The new guidelines related to surrender of insurance policy are going to come into effect from Tuesday, October 1. It is anticipated that this may increase insurance premiums or reduce the commission of insurance agents. Earlier this year, the Insurance Regulatory and Development Authority of India (IRDAI) had introduced revised guidelines on ‘surrender value’ to provide better returns to policyholders who exit their life insurance policies early.
what are the details
‘Surrender value’ in insurance means the amount that is paid by the insurance company to the policyholder if the policy is surrendered before the maturity date of the policy. If the policyholder decides to return the policy while it is in force, he will be given a share of the income and savings.
The regulator has stressed the need for insurance companies to ensure ‘fairness and value for both exiting and continuing policyholders’ while deciding the amount to be returned at the time of ‘surrender’.
what do experts say
A senior official of a private sector insurance company said that to compensate for the revised ‘surrender’ charges, life insurance companies will either increase the premium amount or cut the commission of their agents. Gaurav Dixit, Director, CareAge Ratings said, “We may see significant changes in insurance products and commission structure. “This may lead to fluctuations in premiums in the second half of the current financial year.”
Most insurance companies have made preparations to change their policies to meet these provisions. Most of these companies have a limited number of policies compared to life insurance giant LIC. At the same time, LIC has to do a big job of changing its policies to meet the instructions of the regulator.
