Re: Exposure Draft on Standardization of Terms & Conditions of Unit Linked Insurance Products and measures for Policyholders’ Protection Regulations
Unit Linked Insurance business forms a significant part of the life insurance business. During the year 2009-10, the share of unit linked insurance business has increased from 50.95% to 54.80%. Further the unit linked business has grown at rate of 35.33% during the year 2009-10 whereas the growth rate for the life insurance business is 25.83%. In terms of the volume of the first year premium, it has increased from Rs.44332.40crores to Rs.59,996.46crores during the year 2009-10.
Authority has carried out a study of the practices relating to unit linked insurance followed by the life insurers and observed that majority of the insurers are following international best practices in vogue in international market. It has been further observed by the Authority that the practices being followed especially for revival, lapsation and surrender of linked policies vary widely from insurer to insurer.
In order to give better understanding of the terms & conditions of the linked products to the policyholders and to provide them an opportunity to make a more informed decision, it is felt that there should be uniformity in the approach on various key parameters of the unit linked products. Therefore, Authority proposes to notify regulations on Standardization of Terms & Conditions of Unit Linked Insurance Products and measures for Policyholders’ Protection.
The basic features of the draft regulations are as under
• It provides for standardization of the approach to be followed on lapsation, revival and surrender of the linked policies so that the interest of a policyholder is protected on one side and at the same time, insurers are allowed to recover their cost in a more transparent and informed way.
• It provides the ceiling on surrender charges instead of leaving it to the discretion of the insurers. These charges have been worked out based upon the study of existing linked products.
An exposure draft of proposed Regulation on Standardization of Terms & Conditions of Unit Linked Insurance Products and measures for Policyholders’ Protection is placed on the website of the Authority to seek the comments of Insurers, Insurance Intermediaries, Policyholders and other stakeholders so as to reach the Authority on or before 27th May, 2010. The comments of the all the stake holders will be placed before the Insurance Advisory Committee and the Board of the Authority for their consideration.
The comments on the said exposure draft may be forwarded to Mr. R K Sharma, Deputy Director or to email id
rksharma@irda.gov.in
Sd/-
A Giridhar
Executive Director (Administration)