The Insurance Regulatory and Development Authority of India (IRDAI) has sanctioned alterations to lapsed life insurance policies that will be advantageous for current policyholders, reported Economic Times. The circular issued by IRDAI represents a significant stride in safeguarding the welfare of current policyholders.
The IRDAI in its circular dated September 01, 2023, shared, “IRDAI has introduced measures allowing more choices and benefits for policyholders with withdrawn life insurance products. Effective immediately, this applies to products that are no longer available for sale but still have existing policies serviced by insurers.”
The central objective of this circular is to provide greater flexibility to current policyholders while ensuring the safeguarding of their interests.
The key developments include:
Introducing additional riders: Companies have the option to offer new riders to policyholders with existing withdrawn plans.
Payment flexibility: Offer the choice to adjust the premium payment mode.
Reduced interest rates: A decrease in interest rates for policy reinstatements and permissible policy loans.
Expanded payment choices: Policyholders can select the frequency of certain benefits received from their policies, including income benefit payments.
In compliance with the circular released by IRDAI on August 31, 2023, adjustments are authorized for the withdrawal of life insurance products. The insurance provider must guarantee that:
- No modifications or amendments are made to the withdrawn file and use applications when extending the aforementioned options to existing policyholders
- An addendum, listing all alterations in chronological order following the format outlined in Annexure I, is consistently maintained for the withdrawn File and Use application, including all changes made up to the current date
- Policyholders are adequately informed about these choices, and explicit requests have been obtained from policyholders regarding points 4(i), 4(ii), and 4(iv).
- The adjustments are accurately recorded within the respective policy documents.
- Providing the aforementioned options does not compromise the interests of the policyholders.
Prior to this, numerous insurers discontinued plans for various reasons. For instance, during the financial year 2022-2023, the Life Insurance Corporation of India (LIC) withdrew approximately 12 plans, as indicated on the LIC website. Similarly, several prominent life insurance companies such as Bharati Axa Life, HDFC Life, Future Generali India Life Insurance, Max Life Insurance, and others have also ceased offering several insurance products for new purchases. Details of the withdrawn policies can be found on the respective insurers' websites.