1. Application and Commencement.

This circular is applicable to all life insurers registered with the IRDA and shall come into force with effect from 1st April, 2004.

2. Product Design.

Every Insurer carrying on life insurance business shall:-
1) ensure that an extension to a life policy in the form of rider shall not be made compulsory at any time during the term of the policy;

2) avoid using ambiguous terms, such as, “Vanishing Premiums”, etc. Provided that where usage of such expressions is considered unavoidable, the same shall be prominently defined and explained by the insurer, so as to avoid confusion and ambiguity;

3) where it is proposed to defer the policy holder’s right to participate in surplus, make a clear statement to the effect in the sales brochure.

3. Brochures.

(1) Every Insurer carrying on life insurance business shall :-

    (a) ensure that the brochure shall be written in simple, unambiguous and easily comprehensible language and that there is no statement, which may lead to a     misunderstanding;

    (b) discontinue any brochure which becomes misleading following any material change of circumstances;

    (c) ensure that any reference to past performance in the sales illustration, if used by it, shall be appropriate to the product being illustrated and shall include a     statement to the effect that past performance may not be a guide to future performance, which may be different;

    (d) ensure that the sales illustrations clearly distinguish between guaranteed and non-guaranteed benefits and state that the quantum of benefits in respect of     non-guaranteed products may vary;

    (e) review the assumptions in its sales illustrations at least once in a year, and where the assumptions are no longer valid, revise the sales illustration.

(2) No Insurer carrying on life insurance business shall issue or use a brochure providing information on benefits where such information is inconsistent with terms and conditions as filed with the Authority.


4. Premium Receipts


(1) Where an insurer carrying on life insurance business does not provide insurance until the proposal has been examined and accepted by the insurer, the receipt for a payment towards premium shall specifically state that insurance protection shall only be provided effective from the date of acceptance of risk.

(2) Where a proposal is received along with the deposit of an amount from the proposer, the insurer carrying on life insurance business shall make it clear that the commencement of risk shall be effective from the date of acceptance of risk.


5. Illustrations

(1) Every insurer carrying on life insurance business shall provide official illustrations to customers directly or through their licensed agents and intermediaries for all products.

(2) All illustrations shall be prepared in consultation with the Appointed Actuary and be authorized for use by the Board of Directors of the Company and, that the illustrations shall be clear and fair to enable a customer to make an informed decision.

(3) There should be 2 views on rate of return on investments of funds (the rate) that are illustrated – a higher rate and a lower rate. The rates to be used are as set by the Life Insurance Council from time to time and all the Life Insurance Companies shall use the same rates. All charges in respect of fund management and policy charges are to be deducted from the gross investment return assumption. For the avoidance of doubt this means that illustrations based on higher and lower rates of return should show a projected fund value after all charges associated with the policy and investment of funds have been deducted. No Insurer carrying life insurance business shall issue illustrations in any other way.

(4) All illustrations shall be reviewed at least once a year in the month of April. The Life Insurance Council may, if required by the IRDA, set a higher and lower projection of interest rates more frequently than annually. The initial rates to be used in projections are 10% p. a. and 6 % p. a.

(5) All the insurers carrying on life insurance business shall be free to use a lower illustrative rate than that is fixed if it so desires. However, under no circumstance, higher rates than those set by the Life Insurance Council shall be used.

(6) Standard common language be employed vis-à-vis statutory warning on all illustrations. The following phrase must appear on the front page of illustrations in the same font size as the rest of the text: “Some benefits are guaranteed and some benefits are variable with returns based on the future performance of your Insurer carrying on life insurance business. If your policy offers guaranteed returns then these will be clearly marked “guaranteed” in the illustration table on this page. If your policy offers variable returns then the illustrations on this page will show two different rates of assumed future investment returns. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including future investment performance.”

(7) The process of issuing illustrations shall be controlled in such a manner that customers are provided illustrations that are authorized by Appointed Actuary and approved by the Board of Directors of the Company.

(8) All policy, fund management and other policy charges payable by customers shall be included explicitly within the illustration tables.


(9) Indicated within the illustration shall be the Company’s policy on surrender values. A Company may show illustrative surrender values if it wishes and should indicate whether or not guaranteed.

6. Policy Information Statement

Every insurer carrying on life insurance business shall issue together with a life policy, policy information statement containing at least the following information, if the policy document does not contain the same:

(a) The facility available for mode and periodicity of payment of premium;

(b) The person or office to be contacted for any enquiry or service relating to the Policy;

(c) The importance of advising the insurer carrying on life insurance business of any change of address of the policy holder or the nominee;

(d) The availability of the mechanism to address complaints and grievances of Policyholders as also information in respect of Insurance Ombudsmen for resolution of any dispute arising from the policy.


7. Periodic Statement

Every Insurer carrying on life insurance business shall inform all policy holders the status of the policy annually.



(T. K. Banerjee)
Chairman (Life Insurance Council)