The Insurance Regulatory and Development Authority (IRDA) has agreed to extend the deadline of new product regulations for the life insurance industry to 1 January from 1 October.
IRDA’s new products guidelines - namely linked insurance products regulations & non-linked insurance products regulations - aim to make insurance policies friendlier for customers.
Product classification
The new guidelines have drawn three broad categories: traditional insurance plans, variable insurance plans (VIPs) and unit-linked insurance plans (Ulips).
Traditional plans..
These are opaque products and can be divided into Pure insurance (Term Plan) & insurance-cum-investment products.
The current regulations have not tinkered with their design.
Variable plans..
According to the guidelines, Variable Insurance Plans (VIPs) will guarantee a certain minimum rate of return, also called the floor rate, at the beginning. Additional benefits could either be pegged to an index, declared upfront, or / come in the form of periodic bonuses which will be guaranteed once declared.
Such as ULIPs, VIPs will have to conform to cost caps. That means the reduction in yield will not be more than 4 percentage points in the fifth year, coming down to a difference of 2.25 % 15th year onwards.
ULIPs:
New rules do not change ULIPs much as most of the changes took place in 2010. ULIPs will have to conform to cost caps by observing the maximum reduction in yield.
If the limit is breached, the insurer will have to plough back the extra cost.
Minimum cover
IRDA has mandated that the minimum sum assured or / death benefit on a life insurance shall not be less than 10 times the annual premium for individuals below 45 years of age.
But for policies with tenors of less than 10 years, the sum assured limit has been reduced to five times the annual premium. That said, at any point the death benefit will have to be at least 105 % of all premiums paid till date.
Higher Surrender Value..
In case of ULIPs and VIPs, the maximum surrender charge will be Rs.6,000 in the first year tapering off to Rs.2,000 in the 4th year and becoming nil fifth year onwards.
For traditional plans, the surrender charge is still on the higher side. As per the new rules, you will become eligible for a surrender value after paying premiums for 2 years in case the premium-paying term is less than 10 years.
You become eligible to a surrender value after three years if the premium-paying term is more than 10 years. The minimum guaranteed surrender value will be 30 % of all premiums paid going up to 90 % of the premiums paid in the last 2 policy years.
No comments:
Post a Comment