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Wednesday, June 02, 2010

Life insurers oppose Irda's surrender charge norms

Life insurers have asked the Insurance Regulatory & Development Authority (Irda) not to enforce the proposed norms for the surrender charges. 

The Insurance Advisory Council (IAC), chaired by Irda chairman J Harinarayan, met in Hyderabad and was discuss elaborately the proposed norms on standardization of Ulip products and treatment for the lapsed policies. "We had met to discuss a few issues. Nothing had been concluded," said Harinarayan. 

Irda in a recent note had said that there should be standardization of the approach to be followed on lapsation, revival and surrender of the linked policies so that the interest of a policyholder is protected on one side and at the same time, insurers are allowed to recover their cost in a more transparent and informed way. 

Irda said it intended to provides the ceiling on surrender charges instead of leaving it to the discretion of the insurers. These charges have been worked out based upon the study of existing linked products. 

Accordingly, Irda had put a cap of 15% of charges for policies with a tenure over 10 years if surrendered in the first year of issuance and 12.5% for policies with less than 10 year if surrendered in the the first year of issuance. 

Life insurers had advocated that Irda's capping charges are too low and business wouldn't be viable. They have further argued that high surrender charges discourage surrenders of Ulips and it will increase in the industry in case the regulator fixes surrender charges at 15%.
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