Traditional product guidelines for life insurance companies will be out in the next 45 days, according to insurers. Sources said the much-awaited guideline for the life insurance industry have been finalised and will seek the nod of the standing committee of the Insurance Regulatory and Development Authority (Irda) for the same.
The revised draft says policy holders will get back as much as 50 per cent of their premiums, if a policy is active for three years, meaning, the policy has a minimum guaranteed surrender value (GSV) of 50 per cent.
Minimum GSV is a sum of guaranteed surrender value and the surrender value of any subsisting bonus already attached to the policy. Unit linked insurance plans already have such minimum guaranteed surrender value.
Insurers said minimum GSV should have been left for the companies to decide. “Minimum GSV will vary from one product to another in a company. So, it is not appropriate to mandate a specific value for it,” said a senior official of a private life insurance company.
Another insurance company chief said since the costs of acquisition and execution for insurance firms are high, it will be difficult for them to operate, if the latest guidelines are implemented, prompting them to sell more traditional products than Ulips.
Further, it has been said that Index Linked Insurance Products (Ilips) will also be available in the market, with a similar structure like unit-linked plans. The draft also gives detailed specifications on all products, death benefits and charges.
Industry experts estimate that almost all the products would have to be refiled when these guidelines come into place. "We would rather be better-off in a stable regulatory environment, in terms of products," said Amitabh Chaudhry, MD & CEO, HDFC Life.
Insurers will be given time till March 31 next year for group policies and June 30 next year for individual policies, to enable them to withdraw products from the market and refile them, as per the new guidelines. However, industry officials said these guidelines would mean 90 per cent of the products would have to be refiled.