The Working Group Committee (WGC) set up by the Insurance Regulatory and Development Authority of India (IRDAI) has recommended the introduction of index-linked insurance policies (Ilips). The report is opened for comments till March 8, 2021.
- The committee has been formed in August 2020 under Dinesh Pant, Appointed Actuary of the Life Insurance Corporation (LIC) of India on the lines of the requests from insurers for reintroducing Ilips. It was banned by IRDAI in 2013.
- The committee was responsible to examining the need of index-linked products in India.
Key Points:
–With this, the new product ILIP will join the other two life insurance categories viz. unit-linked insurance plans (ULIP) and traditional plans.
–The returns from Ilips will be linked to benchmark indices.
–Most probably, this plan will be offered as the pension plan product.
–Ilips can be an alternative or complementary option to the current conventional guaranteed products (including annuities and savings products) and unit-linked insurance plans (Ulips)
What are index-linked insurance policies (Ilips)?
Index linked policies are subject to change as the returns are linked to the benchmark indices such as the 10-year Sovereign Bond Index, Sensex or Nifty. If it is linked with Gvernment bonds then it is less risky and those that are linked to the equity-based indices mostly in returns have fluctuations based on the performance of the stock market.
- The index-linked insurance plan provides a lock-in period of five years.
- The ILIPs can be regarded as a life insurance policy under Section 10(10D) and taxability of the Insurance Policy Act.
Recent Related News:
i.IRDAI has mandated General Insurance Companies to offer 3 standard Insurance Products namely – Bharat Griha Raksha, Bharat Sookshma Udyam Suraksha & Bharat Laghu Udyam Suraksha to cover risk of fire & allied perils from April 1, 2021.
ii.India’s Insurance regulator IRDAI (Insurance Regulatory and Development Authority of India) formulated a 10-member advisory committee to improve the product quality and coverage of the health insurance in the country. The committee will be chaired by IRDAI chairman.
About Insurance Regulatory and Development Authority of India (IRDAI):
Chairman – Subhash Chandra Khuntia
Headquarters – Hyderabad, Telangana
