IRDAI issues Master Circular on Life Insurance Products

Introduction

The Insurance Regulation and Development Authority of India (IRDAI), the nodal body supervising the functioning of insurance companies and products along with ensuring thorough development in the insurance sector has recently released its Master Circular on Life Insurance Products on 12th June, 2024.

Through the circular, the Regulatory and Development Authority has aimed to bring numerous changes in the life insurance regime leading to various updated rules and regulations which are as follows:

1. Firstly, IRDAI has extended the ‘Free Look Period’ in life insurance policies from 15 days to 30 days leading to an increased censure of flexibility to the consumers and policyholders to review and evaluate the terms and conditions of their policies.
2. Secondly, in order to facilitate financial planning and strengthening the flexibility in the premium payment system, the insurers have now been allowed to offer various diverse plans with a huge range of payment systems.
3. Parties and entities operating in insurance sector as insurers are also allowed to provide services known as ‘health riders’ for covering contingencies related to health and emergencies without compulsorily taking a recourse to surrender the current health policies.
4. In case of surrender of policies, the insurers are obligated to ensure reasonableness and value for money for both continuing as well as surrendering policyholders.
5. In order to provide for enabling policyholders to meet event specific contingencies such as higher education of children, purchase of residential premises or further constructions, medical expenses, treatment of illness and diseases etc., facility of partial withdrawal under pension products has also been made which enables them to fulfil such obligations without facing financial crisis.
6. Various new features and products have also been made available such as ‘annuity products’ having a payout option with payments linked with publicly available benchmark-based products for non – employer employee-based groups and index-based products.

Grievance Redressal Mechanism

A robust mechanism for grievance redressal has also been setup wherein the complainants have to be informed and kept updated about the mechanism for escalation for the insurance ombudsman in cases the grievance is not resolved upto the satisfaction of the complainant. Secondly, in the event that the insurance provider, i.e., the insurer, fails to appear against the award made by the insurance ombudsman and the same is not implemented within 30 days, a penalty of Rs. 5,000/- may be made applicable which shall be payable to the complainant directly.

Moreover, while deciding upon the prices of the products, it shall be the liability of the insurer to ensure the following benchmarks:

1. That the rates of premium and the allied charges are fair.
2. That the discounts offered, and other surcharges are unambiguous and properly defined.
3. That various subsequent and consequent risks are not discriminated in terms of the charged premiums.
4. That the pricing is equitable for the same policies sold through different channels.

For the purpose of nomination, the policyholder has been allowed to nominate one person to whom the secured sum of money shall be assigned in event of the death of the policyholder and such nominee can be changed at any point of time during the tenure of the policy’s existence. The procedure for registering and updating the nominees and nominations in their policy. Moreover there are various other measures that have been stated by the IRDAI to enhance governance framework which include periodic training which is to be provided to the intermediaries, channels of distribution and employees of the ensurers, simplification of product clearance process, improvement of mechanism for persistency, curbing mis-selling and prevention of financial loss to the policyholders and ensuring consistent and sustained long term benefits to the consumers.

Lastly, as per the new guidelines, the life insurers are mandated to make available various products to the policyholders or prospective customers that suit the needs of all classes, ages, regions, occupations categories, persons with disabilities, affordability range etc., and not merely one product to suit the need of all the categories collectively. Moreover, the insurers shall also provide flexibility to the consumers to choose their products as per their discretion and needs. Moreover, the settlement options, partial withdrawal options, top up facilities for additional premium over and above the contractually agreed amount of principal premium and availability for loan over policy.

Conclusion

The guidelines of IRDAI are a phenomenal step towards ensuring consumerism in the market as well as easing the burden on consumers towards facilitating the smooth flow of purchasing the policies, governance of policy products and related framework and promoting the interests of insurers as well as consumers in the market.

Through this policy, the IRDAI has also updated the norms for the insurers or insurance companies to comply with various requirements and market demands such as providing policies suiting all classes of individuals across all regions and age groups along with giving wider choices to existing holders which would further promote security and stability in the market while giving an option for purchasers to decide the best possible alternatives based upon their suitability.