Some popular insurance policies issued by the Life Insurance Corporation of India (LIC) won’t be available after November 30 including the Jeevan Anand, Jeevan Umang, Jeevan Lakshya and Jeevan Labh, reported Asian Age.
These policies are being withdrawn by LIC to rework their terms and conditions so that they are in line with the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI). Around 20-25 individual insurance products, eight group insurance products and some riders are part of the list of products which will be withdrawn with effect from the end of November.
After the necessary revisions, the policies will be relaunched under the same name or some different names. An LIC official has said it is a huge challenge to modify the products, prepare the policy documents, revise the benefit illustrations, change the software and once these are ready, to train the agents to sell them.
Completing these tasks on time, managing logistics-related issues and finally implementing the policies in their new avatar will be challenging as well. Insurance buyers may have to be prepared for higher premiums and decreased amounts of bonuses in the policies issued by LIC in the future.
IRDAI issued guidelines on July 8, 2019, which addressed the issue of unit-linked insurance products and non-linked insurance products. The underlying idea behind the new rules framed by the IRDAI was to end the practice in the industry of selling or mis-selling insurance policies as investment options to the gullible public. Experts have always been recommending that insurance products should not be seen as investments but only as a fallback mechanism for any eventuality in life.
The general assessment is that over 75 to 80 insurance products across the industry will be removed due to the new rules coming into force. Policies sold till November 30 will be honoured as such.
Those policies that are in compliance with the IRDAI rules will continue to be sold as they are without any modifications. IRDAI says the market will not be disrupted due to these changes.
Insurance companies have been given the option of making the changes to the policies and start selling them while simultaneously applying to the regulator for approval. They are calling it ‘Use and File’. IRDAI says the new policies need to be more customer-centric and the rules aim at curb mis-selling.
As far as LIC is concerned, their existing policies allow for early exit for policyholders whose policies are within three years from the start of the policy whereas as per the new provisions, this period has been cut down to two years. The surrender value becomes payable. The new downward-looking interest regime will also have some impact on the bonuses, LIC feels.
Early surrender of policies is being discouraged as a matter of policy by increasing the penalties.
