IRDA Planning New Guidelines for Life Insurance Products

The Insurance Regulatory and Development Authority (IRDA) is planning to frame new draft guidelines for life insurance products within a month. The members of industry said that the move is aimed at helping customer by preventing mis-selling of life insurance products. They also said that the new draft guidelines will also bring parity among products offered by various life insurers.

The members of insurance industry said that the insurance regulator set up a product design committee with representatives across the insurance industry. IRDA has also circulated draft guidelines to discuss among themselves, which include proposals like – maintaining minimum premium payment term for 5 years, capping the maximum commission which is charged for 1st year and subsequent years, introducing time periods for products guaranteeing highest NAV.

The guidelines also define the minimum death benefit applicable in case of participating and non-participating products. In participating products, policyholders are entitled to a share in the profits or surplus whereas in non-participating products, returns are guaranteed and benefits disclosed upfront. Moreover, the proposal suggests life insurers to offer ‘par’ products only on non-linked platform and ‘non-par’ on traditional or unit-linked platforms, along with the ways for accrual and payout of benefits under such products.

According to the officials of insurance companies, IRDA is now looking to introduce a comprehensive unified proposal form to streamline systems and processes. Most of these IRDAs proposals focus on the technical aspects of designing product in order to bring some parity among all the life insurance products offered by various life insurers.