Thursday, September 12, 2013

IRDA approves 350 plans ahead of new guidelines

The Insurance Regulatory and Development Authority (IRDA) has approved most of the plans applied to it by various insurance companies ahead of the new product guidelines which is to be kicked in from October this year. The largest insurer Life Insurance Corporation (LIC) of India had applied for around 50 products with the regulator; while leading private insurers like ICICI Prudential Life Insurance, and HDFC Life had filed about 12-15 products each.

According to an industry insider, about 450 products were filed with the regulator for approval, and it has cleared almost two-third of the proposals.  

"We have already filed most of our products and started receiving approvals too”, Sri Niraj Shah, Senior VP, and Head of Products at ICICI Prudential Life Insurance, said adding, “Recently, we launched a plan in compliance with the new guidelines. We hope to launch a reasonable number of products by October.”

As per the new guidelines, traditional products have been brought together with unit-linked insurance products; commission to policy has been linked to the policy term. Also, the regulator has asked insurance companies to specify the minimum cover, depending on the age of the customer.

From October 1, if the age of a customer is below 45 years, the insurance cover will be 10 times the annual premium or 105% of all premiums paid as on the date of the death of the policyholder, whichever is higher. Also, products like the highest net asset value guarantee and fund based guarantee will not be available in the market.

Policy surrender rules will also be changed and all policies surrendered between the fourth and fifth years will acquire a surrender value of 50% of the total premium paid minus the less survival benefits already paid. Products where premium rate, assumptions and benefits do not change, can be certified by the appointed actuary of the company and launched in the market. Delay in products approval may adversely affect first year income of insurance companies.

The Insurance Regulatory and Development Authority had granted one-month extension to implement similar norms in group products. The industry is expecting a similar extension for individual category products too.

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