Insurance regulator IRDA has extended the deadline for implementation of new individual product regulations for the life insurance industry by three months to December 31 to enable insurers to cope with the system readiness.
After detailed examination of representations from insurance companies, it has been decided to allow the launch of products under the new regulations during extended period, Insurance Regulatory and Development Authority (IRDA) said in a circular.
The new guidelines are aimed at making insurance policies more customer-friendly.
However, it said, insurance products with highest NAV (net asset value) guarantee and with fund level guarantees have to be withdrawn immediately and will no be sold from October 1.
Products where benefits are linked to any external index have also to be withdrawn.
"All the existing group policies and all the existing individual products not in conformity with the provisions of this regulation shall be withdrawn from August 1, 2013 and January 1, 2014, respectively," IRDA said in a circular.
With regard to group policies, the life insurers has been asked not to enroll these policies after the immediate policy anniversary falling due after July 2013.
However, it said, all group policies at the time of renewal of such policy shall be given an option to switch over to the modified version of the group product, if any, once introduced.
Those group policies which do not switch over the modified version may continue to be renewed under the old policy or closed to new members.
As per the new guidelines there will be three broad categories of products-- traditional insurance plans, variable insurance plans (VIPs) and unit-linked insurance plans (ULIPs).
IRDA has mandated that the minimum sum assured or death benefit on a life insurance will not be less than 10 times the annual premium for individuals below 45 years of age.
But for policies with tenors of less than 10 years, the sum assured limit has been reduced to five times the annual premium.
The minimum death benefit in case of traditional plan is at least the amount of sum assured and the additional benefits, if any.
In case of ULIPs, insurers will now have to inform policyholders about the reduction in yield of their ULIP on a monthly basis.
As per the new norms, variable insurance plans will guarantee a certain minimum rate of return at the beginning of the policy, though they are linked to an index.