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SummaryAll individual non-linked insurance policies may soon have a minimum tenure of five years.

Irda’s draft guidelines standardise insurance products and make it easier for customers to choose from a plethora of policies

All individual non-linked insurance policies may soon have a minimum tenure of five years. According to the Insurance Regulatory and Development Authority's (Irda) draft regulations on standardisation of 18 products in linked, non-linked and group categories, insurers will also have to offer policyholders flexibility to alter the premium payment term.

All unit-linked insurance products (Ulips) will have to provide a minimum death benefit, which will have to be at least equal to the guaranteed minimum sum assured, plus the balance in the unit fund or policy account. Insurers will have to give a minimum maturity benefit, which will be at least equal to the balance in the unit fund or policy account.

All non-linked products will have to be classified as participating and non-participating products and all benefit accrual will be either at the beginning of every quarter or half-yearly or at the end of the financial year as specified in the policy.

The benefits accrued cannot be linked to any index and the terminal bonus will be declared and payable at the end of the term. Even the benefits or interest rates for fund-based group insurance policy cannot be linked to any index.

The insurance regulator has underlined that except for variable insurance products, the death benefit for all non-linked individual product cannot be less than the basic sum assured. Insurers can pay death benefit in installments over a definite period of time and at a defined rate of interest, as approved under the ‘file and use’ procedure on the declining balance if such an option is provided at the inception of the policy.

As a part of the standard kit, Irda has proposed a standard proposal form, standard sales literature and benefit illustrations, except details of the insurer.

Analysts say the draft guidelines will standardise insurance products and will make it easier for a customer to choose a policy.

In fact, Irda’s draft norms on standardisation of products, which is now circulated to the Life Insurance Council for suggestions, were prepared after the finance minister had suggested a list of standard products that will be a part of the ‘use and file’ procedure for simple and easy understanding of products. After the standard products are approved, insurers can launch new products after 15 days of the filing with the Irda.

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