The Insurance Regulatory and Development Authority of India (Irdai) has released a circular permitting life insurance companies to offer extra choices to policyholders who have policies or products that have now been discontinued. The circular is applicable to policyholders who possess active policies with the insurer, even though the insurer no longer provides these products to new clients. The circular comes into force with immediate effect.
The regulator has stated its intention to offer added choices and benefits to current policyholders, thus enhancing their flexibility without negatively affecting their benefits.
This circular permits the following options for the discontinued policies.
Inclusion of existing riders that are currently available for purchase.
Addition of alternative premium payment frequencies.
Reduction in interest rates for policy revivals or loans.
Introduction of one or more payment frequencies for policyholders receiving income benefits.
IRDAI has also established specific conditions that must be met when offering supplementary choices to current policyholders.
Among these conditions, it is essential that policyholders are adequately informed about these options, and their explicit consent is obtained regarding the points mentioned in 1, 2, and 4.
Additionally, any alterations must be accurately recorded in the corresponding policy document, thus ensuring that policyholders make informed choices. Also, the duration of the rider should not surpass the remaining policy term under the primary policy.
The insurance regulator has also asked life insurance companies to provide an annual report detailing alterations made to discontinued products, in conjunction with the annual report from their appointed actuary. Insurers are, anyway, responsible for maintaining a complete set of documents and promptly providing them to Irdai whenever requested, specifically for the identified products.
The Irdai had also in June 2023 extended the “Use & File” procedure to include group unit-linked insurance plans (Ulips), individual Ulips with new funds, and combi products where the life insurer acts as the lead.
This means that life insurers can now launch these products without prior approval from Irdai. This move was aimed at enhancing the ease of doing business and encouraging a swift response to market demands.
Life insurance plays a crucial role in ensuring financial security for individuals and their families. However, the traditional process of product approvals and regulatory compliance has often been seen as a barrier to innovation and growth in the insurance industry. Recognising this, Irdai has taken a significant step towards making life insurance product approvals easier and more streamlined.