The insurance regulator IRDAI has finally approved a set of significant changes in the current regulations on product guidelines for linked and non-linked life insurance policies that would impact designing term, credit life and micro-insurance products by the players..
The board of the regulator which met on Thursday in Hydearabad, has also given its initial stamp of approval –known as R1- for the entry of LN Mittal's Indiabulls in to the domestic Rs 1.50 lakh crore general insurance market.
However, the much expected second level of approval-known for R2- for Indiabulls has been postponed to the next board meeting that would happen after three months..
With the Indiabulls foraying into the domestic life insurance sector,the industry has seen a new player after a long time. The sector had seen more exits, particularly of the foreign players and slow-down since 2010.
The total numbers of 24 life insurers including state owned Life Insurance Corporation(LIC) have remained static for almost last six to seven years as no new players have ventured in to the sector. On the contrast, the number of players in the non-life industry including the health insurance are increasing steadily every year and with the entry of Indiabulls in to the sector , the number of players will increase to 34. Besides a couple of stand alone health players, backed by private equities(PE), are waiting for the final regulatory approvals from the IRDAI.
The new regulations on life insurance products , which will be implemented shortly, will encourage innovations in the methods of placing the products in the market, said IRDAI sources.
The following are some of the key changes proposed to the current Regulations
a) Minimum death benefit has been made 7 times for regular premium products and 1.25 times for single premium products for all ages,.
b) Non-linked policies to acquire guaranteed surrender value after 2 years,
c)Revival period extended to 5 years from the current 2 years in respect of non-linked products,
d)In respect of pension products, option for commutation up to 60 pension allowed,
e)Facility for partial withdrawal allowed for linked pension products,
f)In respect of annuities Open market option is allowed,
g)Settlement option period extended till 10 years or original policy term whichever is lower,
h)Switches now allowed during settlement period. This helps the customers of unit linked policies to manage their funds better in a volatile market situation,
i)Insurers can now design individual term, group term and credit and micro insurance products which offer a range of policy terms,
j)Provisions governing group products modified to allow wider range of products based on customer requirement,
k) Category of linked Variable Insurance Products is removed as linked product structure addresses the requirements in a better manner. The provisions relating to Non-Linked Variable insurance products are simplified,.