The Insurance Regulatory and Development Authority of India (IRDAI) in its Master Circular on Life Insurance Products, has mandated insurance companies to offer a policy loan facility across all life insurance savings products, effective from 30 September 2024, to help policyholders meet liquidity needs.
- This Master Circular issued under the provisions of Section 34 of the Insurance Act, 1938, Section 14 of the IRDA Act, 1999, along with Regulation 7 of the IRDAI (Insurance Products) Regulations, 2024, serves as a comprehensive guideline for all life insurers in India.
About Master Circular on Life Insurance Products:
i.This Master Circular outlines provisions under the IRDAI (Insurance Products) Regulations, 2024, which applies to all life insurers, ensuring uniform compliance unless exemptions are specified.
ii.This Master Circular undergoes an annual review, ensuring relevance and alignment with evolving regulatory needs.
- This new master circular consolidates and simplifies provisions from previous circulars.
Eligibility:
i.All non-linked savings products offering surrender value are eligible for policy loans based on the surrender value.
ii.Annuity products with the “Return of Purchase Price(ROP)” option can also offer policy loans.
iii.Unit Linked Insurance Products (ULIPs) are excluded from this mandate.
Partial Withdrawals and Surrender Value:
i.Policyholders can make partial withdrawals (under pension products) after 3 years from the policy start date.
ii.Partial withdrawals are now allowed for specific financial needs such as higher education, marriage, home purchase/construction, and medical expenses.
iii.The IRDAI maintains current policies on surrender values, emphasising fairness for both surrendering and continuing policyholders.
- On surrender value or the amount, the insurer pays to the policyholder opting to terminate the policy before the maturity date.
iv.Insurers are encouraged to offer higher Guaranteed Surrender Values (GSVs) than the minimum specified.
v.The withdrawal limit is set at 25% of the total premiums paid, allowed up to 3 times during the policy tenure.
Product Innovation and Flexibility:
i.The insurance companies are also permitted to introduce products with varied premium payment terms.
ii.Minimum policy term: 5 years for individual savings products, 1 year for group policies.
Consumer Protections:
i.The free look period for reviewing policy terms is extended from 15 to 30 days.
ii.New product options include annuities linked to benchmarks, fund-based products for groups, and index-linked products.
iii.Insurers must establish measures to prevent mis-selling and misleading sales practices.
Grievance Redressal:
Insurers face a penalty of Rs 5,000 per day for failing to implement Insurance Ombudsman awards or appeal decisions within 30 days.
IRDAI introduces “Customer Information Sheet” to simplify policy details for buyers
IRDAI also introduced major reforms in the motor, health, and home insurance segments to simplify the insurance landscape. The new set of reforms has introduced a Customer Information Sheet (CIS) to provide comprehensive policy details such as:
- Scope of Coverage;
- Exclusions;
- Warranties; and
- Claim settlement processes
Policy Flexibility:
i.Consumers can now choose insurance policies of half-yearly, annual, or longer durations.
ii.It offers flexibility to suit individual preferences.
Claim Settlement Simplification:
i.No cancellation of claims due to missing documents.
ii.Only essential documents are required for claim settlement under new rules.
Cancellation Policy:
i.Retail customers can cancel policies anytime by informing the insurer.
ii.Insurers can cancel policies only in cases of fraud.
iii.Refunds are proportionate to the premium amount on the unexpired policy period on cancellation.
Innovative Insurance Options:
Insurers are mandated to offer pay-as-you-drive and pay-as-you-go options to customers in motor insurance as primary choices.
Home Insurance Enhancements:
Homeowners can customise “fire” policies, with an option to choose add-ons like flood, cyclone, or earthquake coverage available.
- Option to opt out of comprehensive fire and allied peril policies.
Recent related News:
IRDAI has introduced new corporate governance regulations for insurers. These new corporate governance regulations were notified on 21 March 2024 under the IRDAI (Corporate Governance for Insurers) Regulations, 2024 (“the Regulations”).
About Insurance Regulatory and Development Authority of India (IRDAI):
i.Following the recommendations of the Malhotra Committee report, in 1999, IRDA was constituted as an autonomous body.
ii.It was incorporated as a statutory body in April 2000.
iii.It is formed under an Act of Parliament, i.e., IRDA Act, 1999 for overall supervision and development of the Insurance sector in India.
Chairperson– Debasish Panda
Headquarters– Hyderabad, Telangana
