Clarifications on IRDA (Non-linked Insurance Products) regulations, 2013 and IRDA (Limited Insurance Products) Regulations, 2013

 

 

 

 

In response to the representations received from the industry and after detailed examination of such representations, the Authority, in accordance with the powers vested in Section 14(2) of the IRDA Act, 1999. Regulations 49 and 51 of IRDA (Non-linked Insurance Products) Regulations, 20`13 and regulations 68 and 69 of IRDA (Linked Insurance Products) Regulations 2013 issue the circular in the form of an addendum to IRDA(Linked Insurance Products) Regulations 2013. The circular shall be applicable with immediate effect.  

 

Clarifications on IRDA (Non linked Insurance Products)Regulations 2013 and IRDA (Linked Insurance Products)Regulations 2013.

I. IRDA (Linked Insurance Products)Regulations 2013.

1. Regulation 6(a) Table : 1 Serial no : 2 is substituted by the following  

2.Regulation 6(b)is substituted by the following : 

For the participating products, in addition to the minimum sum assured on death as stipulated in 6(a) herein the bonus/additional benefits, if any, as specified in the policy and accrued till the date of death shall become payable on death, if not paid earlier. However, for other than single premium products, the minimum death benefit shall be at least 105% of all the premiums paid as on date of death. 

3. Regulation 6(d) substituted by the following :

a. In case of death due to suicide within 12 months:

• from the date of inception of the policy the nominee of beneficiary of the policyholder shall be entitled to at least 80% of the premiums paid provided the policy is in force or 
• from the date of revival of the policy the nominee or beneficiary of the policyholder shall be entitled to an amount which is higher of 80% of the premiums paid till be date of death or the surrender value /policy account value as available on the date of death.
• In case of the variable insurance products, any charges recovered subsequent to the date of death shall be paid back to nominee or beneficiary along with death benefit. 

 

4. Regulation 6 (f) is substituted by the following 

“For policies issued on minor life,. The date of commencement of risk may start any time within two years or on the policy anniversary after attainment of majority whichever is earlier from the date of commencement of the policy”.

 

5. Regulation 6(g) is substituted by the following :

“The provision of minimum sum assured on death shall not be applicable to reduced paid up policies, pension products, all types of immediate annuity products, and decreasing cover term insurance products. However, for all individual pension products, the minimum benefit payable on death shall not be less than 105% of all premiums paid as on death”

1. The following Regulations are inserted after Regulation 19(b)

“Regulation 19© :For group credit insurance products and group term insurance products with other than single premium payment products, the policy term shall not be less than 5 years. 

Regulation 19(d):Except for one year renewable group products, all single premium group credit insurance products and single premium group term insurance products the policy term shall not be less than 2 years.”

7. Regulation 20(a)(i) is clarified as under :

Except for single premium payment products, the premium paying term for all other individual products shall not be less than 5 years”

8. The following Regulation is inserted after Regulation 20(a):

“Regulation 20(b) : Except for single premium payment products, the premium paying term for all long term group products shall not be less than 5 years.

9. Regulation 21© is modified by the following :

“For single premium group term insurance and single premium Group Credit insurance with long term, the maximum commission or remuneration in any form shall be 2 percent of premium with a ceiling of Rs.200000/- per scheme.”

1. Regulation 21(d) is modified by the following :

“For one year renewable group term insurance and One year Group Health Insurance, the maximum commission or remuneration in any form shall be 2 percent of premium paid during the first year and2 per cent of premium paid during the subsequent renewals with a ceiling of Rs.50000/-per scheme in each year.”

2. Regulation 30(b)(i) is substituted by the following :

“Group term insurance products with minimum term of not less than 5 years shall be allowed under the micro insurance products and for the non-employer-employee homogenous groups only, provided :

1) The premiums are aligned with that of individual pure term insurance products with similar term and entry age

2) The maximum premium under such micro-insurance products shall not exceed 

• In case of pure term insdurance,Rs.750/- per annum per member
• In case of term insurance with return ofpremiums,Rs.3000/- per annum per member

3)The insurer shall monitor the experience regularly and submit an analysis of all such products in terms of expected and actual experience as an annexure to the Appointed Actuary Annual Report.”

3.Regulation 31(f) is modified by the following :

“For the purpose of the Regulation, number of years elapsed since inception stipulated in Regulation 37 shall be read as number of years elapsed since original inception of the policy.

4.Regulation 32 is substituted by the following :

“Group products stipulated in Regulation 30(a)(a)(ii),(iii)and 30(b)(i),(ii) &(iii) herein shall acquire surrendered value as stipulated in regulation 35, in general, and Regulatory 35(n)in particular, if the premium payment term is either single premium or limited premium paying term.”

14.The following Regulation is inserted after Regulation 35(n):

Regulation 35(n)- The guaranteed surrender value in respect of group products stipulated in Regulation 30(a)(ii),(iii)and 30(b)(i),(ii) herein shall consider the premiums already paid and the possible proxy asset shares on such products”.

 

5.Regulation 36 is substituted as below :

“Advance premium 

(i)Collection of advance premium shall be allowed, the premium is collected within the same financial year.

(ii)The premium so collected in advance shall only be adjusted on the due date of the premium

(iii)The commission shall only be paid on such due date

16. Regulation 43(a) is substituted by the following :

“Except for products where all the benefits are assured in absolute amounts at the outset of the contract, all other insurance products shall provide the prospective policyholder a customized benefit illustration, illustrating the guaranteed and non guaranteed benefits at gross investment returns of 4% and 8% or as may be specified by IRDA or Life Insurance Council from time to time.”

17. Miscellaneous : Clarification of the term “non-negative” wherever used throughout the Regulation. The term non-negative wherever used in the regulation shall mean ‘non-zero positive.

II. IRDA (Linked Insurance Products)Regulations, 2013

1.Regulation 5(f)(iii) is modified as below :

i.In case of death due to suicide within 12 months from the date of inception of the policy or from the date of revive of the policy, the nominee or beneficiary of the policyholder shall be entitled to fund value/policy account value, as available on the date of death.

ii. Any charges recovered subsequent to the date of death shall be paid back to nominee or beneficiary along with death benefit.

2. Regulation 5(f)(v) is modified as below :

“For policies issued on minor life, the date of commencement of risk may start anytime within two years or on the policy anniversary after attainment of majority whichever is earlier from the date of commencement of the policy”.

3. Regulation 6(b) (ii) is substituted by the following :

“In case of linked products where guarantee charge is levied. If a guarantee charge is levied for the guarantees offered, the insurer shall submit a comprehensive documentation on such guarantee charge and demonstrate in their application under the File and Use”.

4. Regulation 6(b)(iii) is modified as below 

“In case of variable insurance products, the insurer may levy guarantee charge, if any provided in guarantee offered throughout the terms of the policy is not less than 4%per annum, subject to regulation 6b(i) & b(ii).

5. Regulation 8(a)(i) is modified as below 

“Except for single premium payment products, the premium paying term for all other individual products shall not be less than 5 years.

6. Regulation 19(a) is substituted by the following:

“The minimum guaranteed interest rate applicable to the discontinued fund/discontinued policy account shall be declared by the Authority from time to time. The current minimum guaranteed rate of interest applicable to the discontinued fund/discontinued policy account value shall be 4  percent per annum”.

7. Regulation 34(b) is substituted by the following :

“Except for single premium product, in all other products the overall charges in all linked products shall be distributed in an even fashion during the lock-in period such that the :

 

1. Premium allocation charge and policy administration charge shall be spread evenly during first 5 years of the policy contract, without wide fluctuations
2. charges could change from year to year in a reasonably orderly manner so that the difference between the maximum and minimum charges during first 5 years shall not vary by more than 1.5 times
3. charges during lock in period shall be so structured such that the cap on net reduction in yield is achieved without any further additions to fund value at any time during the first five years of the contract the provision is applicable to both single premium products and other than single premium products.

 

8. Regulation 35©(iii) is modified as below

“In case of variable insurance products, the insurer may levy guarantee charge, if any provided the guarantee offered throughout the term of the policy is not less than 4% per annum.

9. Regulation 37© is modified as below 

“The insurer shall ensure that the reduction in yield I (a) and (b) is complied for all gross investment returns. However, only for the purpose of demonstration, the insurer shall demonstrate in the File and Use Application the compliance of reduction in yield in (a)and(b) for gross investment returns of6%p.a.,8%and 10% p.a.

10. Regulation 37(d) is modified as below :

“In the process to comply with the reduction in yield, the insurer may arrive at specific non-negative additions, if any to be added to the unit fund/policy account value, as applicable, at various durations of time after the first five years of the contract. In case of unit linked products, such specific non-negative additions shall be called non-negatie claw=backadditions and shallbefiled in thefile and use procedureforapproval.”

11. Regulation 41(g) is clarified as below :

“For the purpose of this Regulation, “number of years elapsed since inception” stipulated in regulation 37 shall be read as”number of years elapsed since original inception of the policy”

12. Regulation 52 is substituted by the following:

“Advance premium,

1. Collection of advance premium shall be allowed, provided the premium is collected within the same financial year
2. The premium so collected in advance shall only be adjusted on the due date of the premium
3. The commission shall only be paid on such due date

 

13. Miscellaneous :Clarification of the term “non-negative” wherever used throughout the Regulation. The term ‘non-negative wherever used in the regulations shall mean Non-zero positive.

All the products which have been already approved in accordance with the said regulations, a certificate of compliance, wherever relevant, shall be submitted to the Authority, provided there is no change in the benefits or premiums or charges levied. 

Sd/- T.S. Vijayan

Chairman