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Insurance Policy Rules: The Insurance Regulatory and Development Authority of India (IRDAI) has notified various regulations. This also includes charges associated with returning or surrendering the insurance policy. In this, insurance companies have to disclose such charges in advance. IRDAI says that if one keeps the policy for a longer period, the surrender value will be higher. IRDA has taken this decision after concerns raised by life insurance companies.
The six regulations have been combined into a unified framework under the IRDA (Insurance Products) Regulations, 2024. These rules will come into effect from April 1, 2024. These stipulate that the policy must be returned or refunded if returned within three years of purchase. The return value is likely to be the same or even lower.
Policies surrendered in the fourth to seventh year may see a slight increase in the surrender value. If the policyholder returns the policy during the policy term, the earnings and savings portion will be paid to him.
Ease of doing business goals
The IRDAI (Insurance Products) Regulations, 2024 aim to enable insurance companies to respond quickly to emerging market demands, improve ease of doing business and promote insurance. IRDAI said in the statement that these rules promote better practices in product design and pricing.
This includes strengthening the rules related to guaranteed value and special return value on policy returns. It also ensures that insurers adopt concrete activities for effective monitoring and due diligence.
34 rules replaced by six rules
IRDAI, in its meeting held on March 19, approved eight principle-based integrated rules after a comprehensive review of the regulatory framework for the insurance sector. This will come into effect from April 1. These regulations cover aspects such as protection of policyholders' interests, rural and social sector responsibilities, electronic insurance markets, insurance products and operation of overseas reinsurance branches as well as registration, assessment of insurance risks and premiums. , Finance, Investment and Corporate Administration. Important areas are covered.
IRDAI said in a statement, this is an important step in the regulatory system. In this, 34 rules have been changed along with six rules. Also, two new rules have been brought in to bring clarity in the regulatory landscape. It said the step has been taken after extensive consultations with various stakeholders including the insurance industry, experts and the public.
For non-single premium Refund amount of total premium paid
30% in the second year.
35% in the third year.
50% between the fourth and seventh years.
90% in the last two years.
single premium
75% in third year.
90% in fourth year.
90% in the last two years.
Let us understand this with an example – Suppose a 15-year policy with an annual premium of Rs 1 lakh is surrendered in the second year, the total surrender value will be Rs 30,000 (i.e. 30% of the premium). The surrender charge for the insurer during this period will be Rs 70,000.
