The Insurance Regulatory and Development Authority of India (IRDAI) has listed the new rules for insurance policies.be the same or even lower, if the insurance policy is surrendered within the tenure of three years. It has also announced the final regulations concerning the surrender value of the insurance policy. The rules will come into effect from April 1. IRDAI has merged six rules into a unified framework under the Insurance Products Regulation, 2024. Its objective is to enable insurance companies to return or refund within three years of purchase, 30 to respond quickly to emerging market demands, improve ease of doing business and promote insurance. As per the new rule, the surrender value is expected to be lower or the same if the policies are surrendered within three years.
The new rules regarding the surrender value stipulate that if the policy is per cent, the customer will get the premium. For policies refunded from the fourth to the seventh year, the refund value will be limited to 50 per cent of the total premium. A total of 90 per cent of the premiums paid by the policyholder will be returned to them by the insurance company if surrendered during the last two years.
Surrender value in insurance refers to the amount paid by insurance companies to the policyholder if they decide to terminate the policy before its maturity date. If the policyholder ‘surrenders’ during the policy term, a fixed amount is paid to him. Earlier, IRDAI had changed the payment rules, in which it was proposed to give more amount on surrender of the policy. These final regulations represent a revision from the draft regulation released in December 2023.
Insurance Regulatory and Development Authority of India (IRDAI) said in its statement that these rules promote better functioning in insurance product design and pricing. It also includes strengthening the rules related to guaranteed value on policy return and special return value.
In the meeting held on March 19, IRDAI approved eight principle-based integrated rules after a comprehensive review of the regulatory framework for the insurance sector. As per the reports, these rules 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. Furthermore, the new regulations will consider the opening or closing of places of business by insurers, both domestically and internationally, is conducted in a manner that prioritises the interests of policyholders.
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