Post on 12-Mar-2018
Source : Courtesy of IRDA
IRDA (Non-Linked Insurance Products)
Regulations, 2013
• IRDA, vide its Notification dated 16.02.2013 has
released the latest regulations on the product
structure of non-linked Insurance Policies (popularity
called “Conventional” policies with in LIC)
• These regulations are likely to have a far-reaching
Impact on the way conventional policies are structured
and sold by Insurers, Including the market leader LIC.
• Around three years back, IRDA’s guidelines on the
structure of Unit Linked Insurance policies had a crucial
Impact on the business of the Insurers
Individual Insurance
What is the Immediate Impact?As per new regulations.
• The Insurance Companies have to immediately examine whether all
existing products are in conformity with the new regulations.
• In case of individual products which are non-compliant, Insurers have
to make necessary modifications to these products and file the
modified file and use before 30.09.2013 for IRDA’s approval.
• All Individual products not in conformity with the provisions of the
new regulations shall be withdrawn from 1st October, 2013.
• All policies issued prior to 16.02.2013 will continue with out any
changes.
• All Policies sold during the transition period will have an option to
switch over to the modified version, if any once introduced.
• Similar kind of regulations are set for Group Insurance Policies.
What is store for Conventional Products
IRDA has mandated new rules for:
• Product Structure
• Minimum Insurance Cover
• Additional Benefits / features
• Policy term, Premium Paying Term, Commission
• Surrender Value
• Advance Premium, Level Premiums, Splitting of policies, Financial Viability of the products
• Benefit Disclosure
• Fund Management in respect of with-profit policies, market value adjustments
• Variable Insurance Products and non-linked pension plans
Proposed changes in a nutshell
Plans like Bima Nivesh
2005, Short term
Endowment, Jeevan
Tarang, Jeevan Anand
etc. to be withdrawn/
modified.
All plans need revamp.
Single Primium:
Min. 125% SP (for age upto 45 yrs)
110% SP for others.
Non-Single Premium :
Min. 10 times Annualised Premium (for
age up to 45 yrs.)
7 times Annualised Premium for others
Suicide Clause:
Suicide with in 1 year, 80% of Premium
paid or Surrender Value Payable
Fraud : Policy Cancelled by paying SV
Minimum Death Benefit
With-profit plans with
Loyalty Addition liken
Jeevan Saral, New Bima
Gold, Bima Bachat etc.
to be withdrawn.
2 Types:
Par & Non-par Products
(with-profit & without-profit)
For Par products: Bonus only on Annual
Basis + Interim Bonus + Final Addl Bonus.
Product Structure
Probable ImpactIRDA MandateChanges in
Proposed Changes in a nutshell (Contd. . . )
All Products may
revamp
PPT 10 years or More:
Guaranteed Surrender Value (GSV)
acquires after premiums paid for 3 years
PPT Less than 10 years:
Guaranteed Surrender Value (GSV)
acquires after premiums paid for 2 years
Single Premium:
acquires immediately ( 70% with in 3rd
policy anniversary increases thereafter )
Surrender Value
Plans like Jeevan Shree-
I, Jeevan Pramukh,
Jeevan Amrit etc. to be
Minimum Premium Paying Term for
other than Single Premium Policies will
be more than 5 yearsPremium Paying Term
NILMinimum Policy Term will be 5 yearsPolicy Term
Probable ImpactIRDA MandateChanges in
Proposed Changes in a nutshell (Contd. . . )
5%7.5%35%12 or more*
5%7.5%33%11
5%7.5%30%10
5%7.5%27%9
5%7.5%24%8
5%7.5%21%7
5%7.5%18%6
7.5%
-
2nd & 3rd
Years
15%
2%
1st Year
Commission / Remuneration in form
25 % Premium
5%
-
Subsequent
Years
5 Commission
Structure of
Money Back
type policies
need revamp.
Over all, no
decrease in the
benefits to
agents
Single
RemarksPremium
Paying Term
Commission Structure (Other than Pension Products)
*For new Insurance Cos. Max. Final year Commission can be 40% in first 10
years of their operation for PPT 12 or more
Proposed Changes in a nutshell (Contd. . . )
2%
-
2nd & 3rd
Years
7.5%
2%
1st Year
Commission / Remuneration in form
25 % Premium
2%
-
Subsequent
Yeasr
Other than
Single
Premium
No decrease in
the benefits to
agents
Single
RemarksPremium
Paying Term
Commission Structure ( Pension Products)
Proposed Changes in a nutshell (Contd. . . )
All Products may need
to be revamped.
Plan like Jeevan Amrit
to be withdrawn.
1. Advance Premium not allowed ( max.
allowed 30 days prior to due date)
2. Premiums will be level all through
out the term of the policy.
3. Service Tax to be collected from
policyholder separately over and
above the actual premium rate
4. Multiple policies of the same nature
(splitting of policies) not allowed.
5. Misleading name of products not
allowed
Miscellaneous
Provisions
Bima Account I & II may
need revamp Various Conditions are proposed
Variable Insurance
Products
No major changes in
New Jeevan Nidhi
expected since it look
Various Conditions are proposedPension Products
Probable ImpactIRDA MandateChanges in
Proposed Changes in a nutshell (Contd. . . )
All Products will have to
be modified.
6. Financial viability of each product to
be reviewed every year. Every
product to be re-filed with IRDA
Every 5 years.
7. Benefit illustration to be signed by
both party & Agent. (Return
assumptions currently to be 4% to
8%)
8. Some other restrictions imposed on
with-profit fund management,
market value management etc.
Miscellaneous
Provisions
Probable ImpactIRDA MandateChanges in
Quick re-cap on possible changes
• All most all our Conventional Products have to be withdrawn on 30.09.2013.
• LIC will have to file new products for IRDA’s approval afresh.
• After 01.10.2013, Service Tax under all products will have to be borne by customer
• There will not be any decrease in the commission structure of agents
In addition to the above IRDA has notified for standard Proposal form for
life Insurance. .
IRDA (Standard Proposal Form for Life Insurance)
• From August 2013 onwards, a standardised
proposal form as mandated by IRDA has to be
used for new proposals.
• Proposal forms need necessarily to be filled
up by Customers only.
• The proposal form will be with 4 different
sections with detailed information, both
personal and financial, sought
Conclusion• This Presentation is prepared with a view to
share the information on the possible course of events in the current Financial Year.
• Field Force needs to get sensitized about the possible fall-out of the new regulations and should prepare immediately to face the new challenges
• Understand the strength of our products & plunge into the market . . .right away!