Insurance regulator IRDAI has made policy loan facility mandatory in all life insurance savings products as a measure enabling policyholders to meet liquidity requirements.
All non-linked savings products should have the facility of policy loan based on eligible surrender value. The insurer may also offer such facility under annuity products with ‘Return of Purchase Price’ option based on eligible surrender value. No loan, however, will be permitted under unit linked insurance products, IRDAI said issuing a master circular on life insurance business.
“Partial withdrawal under pension products is now [also] allowed enabling the policyholders to meet specific financial needs such as higher education or marriage of children, purchase/construction of the house/flat, medical expenses and treatment of critical illness,” it said.
Consolidating various provisions of four circulars that since have been repealed, the master circular follows those on health as well as general insurance issued in recent weeks with an emphasis on simplification at the heart of the initiative.
On surrender value or the amount insurer pay to policyholder opting to terminate the policy before the maturity date, the Insurance Regulatory and Development Authority of India struck to status quo advising insurers to ensure reasonableness and value for money, in such cases, to both surrendering policyholders and continuing policyholders.
The regulator, whose proposal to increase the surrender value in favour of the policyholders had generated considerable interest while also upsetting the insurers, in the master circular advised the companies to “establish strict measures to curb mis-selling, mis-leading sales leading to surrender or lapses resulting in policyholders’ grievances and financial loss.”
Insurers may, however, offer higher guaranteed surrender values (GSV) than those specified in the regulations and these values may vary with premium size, premium paying term, policy term, the duration elapsed at the time of surrender and other relevant factors, as applicable, it said.
Other key features in the master circular include an increase in the free look period which provides time to review the policy terms and conditions from 15 to 30 days. A variety of products and product features are now possible such as annuity products to have pay-out option with payment linked to publicly available benchmark; fund-based products for non-employer-employee groups; and index linked products, the regulator said.
Stressing on robust systems for grievance redressal, IRDAI in the event of the insurer neither going on appeal against the award of Insurance Ombudsman nor implementing the same within 30 days, a penalty of ₹5,000 per day will be payable to the complainant.
