Introduction: The Insurance Regulatory and Development Authority of India (IRDAI) has issued a significant circular, dated 31st August 2023, aimed at providing additional options and benefits to policyholders of withdrawn life insurance products. This article delves into the modifications permitted by the circular and their implications for existing policyholders.
Detailed Subheading Wise Analysis:
1. Understanding the IRDAI Circular and Its Authority
- Explanation of the legal basis for the circular’s issuance under Section 14 (2) (e) of the Insurance Regulatory and Development Authority Act, 1999.
2. Scope and Applicability of the Circular
- Explanation of the circular’s applicability to withdrawn life insurance products that have existing policies but are closed for new business.
3. Objectives of the Modifications
- Discussion on the primary objectives of the circular – enhancing policyholder benefits and flexibility while ensuring no adverse impact.
4. Permitted Options for Withdrawn Products
- Explanation of the modifications allowed:
- Addition of existing riders open for sale.
- Addition of premium payment modes (frequencies).
- Reduction in interest rate for revivals/policy loans.
- Addition of payment frequencies to income benefits.
5. Conditions and Compliance
- Detailed explanation of the conditions insurers must satisfy while offering the aforementioned options to policyholders.
- Discussion on proper documentation, communication, and ensuring policyholders’ informed decisions.
6. Role of the Product Management Committee (PMC)
- Explanation of the PMC’s role in reviewing and approving changes under the circular.
7. Reporting and Documentation
- Clarification on submitting the statement of changes to withdrawn products along with the Appointed Actuary’s Annual Report.
- Requirement for maintaining a complete set of documents and timely submission to IRDAI.
8. Immediate Effect and Compliance
- Discussion on the circular’s immediate implementation and the implications for insurers.
Conclusion: The IRDAI’s circular on modifications for withdrawn life insurance products signifies a proactive approach towards enhancing policyholder benefits and flexibility. By allowing insurers to provide additional options within specified conditions, the circular aims to ensure that existing policyholders can avail themselves of benefits while maintaining the integrity of the products. Insurers must adhere to the conditions, communicate effectively with policyholders, and ensure proper documentation to comply with the circular’s provisions. This regulatory step emphasizes the importance of protecting policyholders’ interests and evolving to meet their evolving needs.
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Insurance Regulatory and Development Authority of India
PRESS RELEASE
IRDAI enables Additional Options for Withdrawn Life Insurance Products
In furtherance to the unwavering commitment to empowering policyholders and improving the insurance landscape, IRDAI has introduced measures allowing more choices and benefits for policyholders with withdrawn life insurance products. Effective immediately, this applies to products which are no longer available for sale but still have existing policies serviced by insurers. A circular has been issued in this regard (https://irdai.gov.in/web/guest/documentdetail?docu mentId=3805685)
The key objective of this circular is to provide greater flexibility to existing policyholders while safeguarding their interests. The decision follows consultation with the Life Insurance Council.
The key provisions include:
- Adding Riders: Companies can offer new riders to the existing policyholders of withdrawn products
- Flexible Payments: Option to change the premium paying mode can also be provided
- Lower Interest Rates: A reduction in interest rates for policy revivals and policy loans, if any is permitted.
- More Payment Options: Policyholders can choose how often they receive certain benefits from their policies with income benefit payments
With this initiative, IRDAI reaffirms its dedication to policyholders by offering greater flexibility and enhancing policyholders’ insurance experiences.
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INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
Cir No. IRDAI/ACTL/CIR/PRO/166/08/2023 Date: 31.08.2023
To,
All Life Insurers
Subject: Modifications permitted to withdrawn Products of Life Insurers
1. This circular is issued in exercise of powers conferred by Section 14 (2) (e) of the Insurance Regulatory and Development Authority Act,1999.
2. Applicability: This circular shall be applicable for withdrawn products which were closed for new business and have existing policies in insurer’s books.
3. Objective:
(i) To provide additional options/benefits to existing policyholders.
(ii) To provide enhanced flexibility while ensuring that policyholders benefits are not adversely impacted.
4. After careful examination of the representation from Life Insurance Council and keeping in view the objectives stated above, it has been decided to allow the following options in respect of withdrawn products of Life Insurers.
(i) Addition of existing riders which are open for sale.
(ii) Addition of premium payment modes (frequencies).
(iii) Reduction in interest rate for revivals/policy loans.
(iv) Addition of one or more payment frequencies to income benefits payable to policyholders.
5. Conditions to be satisfied while allowing the above mentioned options:
The insurer shall ensure that;
(i) withdrawn File and Use applications shall not be altered/amended while offering the above options to the existing policyholders.
(ii) an addendum listing the changes in chronological order as per format prescribed in Annexure I, is maintained in respect of the withdrawn File and Use application, on ongoing basis incorporating all the changes made till the date.
(iii) the policyholders are suitably informed about the options and a specific request has been obtained from policyholders in respect of point 4(i), 4(ii) & 4(iv).
(iv) changes are appropriately documented in the respective policy document.
(v) offering the above options is not detrimental to the interests of the policyholders.
(vi) extant norms while offering the options as allowed under the circular are complied with.
(vii) proper system and processes are in place such that the policyholders are appropriately informed of the options available and take a well informed decision.
(viii) the term of rider does not exceed outstanding policy term under the base policy.
6. The Product Management Committee (PMC) constituted as per para 5 of section A of chapter I of circular IRDAI/ACTL/CIR/PRO/207/10/2022 dated 04th October 2022 shall review and approve the changes to be introduced as allowed under para 4 of this circular.
7. Statement of changes to withdrawn products mentioned in Annexure I shall be submitted on annual basis along with Appointed Actuary’s Annual Report.
8. Insurer shall ensure that entire set of documents is maintained and the same shall be submitted immediately to IRDAI in respect of the products identified whenever called for.
9. This circular comes into force with immediate effect.
Chief General Manager (Actuarial)
Annexure I
Statement of changes to withdrawn products
| S. No | Date of Appro val of change by PMC |
Name of the product | UIN of the product |
Option introduced | Brief descrip-tion of Changes* | Any other\ Informa-tion /Remarks | Num-ber of policies as on date of change | Number of policies opting the change as on date of submi-ssion |
*For Revival and Policy loans, please indicate existing interest rate vis a vis revised interest rate.
Signature of Appointed Actuary
Signature of CEO/Principal Office
01.09.2023
