1. This is further to our file and use circular on the linked and non-linked products.

2. In order to adopt a standard market practice with regard to profit sharing / experience rating the Authority, after having consultations with CEO's and AA's of Life Insurers issues the following guidelines:

(a) Minimum number of life years covered under a Group Master Policy should not be less than 1000 for considering profit sharing. Where for a scheme year the available experience is less than 1000 life years, profit sharing arrangement shall be deferred until the end of the scheme year in which the minimum number of life years of 1000 in scheme is reached on cumulative basis prospectively.

(b) Profit sharing shall not be allowed other than on a scheme year basis.

(c) Whether to carry forward losses or not shall be decided by the Appointed Actuary having regard to related factors like pricing basis, percentage of profit sharing formula and assumptions for profit sharing etc.

(d) Profit sharing percentage shall not exceed 75% (seventy-five per cent) if number of life years for a scheme is less than one lakh and shall not exceed 90% (ninety per cent) if the number of life years is one lakh and more for a scheme.

(e) Mortality assumption for this purpose shall not be lighter than 60% of the rates under the standard mortality table prescribed for the pricing assumptions i.e. currently LIC (94-96) ultimate mortality experience.

(f) The experience rating / profit sharing formula and related assumptions should be furnished at the time of filing the product with the authority.

3. This circular is effective from 1st September 2003. This circular also applies to all the new products filed with the Authority pending for clearance as on the date of this circular.

4. (a) Existing Group Policies: Not withstanding the above guidelines where under existing group policy contracts (issued before the date of this circular) profit sharing arrangement is provided the same may continue with any life insurer; but if profit sharing arrangement is to be provided for the first time under existing contracts the above guidelines will apply.

(b) With regard to existing Group contracts with profit sharing arrangement the formula and assumptions should be filed immediately. 5. The above stated guidelines are to be adhered to strictly.


(P.A. BALASUBRAMANIAN)