IRDAI Master Circular on Life Insurance Products

Introduction

The Master Circular on Life Insurance Products, issued on June 12, 2024, by the Insurance Regulatory and Development Authority of India (IRDAI), consolidates various guidelines and regulations to streamline the life insurance sector. It aims to enhance transparency, compliance, and customer-centric practices.

Key Sections and Provisions

Chapter 1: General Information for the Policyholder/Prospect/Customer

1. Product Availability:
   • Insurers must offer a variety of products and riders catering to different customer needs, age groups, regions, and occupational categories, including provisions for persons with disabilities.
2. Customer Information Sheet (CIS):
   • A mandatory CIS must accompany each policy, detailing basic features, benefits, exclusions, claims procedure, policy servicing, and grievance redressal mechanisms in simple language.
3. Benefit Illustration:
   • Customized benefit illustrations must be provided at the point of sale, signed by both the policyholder and the insurer’s representative, ensuring clear communication of policy benefits.
4. Key Features:
   • Clear statements on survival benefits, death benefits, surrender benefits, and options such as partial withdrawal, settlement options, and top-ups must be included.
5. Free Look Period:
   • Policyholders have a 30-day period to review the policy and cancel if dissatisfied, ensuring customer satisfaction and trust.
6. Nomination and Assignment:
   • Easy processes for nomination, change of nominees, and policy assignment either wholly or in part.
7. Grace Period:
   • A grace period of 15 days for monthly premium payments and 30 days for other payment frequencies.
8. Policy Splitting:
   • Splitting policies should not result in additional costs to policyholders.
9. Non-Contestability:
   • Policies are non-contestable after three years from the date of issuance, commencement of risk, or revival, providing security to policyholders.
10. End-to-End Technology Solutions:
    • Insurers must implement technology solutions for efficient policy servicing and claim settlement.
11. Training:
    • Regular training for intermediaries, distribution channels, and employees on products, regulations, and service standards.
12. Grievance Redressal:
    • A robust system must be in place, including a grievance portal/app. Response letters must include the insurance ombudsman’s contact details.
13. Implementation of Ombudsman Awards:
    • Compliance with ombudsman awards within 30 days, with penalties for delays, ensuring timely resolution of grievances.

Chapter 2: Implementation of IRDAI (Insurance Products) Regulations 2024

1. Product Compliance:
   • Existing products must comply with new regulations by September 30, 2024, or be withdrawn.
2. Product Governance Framework:
   • Insurers must have board-approved policies for product design, pricing, underwriting, and advertisements.
3. Product Management Committee (PMC):
   • The PMC must ensure compliance with product-related regulations and maintain relevant records.

Section III: Additional Provisions on Pricing

1. Fair Pricing:
   • Premium rates and charges must be fair, reasonable, and based on actuarial principles.
2. Group Product Pricing:
   • Discounts and loadings for group products must be based on objective criteria, avoiding discretionary practices.

Section IV: Other Provisions

1. Policy Classification:
   • Clear classification of products as participating/non-participating, linked/non-linked, etc.
2. Premium Payment Options:
   • Various options for single, regular, and limited premium payments.
3. Fraud and Misstatement:
   • Policies treated as per Section 45 of the Insurance Act, 1938, to prevent fraud and misstatements.
4. Policy Loans:
   • Non-linked savings products must offer policy loans based on surrender value, providing liquidity to policyholders.
5. Surrender Value:
   • Guaranteed Surrender Values (GSV) and Special Surrender Values (SSV) must be fair and reasonable.
6. Annuity Products:
   • Various annuity options must be provided, maintaining minimum guaranteed annuity rates.

Section V: Product Approval Process

1. Product Filing:
   • Detailed product filing requirements, including certifications and benefit illustrations, ensuring regulatory compliance.

Section VI: Unique Identification Number (UIN)

1. UIN Allocation:
   • Process for obtaining and maintaining UINs for products, ensuring unique identification and tracking.

Section VII: Modifications to Withdrawn Products

1. Product Modifications:
   • Guidelines for modifying withdrawn products and offering them as new products, ensuring updated compliance.

Section VIII: Application Forms and General Instructions

1. Form Requirements:
   • Detailed instructions for application forms and required certifications, ensuring standardized documentation.

Section IX: Customer Information Sheet (CIS)

1. CIS Format:
   • Standard format and requirements for the CIS, ensuring consistency and clarity for policyholders.

Section X: Repeal

1. Repeal of Previous Guidelines:
   • This circular supersedes previous guidelines and circulars related to life insurance products, consolidating regulations.

Conclusion

The Master Circular on Life Insurance Products provides a comprehensive framework for regulating life insurance products in India. It emphasizes transparency, fairness, and compliance, ensuring customer-centric practices and robust governance. Insurers must adhere to these guidelines to enhance policyholder trust, streamline operations, and maintain regulatory compliance.