Final surrender value rules likely in favour of life insurers, notification expected next week

The Insurance Regulatory and Development Authority of India (IRDAI) is expected to have approved the surrender value regulations for life insurers, sources informed CNBC-TV18. The final regulations are expected to see some favourable changes for insurers.

This development comes after consideration of concerns raised by life insurers.

The proposed regulations, which are anticipated to be notified by early next week, aim to address concerns regarding asset-liability management issues raised by life insurers.

The IRDAI's December 2023 proposal, which served as the foundation for these regulations, initially suggested the introduction of threshold premiums and higher surrender values for endowment policies.

Surrender charges, commonly referred to as penal charges for early policy termination, have been a subject of contention.

The IRDAI is expected to release a detailed circular outlining the finalised surrender value rules, providing clarity and guidance to both insurers and policyholders.

Commenting on the same, Madhukar Ladha, Director at Nuvama Institutional Equities said: "The proposed surrender value regulations, particularly the earlier draft from December, seemed quite stringent. However, expectations suggest that the revised version may not significantly alter surrender values within the initial five years, which could be beneficial. Profits from non-linked savings products often rely on surrender value, which underscores the importance of this relief. We eagerly await the final regulations for confirmation."

In a related development, sources have indicated that the electric insurance marketplace, formerly known as Bima Sugam, is likely to be rebranded as Rashtriya Bima Sugam Nigam Ltd.

The platform, initially scheduled for launch in January 2023, has encountered delays due to complexities involving stakeholders and technical challenges.

The platform is now slated for a June 2024 launch.

Bima Sugam, envisioned as a government-backed marketplace akin to Amazon, aims to revolutionise the insurance landscape by offering a comprehensive platform for comparing and purchasing various insurance products.

This initiative is expected to streamline the insurance buying process, providing policyholders with access to a wide array of life, health, motor, and travel insurance products from different insurers.