In a progressive move towards making life insurance simple, easy to understand, enhance transparency for a well-informed decision by a prospect/policyholder, Insurance Regulatory and Development Authority of India (IRDAI) has issued a Master Circular on Life Insurance business on 12.06.2024 after a comprehensive review and consolidation of an array of provisions covered under four existing circulars, which now stands repealed. 

This is an important step in the series of reforms taken up by the Insurance Regulator with interests of the policyholders at the core. A conducive environment is now facilitated to spur innovation, enhance customer experience and satisfaction. Boards of Insurers are now enabled to decide on various business aspects to quickly align their strategies to the changing market requirements. Product governance framework has been strengthened whereby the Product Management Committee of the insurers oversee the product development, pricing and design. Insurers are required to put in place end to end technology solutions to ensure efficient and seamless services through the entire life cycle of an insurance contract. Wider choices and flexibility is to be provided to the customers to choose products/riders as per their needs. 

Key Highlights of the Master Circular: 

Simplification and Transparency 

• Customer Information Sheet (CIS) has been introduced which provides policy related information in simple and easily understandable language, explaining various policy benefits and terms & conditions so that the policyholders can find a snapshot of the policy in one place. This forms a part of the policy document. This is in addition to the improved Benefit Illustration of products to be made available to a prospect/policyholder

Additional features/options made available to the policyholders 

• Facility of Policy loan is now mandatory in all life insurance savings products enabling policyholders to meet liquidity requirements, if need be 

• Health riders for covering health related contingencies/emergencies without recourse to surrendering the policies is possible  

• Facility of partial withdrawal under pension products is now allowed enabling the policyholders to meet their specific financial needs for important life events like higher education or marriage of children; purchase/construction of the residential house/flat; medical expenses, treatment of critical illness

• In case of surrenders, reasonableness and value for money to be ensured for both surrendering policyholders and continuing policyholders 

• To facilitate financial planning and enhance the flexibility in premium payments insurers are now permitted to offer products with range of premium payment term 

• Variety of products and product features are now possible like

o annuity products to have pay-out option with payment linked to publicly available benchmark 

o fund-based products for non-employer-employee groups 

o index linked products 

• Free look period which provides time to review the policy terms and conditions is enhanced to 30 days from 15 days  

• Robust systems to be in place for Grievance Redressal. Complainant to be informed about the escalation mechanism in place to Insurance Ombudsman, if the grievance is not redressed satisfactorily. In case the insurer does not appeal against the award of Insurance ombudsman and does not implement the same within 30 days, a penalty of Rs. 5000/- per day shall be payable to the complainant 

Measures to strengthen Governance  

• Mechanisms to be put in place to improve persistency, curb mis-selling and avoid financial loss to the policyholders and also enhancing long term benefits to them

• Periodic training to be provided to the Intermediaries, distribution channels and employees of the insurers on their products (existing and new), TATs in policy servicing and changes in the regulations etc.  

• Product clearance process simplified; Board constituted Product Management Committee empowered to deal with governance aspects of product development, pricing and design  

• While pricing the products insurers shall ensure 

o Premium rates/charges are fair 

o Discounts offered & loadings are unambiguous and objectively defined

o Similar risks are not discriminated in terms of premium charged 

o Pricing is equitable between policies sold through different channels

Underlying principles of simplification and transparency in insurance enables a well informed decision by a prospect/policyholder. It minimizes policyholder grievances; enhances customer satisfaction and confidence. It goes a long way to improve insurance penetration while also providing an inclusive, equitable and diversified insurance for all. 

Please refer to the full text of the Master Circular on the IRDAI website at (https://irdai.gov.in/web/guest/document-detail?documentId=5032913)