IRDAI Introduces New Provisions for Higher Surrender Value in Life insurance Policies

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new provisions that provide higher surrender value for Life insurance policyholders who want a seamless exit payout. This move aims to ensure that policyholders receive a fair sum if they choose to discontinue their premiums.

Under the new provisions, insurers will now be liable to pay the special surrender value if the policyholder decides to exit after completing one year. Previously, no exit payouts were given in the first year. The special surrender value must be at least equal to the expected present value of future benefits, paid-up sum assured, and accrued or vested benefits provided in the policy.

For non-linked pension products, assured benefits should be disbursed upon vesting, while for linked pension products, the payment of defined assured benefits upon vesting is discretionary. IRDAI has also clarified that pension products must offer specific assured benefits to individual customers in the event of death or covered health contingencies.

Additionally, policyholders with multiple health insurance policies now have the option to choose the policy under which they can claim the admissible amount. Insurers may also reward policyholders with a No Claim Bonus if no claims are made during the policy period, either by increasing the sum insured or discounting the premium amount.

If a policyholder decides to cancel their policy at any time during the policy term, they will be eligible for a refund of the premium or proportionate premium for the unexpired policy period. The guaranteed surrender value (GSV) under the revised regulations varies based on the policy tenure, ranging from 30% to 90% for different years.

IRDAI aims to safeguard policyholders and prevent mis-selling through these regulations. By promoting transparency and stability in the insurance sector, the authority seeks to create a conducive environment for the growth and expansion of the industry, benefiting both insurers and policyholders in India.

In the fiscal year 2022-23, the insurance industry recorded a premium income of Rs 7.83 lakh crore, with a 13% year-on-year growth. The private sector saw a premium growth of 16.3%, while public sector insurers experienced a 10.9% increase. The regulations also aim to promote prudent risk management practices related to outsourcing activities by insurers.

Overall, these new provisions by IRDAI aim to provide policyholders with a seamless exit option and ensure fair treatment in case of policy discontinuation, ultimately enhancing the trust and confidence of consumers in the insurance sector.