Insurance regulator Irda is likely to give companies time until December 1 to align products in the ‘individual’ category with the sector’s new norms, according to a senior executive of an insurance firm. Earlier, the deadline was October 1.
“Irda is looking to extend the deadline by two months,” the executive, who did not wish to be named, told ET. The decision has been taken to avoid a situation where companies are left with no products to sell, the executive added. A senior official of the Irda confirmed that such a plan is being actively considered.
This is the second time the regulator would be giving in to lobbying by insurers. In June, it had given insurers a month’s extension to comply with norms for group products.
Under Irda’s new rules, finalised in February, commission for all products will be linked to the premium-paying period and will vary between 15% and 35%.
The maximum commission that can be paid to an agent has been set at 15% for the first year, 7.5% for the second and 5% for the third year. Commission will be lower for shorter term products.
As per the new norms, all existing products have to be withdrawn from the market before October 1. Experts, however, are advising policy buyers to wait till the new regime kicks in. Although the insurance product will cost more under the new regime, buyers will benefit from features like guaranteed surrender value and higher cover in the event of death, they say. For instance, in the new structure if a person fails to pay premium after five terms, the policyholder will be eligible for a guaranteed surrender value of 30%, which would not be the case for an existing product.
“The cost of the product goes up by 1-2%, but it gives benefits that are not available in the existing products,” said another senior executive of a life insurance company.
Products will carry higher death cover for customers under 45 years of age—the cover will be 10 times the annual premium or 105% of all premiums paid as on the date of death, whichever is higher. At present, agents earn up to 35% commission on existing traditional products irrespective of the premium paying term.
• Under Irda’s new rules, commission for all products will be linked to the premiumpaying period
• As per the new norms, all existing products have to be withdrawn from the market before October 1
• Although the insurance product will cost more under the new regime, the policyholders will benefit
Source: The Economic Times
Date: 30th September 2013