IRDAI may allow companies to up savings part, reduce sum insured in policies

IRDAI may allow companies to up savings part, reduce sum insured in policies
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Bengaluru, Oct 29: The Insurance Regulatory and Development Authority of India (IRDAI) has put out a draft paper, proposing regulations to standardise life insurance products — with some changes to the benefit of customers. The freedom to offer lower sum insured will increase the savings component in the policy, leading to a higher return in exchange for a lower protection amount.
One of the proposals is to make the minimum death benefit 7 times for regular-premium products and 1.25 times for single-premium products for all ages. Earlier, the minimum death benefit was 7-10 times the premium paid. That is, for a premium of Rs 10,000, life insurance or death claim paid was between Rs 70,000 and Rs 1,00,000.
Another proposal is for policyholders to get a definite sum if they surrender the policy after two years. Currently, for life insurance policies, insurers pay a lump sum on surrendering a policy only after three years. IRDAI did not specify how the surrender value would be calculated.
For pension products, IRDAI is looking at an option of up to 60% of pension maturity amount for commutation, which is the percentage of the pension maturity income available to the policyholder before maturity and is exempt from tax. IRDAI also plans to have partial withdrawal for linked pension products. Currently, ULIPs provide some flexibility to policyholders by allowing them to withdraw a partial amount from their fund value before the policy ends.
To budget for market volatility, the draft paper proposes to allow customer switches in ULIPs during the settlement period and an open market option for annuities. IRDAI also said it is looking at permitting “insurers flexibility in designing individual term, group term and credit and micro insurance products which offer a range of policy terms”, and permit more products in group policies.
The exposure draft said that it was prepared in response to representations that “insurance products should be able to cope with the dynamism of the market”. Public comments have been invited and a working group constituted to consider the recommendations of the committee.