this requirement is already circulated and responses are coming in. Whilst on mis-selling , IRDA has identified Distance Marketing as yet another area of concern and draft guidelines in this regard have been put up as an exposure note for all stakeholders to respond to.
Mention must be made of what is perhaps the most important step that the Authority has taken keeping in view the interests of policyholders. IRDA set up an exclusive Consumer Affairs Department that focuses on consumer related issues and initiatives including grievance redressal and consumer education through Insurance Awareness Campaigns.
With a view to creating a central repository of industry-wide insurance grievance data and facilitating monitoring of disposal of grievances by insurers, IRDA is on the verge of implementing the Integrated Grievance Management System IGMS.
IGMS will not only help monitor the redress systems of insurers but also create a gateway for policyholders to register complaints with insurance companies first and if need be escalate them to the IRDA Grievance Cells.
The Consumer Affairs department goes beyond facilitation and works towards taking grievances to their logical end by calling for explanations where required, carrying out enquiries and inspections etc.
It is proposed to make the institution of the Insurance Ombudsman handle all types of complaints including those relating to policy sale and servicing rather than just restricting it to claims. Further, keeping in view the need for efficient functioning of the insurance sector for protecting the interests of policyholders, it is necessary to have reliable, timely and accurate data relating to insurance.
The IIB has started functioning and has already made good progress. IRDA therefore initiated exposure drafts covering these areas and received considerable feedback from various stakeholders on the issues put forth. The issues were then presented to and discussed with the members of the Insurance Advisory Committee as well as the members of the Board of the Authority. The following regulatory initiatives have been approved by the Authority during the Board meeting on Distribution channel related changes:.
The Regulations have also been amended to ensure that there is no scope for any kind of remuneration other than commission where sale has been effected. This measure will reduce the expenses of the insurer, thereby lowering premiums to be paid by the policyholder. Regulations for referrals: IRDA has also addressed the issue of Referrals by bringing out separate Regulations leaving no scope for misuse of the system.
Companies which wish to share their database of customers with insurers would need to get approval from IRDA after having conformed to the requirements as laid down in the Regulations.
Further, there are restrictions on the business activities of the referral company to ensure that there is no misuse of the system. The Regulations cast obligations on the referral company as well as the insurer including submission of data as and when called for by the Authority.
IRDA has increased the lock-in period for all Unit Linked Products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection. Any additional payments shall be treated as single premium for the purpose of insurance cover. Even Distribution of Charges:.
Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure that high front ending of expenses is eliminated. All limited premium unit linked insurance products, other than single premium products shall have premium paying term of at least five years.
Increase In Risk Component:. Further, all unit linked products, other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products.
Minimum Sum assured for age at entry of below 45 years. Minimum Sum assured for age at entry of 45 years and above. At no time the death benefit shall be less than percent of the total premiums including top-ups paid. In case of whole life contracts, term T shall be taken as 70 minus age at entry. Minimum annual health cover for age at entry of below 45 years.
Minimum annual health cover for age at entry of 45 years and above. Regular Premium RP contracts : 5 times the annualized premiums or Rs. At no time the annual health cover shall be less than percent of the total premiums paid. Regular Premium RP contracts : 5times the annualized premiums or Rs. This will protect the life time savings for the pensioners, from any adverse fluctuations at the time of maturity.
With a view to smoothening the cap on charges, the capping been rationalized to ensure that the difference in yield is capped from the 5 th year onwards. This will not only reduce the overall charges on these products, but also smoothen the charge structure for the policyholder.
The Regulations stipulate that an insurer shall recover only the incurred acquisition costs in the event of discontinuance of policy and that these charges are not excessive. The discontinuance charges have been capped both as percentage of fund value and premium and also in absolute value.
The Regulations also clearly define the Grace Period for different modes of premium payment. Upon discontinuance of a policy, a policyholder shall be entitled to exercise an option of either reviving the policy or completely withdrawing from the policy without any risk cover.
Further, the regulations also enable IRDA to order refund of discontinuance charges in case they are found excessive on enquiry. J Hari Narayan Chairman. Note : Please download the. Annual Reports. Committee Reports. Press Releases.
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New IRDA guidelines make ULIPs an attractive option
The lock-in period is the time frame during which you cannot exit the insurance policy due to any circumstances. So, as the names suggests, your money is locked in. This has been put in place to ensure that the policy holder stays with the insurance policy for a longer period of time as the benefits for most investment products need some time before they start making money. In short, it is to encourage use of ULIPs as a long term investment rather than as a short term investment tool. The new guideline says that the lock-in period has been increased to 5 years. During this 5 year period no payments can be made to the customer on account of policy lapsation, surrender or discontinuation. Any payments which need to be made by the insurance company to the policy-holder on account of policy lapse, surrender or discontinuation would be made to the policy-holder only after the lock-in period of 5 years.
Rating new ulips
All rights reserved. For reprint rights: Times Syndication Service. ET Magazine. Market Watch. Pinterest Reddit. Soon, all insurance companies will withdraw most of their existing unit-linked insurance plans Ulips and will issuing a new set of such policies.