Insurance Regulatory And Development Authority Of India (Insurance Products) Regulations, 2024

[20th March 2024]

In exercise of the powers conferred under clause (zba) and clause (zd) of sub section (2) of section 114A of the Insurance Act, 1938, and clause (i) of sub section (2) of section 14 and section 26 of the Insurance Regulatory and Development Authority Act, 1999, the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely:

CHAPTER 1 PRELIMINARY

Regulation 1. Short title, applicability and commencement :-

(1)     These regulations may be called the Insurance Regulatory and Development Authority of India (Insurance Products) Regulations, 2024.

(2)     These regulations shall come into force from the date of its publication in the Official Gazette or 1st April, 2024, whichever is later.

(3)     Unless otherwise specified herein, these regulations shall be applicable to insurers who have been granted certificate of registration to transact the business of life insurance or general insurance or health insurance in India, as applicable.

(4)     These regulations shall be reviewed once in every three years from the date of its publication, unless the review or repeal or amendment is warranted earlier.

Regulation 2. Objectives :-

The key objectives of these regulations are as under:

(1)     To facilitate insurers to respond faster to the emerging market needs and also to design innovative products, to promote ease of doing business and to improve insurance penetration.

(2)     To protect the policyholders interests by enabling insurers to adopt good governance while designing and pricing the products.

(3)     To ensure sound and responsive management practices for effective oversight and adequate due diligence with regard to insurance products, including innovative products considering the interests of policyholders.

Regulation 3. Definitions :-

In these regulations, unless the context otherwise requires-

(1)     "Act" means the Insurance Act, 1938 (4 of 1938).

(2)     "Authority" means the Insurance Regulatory and Development Authority of India established under the provisions of section 3 of the Insurance Regulatory and Development Authority Act, 1999.

(3)     "Competent Authority" means

(a)      Chairperson or

(b)      such whole-time member or such committee of the whole-time members or such officer (s) of the Authority, as may be determined by the Chairperson.

(4)     "File and use" means the procedure where the insurers are permitted to market the product only after prior filing to the Authority and assignment of Unique Identification Number (UIN).

(5)     "Group" consists of persons who join together with a commonality of purpose or engaging in a common economic activity and includes employer- employee group and non-employer- employee group:

(a)      Employer- employee group is a group where an employer-employee relationship exists between the master policyholder and the member in accordance with the applicable laws.

(b)      Non-Employer- employee group is a group other than employer- employee where a clearly evident relationship between the member and the group policyholder exists for services/activities other than insurance.

(6)     "Government sponsored insurance scheme" means any insurance scheme, designed or notified or sponsored by the Central Government and/or the State Government and offered by insurers. The schemes may or may not be subsidized by the Central Government and/or the State Government.

(7)     "Micro-insurance business" means category of insurance business provided through the products categorized as micro-insurance products under these regulations.

(8)     "Micro-insurance policy" means an insurance policy which has been issued through solicitation of microinsurance product.

(9)     "Micro-insurance product" includes:

(a)      life micro-insurance product or general micro-insurance product or health-micro insurance product;

(b)      insurance products designed or notified or sponsored by the Central Government and/or the State Government under the head "Micro-insurance";

(c)      insurance products subsidized either fully or partly by the Central Government and/or the State Government; and

(d)      any other product approved as "Micro-insurance" product by the Competent Authority.

(10)   "Product management committee (PMC)" shall be a Board constituted committee within the insurer with functions as per these regulations.

(11)   "Senior citizen" shall have the same meaning assigned to it under Maintenance and Welfare of Parents and Senior Citizens Act, 2007.

(12)   "Unique identification number (UIN)" means a unique number allotted to each product which is required to be disclosed in product related literature, policy documents and any other supporting documents for such product.

(13)   "Use and file" means the procedure where the insurer is allowed to launch the product to market after assignment of unique identification number (UIN) and without prior filing to the Authority.

(14)   "Products" include base products and riders or add-ons.

(15)   All words and expressions used herein and not defined in these regulations but defined in the Insurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or any Rules or Regulations made thereunder shall have the meanings respectively assigned to them in those Acts or Rules or Regulations.

CHAPTER 2 PRINCIPLES OF PRODUCT DEVELOPMENT, PRICING AND DESIGN

Regulation 4. Principles of design and pricing of insurance products :-

 

(1)     As part of product design and development cycle, every insurer shall ensure that:

(a)      evolving risk coverage needs of the customer are taken into account while developing new products and revising existing products;

(b)      product covers an insurable risk with an underlying risk transfer;

(c)      the products offered are simple to understand and not complex;

(d)      there is transparency and clarity in wordings, terms, coverage, exclusions and conditions;

(e)      policyholders interests are protected;

(f)       the basic principles of insurance like insurable interest, indemnity, utmost good faith, proximate cause, contribution clause, salvage and subrogation etc. are adhered to;

(g)      all the risks relevant to the products are appropriately considered in the pricing;

(h)     the premium rates are fair and not excessive, inadequate, unfairly discriminatory and provide value for money;

(i)       all relevant factors such as risk appetite, capital availability, claim experience, reinsurance costs, guarantees, options are considered;

(j)       products are viable and self-sustainable;

(k)      market conduct practices are appropriate and fair;

(l)       appropriate systems, procedures relevant to the product, such as underwriting, pricing, reinsurance, claims management are in place.

(2)     Additionally, the products shall follow the applicable provisions set out as under:

(a)      Schedule I & III - Life insurance products;

(b)      Schedule II & III - General insurance products;

(c)      Schedule III - Health insurance products.

Regulation 5. Micro-insurance products :-

Insurance products to be categorized as micro-insurance product along with related provisions, as applicable, shall be specified by the Competent Authority from time to time.

Regulation 6. Product management and governance :-

(1)     Board approved policies and Product management committee (PMC):

(a)      Every insurer shall have in place Board approved policies covering all areas of product design, underwriting, advertisements and overall management of the insurance products.

(b)      The Board constituted Product management committee shall be responsible for implementation of the Board approved policies and ensuring:

(i)       adherence to principles of design and pricing of insurance products;

(ii)      appropriateness of the product design for the target market;

(iii)     regulatory compliance and recommending products for filing under File and use procedure, as applicable;

(iv)    products falling under Use and file category are approved;

(v)      periodical review of product performance, market conduct issues including grievances and taking up corrective actions, as may be necessary;

(vi)    modification or withdrawal of the product, if required;

(vii)   overall management of the insurance products;

(viii)  maintenance of documentation of the decisions taken for each product for inspections of the Competent Authority.

(c)      All advertisements issued by the insurer and their distribution channels shall be approved through a Board approved advertisement committee of some of the Key Management Persons (KMPs) and one permanent invitee from PMC of the insurer. The constitution of this committee shall be asspecified by the Competent Authority. The approvals may be granted by the committee considering the expectations that may get created from such advertisements and possible market conduct issues. These approvals shall be in accordance with the specified framework and the approvals given by the PMC on such products.

(2)     System and control:

(a)      PMC shall recommend the launch of approved insurance products, only after ensuring that all the processes, suitable infrastructure, system requirements and standard operating procedures are in place on an ongoing basis from policy issuance to claim settlement, including determination ofreserves & solvency margin and for seamless operations of the insurer including policyholders servicing on a day-to-day basis.

(b)      Insurers shall exercise prudent management and oversight of insurance products including maintaining and implementing adequate controls.

(c)      Insurers shall put in place monitoring mechanism, systems and procedures to prevent, identify and mitigate frauds.

(3)     Review of insurance products:

(a)      All products, offered for sale, shall be reviewed by Appointed Actuary at least once a year taking into account:

(i)       the reasonable expectation of all stakeholders, including policyholders;

(ii)      financial viability of the products;

(iii)     emerging risks and experience under the products;

(iv)    any other relevant factors.

(b)      Appointed Actuary shall present the results of such review to the PMC and make suitable recommendations for any modifications or withdrawal of the product.

(c)      Any revision either of the premium rates or the corresponding benefits or both with respect to the existing products shall be based on credible underlying experience of relevant risk parameters.

The revision shall also consider the analysis of policyholders grievances and market feedback, if any.

CHAPTER 3 MISCELLANEOUS

Regulation 7. Powers to issue circular, guidelines and directions from time to time :-

 

(1)     The Competent Authority may issue circulars, guidelines and directions, if necessary, from time to time, relating to these regulations including, but not limited to, transitory provisions regarding implementation process of these regulations, product approval process, categorization of products, any matter relating to product design, standard products, combi-products, administration and overall management of products including matters related to Product management committee and advertisement committee, withdrawal and revision of products, migration and portability, market conduct, maintenance of records, submission of returns and statements, disclosure norms and other operational aspects including customer information sheet.

(2)     The Competent Authority may direct insurer to withdraw any product, if it is not in the interest of policyholders or the insurance industry.

Regulation 8. Power to remove difficulties and issue clarifications :-

In order to remove any doubts or difficulties that may arise in the application or interpretation of any of the provisions of these regulations, the Competent Authority may issue appropriate clarifications or guidelines as deemed necessary.

Regulation 9. Repeal and Savings :-

(1)     The following regulations shall be repealed from the date these regulations come into force:

(a)      IRDAI (Micro Insurance) Regulations, 2015;

(b)      IRDAI (Minimum Limits for Annuities and other benefits) Regulations, 2015;

(c)      IRDAI (Acquisition of Surrender and Paid up values) Regulations, 2015;

(d)      IRDAI (Health Insurance) Regulations, 2016;

(e)      IRDAI (Unit Linked Insurance Products) Regulations, 2019;

(f)       IRDAI (Non-Linked Insurance Products) Regulations, 2019;

(2)     Other provisions which were in existence in the regulations mentioned under sub regulation (1) of regulation 9 above and not mentioned in these regulations shall be provided separately by the circular issued under provision of regulation 7 of these regulations or under other applicable regulations specified by the Authority as deemed necessary.

(3)     Unless otherwise mentioned herein, nothing in these regulations shall be deemed to invalidate the insurance contracts entered into prior to these regulations coming into force.

Schedule I: Specific provisions applicable to life insurance products (refer regulation 4)

1.        Definitions:

A.        General definitions:

1.1. "Death benefit" means the benefit which is payable on death of life assured, as stated in the policy document.

1.2. "Grace period for other than single premium policies" means the time granted by the insurer from the due date of payment of premium, without any penalty or late fee, during which time the policy is considered to be in-force with the risk cover without any interruption, as per the terms & conditions of the policy. The grace period for payment of the premium for all types of life insurance policies shall be fifteen days, where the policyholder pays the premium on a monthly basis and 30 days in all other cases.

1.3. "General annuity business" means the business of effecting contracts to pay annuities on human life but does not include contracts under pension business.

1.4. "Group fund based products" means products wherein a life insurer assures a return, whether guaranteed or otherwise, on the corpus created through periodic or lump-sum contribution received from the master policyholder and/or members of the group. The master policyholder is generally the employer or trustee.

1.5. "Index linked insurance products" are the products where the benefits under the policy are directly linked to a publicly available index.

1.6. "Non-Linked insurance products" are the products other than Linked insurance products.

1.7. "Non-par products" or "Products without participation in profits" means products where policies are not entitled for any share in surplus (profits) during the term of the policy;

1.8. "Par products" or "Products with participation in profits" means products where policies are entitled to share in surplus (profits) during the term of the policy as per section 49 of the Act.

1.9. "Pension business" means the business of effecting contracts under pension products or superannuation scheme which may eventually lead to payment of annuity under general annuity business.

1.10. "Revival of a policy" means restoration of the policy, which was discontinued due to the nonpayment of premium, by the insurer with all the benefits mentioned in the policy document, with or without rider benefits if any, upon the receipt of all the premiums due and other charges or late fee if any, during the revival period, as per the terms and conditions of the policy, upon being satisfied as to the continued insurability of the insured or policyholder on the basis of the information, documents and reports furnished by the policyholder, in accordance with Board approved underwriting policy.

1.11. "Rider" means the insurance cover(s) added to a base product for additional premium or charge.

1.12. "Rider benefits" means an amount of benefit payable on occurrence of a specified event covered under the rider, and is an additional benefit to the benefit under the base product, and may include waiver of premium benefit on other applicable riders.

1.13. "Savings products" means those products other than "Pure risk products".

1.14. "Sum assured on death" means an absolute amount of benefit which is guaranteed to become payable on death of the life assured in accordance with the terms and conditions of the policy.

1.15. "Sum assured under health cover" means an absolute amount of benefit which is guaranteed to become payable on happening of insured health related contingency in accordance with the terms and conditions of the policy under health cover.

1.16. "Surrender" means complete withdrawal or termination of the entire policy contract.

1.17. "Surrender value" means an amount, if any, that becomes payable on surrender of a policy during its term, in accordance with the terms and conditions of the policy.

1.18. "Unit linked insurance products (ULIP)" are the products where the benefits are partially or wholly dependent on the performance of the underlying assets under each of the segregated fund offered.

B.        Definitions applicable to linked insurance products:

1.19. "Allocation" for linked insurance product means the process of allocating premium to create units, at the prevailing unit price, in the segregated funds offered under the linked insurance product, as and when the premiums are received or switches from one fund to another fund are made.

1.20. "Annualized premium" means the premium amount payable in a year excluding taxes, rider premiums and underwriting extra premium on riders, if any.

1.21. "Date of payment of premium" means the date on which premium payment is received by the insurer in accordance with the provisions of Section 64 VB (2) of the Act.

1.22. "Discontinuance" means the state of a policy that could arise on account of surrender of the policy or non-payment of the premium due before the expiry of the grace period.

1.23. "Discontinued policy fund" means the segregated fund of the insurer constituted by the fund value, as applicable, of all the linked insurance policies discontinued during lock-in period.

1.24. "Lock-in period" means the period of five consecutive completed years from the date of commencement of the policy, during which period the proceeds of the policies cannot be paid by the insurer to the policyholder or to the insured, as the case may be, except in the case of death or upon the happening of any other contingency covered under the policy.

1.25. "Net asset value (NAV)" means the price per unit of the segregated fund.

1.26. "Partial withdrawals" means any amount withdrawn partially out of unit fund by the policyholder during the term of the policy.

1.27. "Premium re-direction" means an option which allows the policyholder to modify the allocation of amount of renewal premium to various segregated funds under a linked insurance policy.

1.28. "Revival period" means the period of three consecutive complete years from the date of first unpaid premium.

1.29. "Segregated fund" means funds earmarked under linked insurance business.

1.30. "Settlement option" means a facility made available to receive the maturity or death proceeds in instalments in accordance with the terms and conditions stated in advance at the inception of the contract.

1.31. "Switches" means a facility allowing the policyholder to move from one segregated fund, either wholly or in part, to other segregated fund(s) amongst the segregated funds offered as per the terms and conditions of the policy.

1.32. "Top-up premium" is an amount that is paid voluntarily by the policyholder besides contractual premium and is treated as single premium for all purposes.

1.33. "Total premiums paid" means total of all the premiums received under the base product including top-ups premium paid, if any.

1.34. "Unit" means a specific portion or part of the underlying segregated linked fund which represents policyholders entitlement in such funds.

1.35. "Unit fund value" means the summation of number of units in each segregated fund multiplied by the net asset value (NAV) for respective segregated fund under that policy.

C.        Definition applicable to non-linked insurance product:

1.36. "Annualized premium" shall be the premium amount payable in a year excluding taxes, rider premiums, underwriting extra premiums and loadings for modal premiums.

1.37. "Maturity benefit" means sum assured on maturity, any additional and accrued benefit, which is payable on maturity in accordance with the terms and conditions of the policy.

1.38. "Pure risk products" means insurance products (without any savings element) where the payment of agreed amount is assured on the happening of death of life assured or on happening of insured health related contingency within the term of the policy.

1.39. "Revival period" means the period of five consecutive complete years from the date of first unpaid premium.

1.40. "Sum assured on maturity" means an absolute amount of benefit which is guaranteed to become payable at the end of the policy term i.e. on maturity of the policy in accordance with the terms and conditions of the policy.

1.41. "Total premiums paid" means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

2.        Product structure:

(i)       All insurance products offered by life insurers shall be categorized either under linked insurance products or under non-linked insurance products.

(ii)      All linked insurance products shall further be categorized under:

(a)      Unit linked insurance products;

(b)      Index linked insurance products.

(iii)     All non-linked insurance products shall be further categorized under:

(a)      With participation insurance products and the same may be referred to as Par products; and

(b)      Without participation insurance products and the same may be referred to Non-Par products.

(iv)    all linked insurance products shall be offered under non-par product category.

(v)      life insurance products may be offered either on individual basis or group basis.

(A)     Unit linked insurance products:

(i)       Unit linked insurance products shall operate by offering one or more segregated funds, wherein each segregated fund shall have well defined asset categorization along with its risk profile.

(ii)      The premiums, net of allocation charges, if any, shall be utilised to allocate units in the segregated funds chosen by the policyholder at its NAV.

(iii)     A Unit linked insurance policy shall offer one of the following death or health benefits:

(a)      the sum assured as agreed in the policy plus the balance in the unit fund;

(b)      the sum assured as agreed in the policy or the balance in the unit fund whichever is higher.

(iv)    Unit linked insurance products may have investment guarantee. Such guarantee shall be reasonable and consistent in relation to the current and long term interest rate scenario and shall be priced appropriately. Any guarantee offered in the benefits under a unit linked insurance product shall be at the product level only and shall not be related to any of the underlying funds.

(v)      Nav shall be determined for each of the segregated funds on a daily basis, based on the performance of the underlying assets of such segregated funds. NAV shall be used for the computation of benefits under the policy.

The NAV of each segregated fund shall be computed as:

(Market value of investment held by the fund + value of current assets - value of current liabilities and provisions, if any)

_________________________________________________________

Number of units existing on valuation date (before creation / redemption of units)

Note: i) Value of current assets represents accrued interest, dividend receivable, bank balance, receivable for sale of investments and other current assets (for investments).

ii) Value of current liabilities represents payable for investments.

iii) Number of units derived from the investment accounting system shall be reconciled on a day to day basis with the policy administration system.

iv) Provisions shall include expenses for brokerage and transaction cost, NPA, fund management charges (FMC) and any other charges, as specified.

v) Insurers shall explicitly specify charges, as applicable, subject to the following conditions:

(a)      use uniform definitions for charges under all the unit linked insurance products in accordance with these regulations.

(b)      Except for single premium products, the overall charges in all other unit linked insurance products shall be distributed evenly during the lock-in period such that the:

(i)       Premium allocation charge and policy administration charge shall be spread evenly during first 5 years of the policy contract, without wide fluctuations.

(ii)      Charges could change from year to year in a reasonably orderly manner so that the difference between the maximum and minimum charges during first 5 years shall not vary by more than 3 times.

(iii)     Charges during lock-in period shall be so structured such that the cap on net reduction in yield is achieved without any further additions to fund value at any time during and at the end of the first five years of the contract. Provided that this provision is applicable to both single premium products and other than single premium products.

(c)      The charges levied under the unit linked insurance products shall be:

I.         Premium allocation charge: This is a percentage of the premium appropriated towards charges from the premium received. For unit linked insurance products, the balance amount known as allocation rate constitutes that part of premium which is utilized to purchase the units of the fund in the policy. The percentage shall be explicitly stated and could vary by the policy year in which the premium is paid, the premium size and the premium type (regular, single or top-up premium).

i.         This is a charge levied at the time of receipt of premium.

ii.        The Premium allocation charge is capped at 12.5% of annualized premium in any year.

II.       Fund management charge (FMC):

i.         This charge is levied as a percentage of the value of assets and shall be appropriated by adjusting the NAV.

ii.        This is a charge levied at the time of computation of NAV, which is done on daily basis.

iii.       The cap on fund management charges in respect of each of the segregated fund other than discontinued policy fund shall be 135 basis points per annum.

For discontinued policy fund, the cap on fund management charge shall be 50 basis points per annum.

III.     Guarantee charge:

i.         This charge is levied as a percentage of the value of assets and shall be appropriated by adjusting the NAV.

ii.        This is a charge levied at the time of computation of NAV, which is usually done on daily basis.

iii.       The cap on guarantee charges shall be 50 basis points.

IV.      Policy administration charge: This charge shall represent the expenses other than those covered by premium allocation charges and the fund management charge. This is a charge which may be expressed as a fixed amount or a percentage of the premium or a percentage of sum assured.

i.         This charge is levied at the beginning of each policy month from the unit fund by cancelling units for equivalent amount.

ii.        This charge could be flat throughout the policy term or vary at a predetermined rate of change not exceeding 5% per annum.

iii.       The maximum policy administration charge that can be levied shall be Rs.500/- per month.

V.        Surrender charge or discontinuance charge:

i.         This is a charge levied on the unit fund for individual unit linked insurance products where the policyholder opts for surrender or on discontinuance of the contract as stipulated under these regulations.

ii.        This charge is usually expressed either as a percentage of the fund or as a percentage of the annualized premiums (for regular premium contracts).

iii.       No discontinuance charge shall be imposed on top-up premiums.

iv.       The charges levied on the date of discontinuance (as a percentage of fund value or one annualized premium or a percentage of single premium) shall not exceed the following limits:

For annual premiums policies:

For single premium policies:

AP- Annualized premium

SP-Single premium

FV- Fund value

VI.      Switching charge: This is a charge levied on switching from one segregated fund to another available within the product. The charge per each switch, if any, shall be levied at the time of executing the switch. The maximum switching charge shall be Rs.500 per switch.

VII.    Mortality or morbidity charge: This is the cost of life or health insurance cover. It is exclusive of any expense loadings and is levied by cancellation of units. This charge, if any, shall be levied at the beginning of each policy month from the fund.

i.         The method of computation shall be explicitly stated in the policy document. The mortality or morbidity charge table shall form part of the policy document.

ii.        Mortality charge table shall be guaranteed during the contract period.

iii.       The mortality or morbidity charge for the mortality or morbidity risk covered shall:

a.        only reflect the pure risk charges for the cover offered and shall not include any allowance for expenses or any other parameters;

b.        be reasonable and consistent with the specified mortality tables or morbidity tables, if any;

c.        be
demonstrated with the support of insurers own experience, wherever applicable;

d.        be expressed as per Rs. 1,000/- sum at risk for each age.

VIII.  Rider charge or rider premium:

i.         In case rider is attached to a unit linked insurance product, the cost of such rider cover shall be levied either through rider charge or level rider premium,but not both. This should be explicitly mentioned in policy document and other product filing documents, as the case may be.

ii.        The cost of rider cover can be levied through level rider premium provided:

a.        the rider premium does not contain any expense loading; and

b.        the premium payment term and policy term of the riders are consistent with premium payment term and policy term of the base unit linked insurance product; and

c.        the level rider premium shall be levied in addition to the base premium.

iii.       In case the rider cost is levied through charge, such charges shall be exclusive of expense loadings and levied separately to cover the cost of rider benefit.

The rider charge, if any, shall be levied by cancellation of units. This charge is levied at the beginning of each policy month from the fund. The rider charge table shall form part of the policy document. The rider charge shall be expressed as per Rs. 1,000/- sum assured for each age

IX.      Partial withdrawal charge: This is a charge levied on the unit fund at the time of partial withdrawal of the fund during the contract period. The maximum partial withdrawal charge shall be Rs.500/- per transaction.

X.        Miscellaneous charge:

i.         This is a charge levied for any alterations within the contract, such as, increase in sum assured, premium redirection, change in policy term etc. This charge shall be expressed as a flat amount. This charge shall be levied by cancellation of units.

ii.        This charge is levied only at the time of alteration. The maximum miscellaneous charge shall be Rs.500/- per alteration.

XI.      Other conditions on charges:

i.         The charges mentioned herein shall not be modified or changed without obtaining appropriate approval.

ii.        All the charges, where upper limit is mentioned in clause 2(A)(vi)(c) of this schedule, may be modified within the upper limits, with supporting data after obtaining appropriate approval.

iii.       The systems and processes for managing unit funds, computation of NAV, calculation of units and deduction of charges shall be reviewed once in a financial year by the insurer.

XII.    Before launch of a product, insurers shall ensure the reduction in yield i.e. difference between gross and net yield, for policies, does not exceed the limits mentioned in the table below:

i.         The equation of value, considering the premiums paid by policyholder and the fund value projected with gross rate of returns 6%, 8% and 10% per annum for each policy year under demonstration, shall give the effective net yield per annum expected to be earned on the contract at the point of sale. The projection of fund shall consider all the charges. However, charges for mortality, morbidity, cost of rider benefits, investment guarantee, tax on charges (as applicable) and extra premium due to underwriting emanating from extraordinary health conditions may be excluded in the calculation of the net yield.

ii.        The policyholders options such as partial withdrawals, premium redirection, switches, settlement options, top up premium, which affect the net yield, shall not be considered for the demonstration of reduction yield.

(vi)    Discontinued policy fund:

Each insurer shall have three separate discontinued policy funds: one for all pension products, one for all life insurance products and one for all health insurance products. Each of these funds shall comprise of all the discontinued policy funds of all the policies offered under the respective unit linked insurance products. Only fund management charges shall be applicable on such funds.

(vii)   Minimum guaranteed interest rate:

(a)      The minimum guaranteed interest rate applicable to the discontinued fund shall be specified by the Competent Authority from time to time.

(b)      The excess income earned in the discontinued fund over and above the minimumguaranteed interest rate shall also be apportioned to the discontinued policy fund in arriving at the proceeds of the discontinued policies and shall not be made available to the shareholders.

(viii)  The maturity benefit shall be at least equal to the balance in the unit fund value available on the date of maturity.

(B)     INDEX LINKED INSURANCE PRODUCT:

a.        The insurer shall ensure compliance with the principles of transparency, simplicity, fairness, awareness and liquidity of indices.

b.        The NAV shall be linked to underlying publicly available index. All other provisions of unit linked insurance products shall be applicable in mutatis mutandis to index linked insurance products.

(C)     NON-LINKED INSURANCE PRODUCTS:

a.        Under non-linked par products, the maturity benefits shall closely reflect the asset share and the bonus accruals during the term shall be as follows:

i.         regular bonus shall be declared only on an annual basis;

ii.        interim bonus shall be declared at the annual valuation period, which shall become payable during the inter-valuation period.

iii.       terminal bonus or other forms of bonus, if any, shall become payable on the specified events or at the end of the term of the policy.

b.        Under non-linked non par individual savings products, the benefit shall be guaranteed in terms of an absolute amount at the inception of policy.

c.        In case of savings products, other than term insurance product with return of premium, survival benefits including maturity benefit shall result in at least non-zero positive return to the policyholder.

(D)     PENSION PRODUCTS:

a.        Pension products may be offered either under linked insurance product or non-linked insurance product.

b.        Pension products offered to individuals shall:

i)         have explicitly defined assured benefit that is payable either on death or on any health contingency, if covered;

ii)        have explicitly defined assured benefit that is payable on vesting under non-linked products;

iii)       be optional to offer the assured benefit in case of vesting for Linked Insurance Products.

c.        The benefit under the pension products shall be utilized on the date of vesting or surrender or death, as per the policy terms and conditions.

d.        For all group fund based non-linked pension products under defined benefits scheme, subscribed by an employer, there shall be an assured benefit that is available on death of a member.

e.        For all group fund based non-linked pension products with the defined contributions scheme, subscribed by an employer where the scheme maintains individual member accounts, there shall be an assured benefit that shall be applicable on each of such individual accounts.

f.         An assured benefit means at least one of the guarantees from the following options:

i)         non-zero positive rate of return on the premiums paid, excluding applicable tax, from the date of payment to date of vesting; or

ii)        an absolute amount to be paid on death or maturity or health contingency (which shall result in non-zero positive return).

(E)     Annuity products include immediate annuity and deferred annuities wherein underlying annuity shall be guaranteed for life. Annuity payments may vary with a publicly available benchmark subject to conditions as may be specified by the competent authority.

3.        Minimum sum assured:

For all life insurance products, the minimum sum assured on death or minimum sum assured under health cover, as applicable during the entire term of the policy, shall not be less than as mentioned herein:

 

The provision of the minimum Sum Assured shall not be applicable to reduced paid-up policies, pension products, annuity products, decreasing cover pure risk products and group fund based products.

The multiples mentioned in this clause are minimum and insurers should also offer higher multiple(s) to policyholders. These higher multiples shall be in accordance with the risk appetite and Board approved underwriting policies of the insurer.

The minimum death benefit or health cover for all life insurance products other than single premium shall be at least 105% (one hundred and five percent) of the total premiums paid up to the date of occurrence of covered contingency, except for immediate annuity products and group fund based products.

4.        Surrender value:

The surrender value shall be derived using generally accepted actuarial principles, including but not limited to:

(1)     The policyholders are treated equitably at the time of surrender.

(2)     The surrender value payable shall be fair and reasonable to the policyholders.

(3)     Surrender value shall follow a smooth progression and shall be close to the expected maturity value towards the end of the policy term.

(4)     As part of the product design, insurers may offer higher surrender value than the minimum guaranteed surrender values for the products referred in clause 4 (A) (a) of this schedule.

(5)     Special surrender value factors for the calculation of the special surrender values shall be based on the asset share or notional asset share, as applicable, and for the purpose of such asset share computation:

(i)       The computation of asset share shall be as per the prevailing Guidance Note or Actuarial Practice Standard issued by the Institute of Actuaries of India from time to time.

(ii)      The notional asset share calculation shall also be consistent with the principles set out in the Guidance Note or Actuarial Practice Standard, subject to:

(a)      expenses being consistent with the pricing basis. However, the expenses shall not exceed the applicable limits specified in the Insurance Regulatory and Development Authority of India (Expenses of Management, including Commission, of Insurers) Regulations, 2024 and,

(b)      interest rate shall not be less than the "pricing interest rate less 50 basis points (bps)".

(6)     Insurers shall enhance the disclosures and improve transparency in the sales process by ensuring the following additional measures:

(i)       The customer is informed regarding all the terms and conditions of the policy in detail including those related to the lapse and surrender of the policy.

(ii)      Customised benefit illustrations shall incorporate surrender values and shall be signed by the prospective policyholder as well as the insurance agent or authorized person of intermediary or such other distribution channel, as may be specified by the Competent Authority, or authorized person of the insurer involved in sales process, as the case may be, to enable the customer to understand the benefits under the policy including guaranteed and special surrender values across all durations and to take an informed decision at the point of sale.

A.        Surrender value under non-linked insurance products:

a)        All individual non-linked savings and protection oriented products such as non-linked life insurance products, and non-linked pension products including deferred annuity products, other than pure risk products and immediate annuity products, shall acquire a guaranteed surrender value.

(1)     Other than single premium products: The policy shall acquire a guaranteed surrender value on payment of premium for at least two consecutive years. The guaranteed surrender value shall be at least:

i.         30% of the total premiums paid less any survival benefits already paid, if surrendered during the second year of the policy.

ii.        35% of the total premiums paid less any survival benefits already paid, if surrendered during third year of the policy.

iii.       50% of the total premiums paid less any survival benefits already paid, if surrendered between the fourth year and seventh year of the policy, both years inclusive.

iv.       90% of the total premiums paid less any survival benefits already paid, if surrendered during the last two years of the policy provided the surrender value beyond the seventh year shall follow a smooth progression and converge to at least 90% of the total premiums paid less any survival benefits already paid, as the policy approaches maturity.

(2)     Single premium products: The guaranteed surrender value shall be at least:

i.         75% of the total premiums paid less any survival benefits already paid, if surrendered any time within third policy year.

ii.        Subject to (iii), 90% of the total premiums paid less any survival benefits already paid, if surrendered in the fourth policy year.

iii.       90% of the total premiums paid less any survival benefits already paid, if surrendered during the last two years of the policy provided the surrender value beyond the fourth year shall follow a smooth progression and converge to at least 90% of the total premium paid less any survival benefits already paid, as the policy approaches maturity.

(3)     The surrender value of the any subsisting bonus and any accrued guaranteed additions shall be added to the guaranteed surrender value.

(4)     The special surrender value shall represent the asset share in case of the par policies, where the asset share shall be determined in accordance with the Guidance Note or Actuarial Practice Standards issued by the Institute of Actuaries of India. For non-par savings policies, the special surrender value shall reflect the notional asset share, guaranteed maturity or survival benefits under the policy.

(5)     The surrender value shall be the higher of the:

a)        surrender value as calculated in accordance with clauses 4(A)(a)(1),4(A)(a)(2) and 4(A)(a)(3) of this schedule; or

b)        the special surrender value.

(6)     A policy which has acquired a surrender value shall not lapse by reason of the non-payment of further premiums but shall be kept in-force to the extent of the paid-up sum assured and the subsisting reversionary bonuses including guaranteed addition, if any, except for policies whose paid up sum assured is less than the amounts mentioned in clause 4(A)(a)(8) of this schedule.

(7)     For other than single premium policies, the paid up sum assured (before inclusion of reversionary bonuses or the guaranteed additions, if any):

i.         On death or for health cover: shall not be less than the amount arrived as the ratio of the total period for which premiums have already been paid bears to the maximum period for which premiums were originally payable multiplied by the "Sum assured on death" or "Sum assured under health cover", as applicable.

ii.        On maturity: shall not be less than amount arrived as the ratio of the total period for which premiums have already been paid bears to the maximum period for which premiums were originally payable multiplied by the sum assured on maturity.

iii.       Adjustment may be made to the paid up sum assured calculated as above on account of survival benefits paid, if any.

(8)     Clause 4(A)(a)(6) of this schedule shall not apply where the paid up sum assured:

i.         of the policy exclusive of attached bonuses and the guaranteed additions, if any, (other than micro insurance business) is less than rupees two thousand five hundred.

ii.        of the policy exclusive of attached bonuses and the guaranteed additions, if any, under micro insurance business is less than rupees five hundred.

iii.       takes the form of an annuity of less than rupees two hundred fifty per month.

(9)     In case the paid up sum assured of a policy is less than as mentioned in clause 4(A)(a)(8) of this schedule, policy may be terminated after expiry of revival period by paying the surrender value.

b)        The group fund based products may levy a surrender charge not exceeding 0.05 per cent of the total fund value with a maximum cap of rupees five lakh (Rs.5,00,000/-), if the policy is surrendered within third annual renewal of the policy.

B.        Surrender value under linked insurance policy:

a)        All individual linked insurance and pension products shall acquire surrender value in the following manner:

(1)     Discontinuance of policy during the lock-in period: On surrender during the lock-in period, the unit fund value after deducting applicable discontinuance charges shall be credited to the discontinuance policy fund and risk cover and rider cover, if any, shall cease. The proceeds of the discontinuance policy fund shall become payable at the end of the lock-in period.

(2)     Discontinuance of policy after the lock-in-period:

i.         In case of surrender of policy, the surrender value shall be at least equal to the unit fund value as on the date of surrender.

ii.        Upon expiry of the grace period, in case of discontinuance of policy due to non-payment of premium, for other than single premium policies, the policy shall be converted into a reduced paid up policy with the paid-up sum assured i.e. original sum assured multiplied by a ratio of "total period for which premiums have already been paid" to the "maximum period for which premiums were originally payable" as per the terms and conditions of the policy. The policy shall continue to be in reduced paid-up status without rider cover, if any. All charges as per terms and conditions of the policy may be deducted during the revival period. However, the mortality charges shall be deducted based on the reduced paid up sum assured only. In case the policyholder does not surrender or revive the policy within the revival period, the policy will continue to be in reduced paid up status. At the end of the revival period the proceeds of the policy fund shall be paid to the policyholder and the policy shall terminate.

b)        The group unit linked insurance products may levy a surrender charge not exceeding 0.05 per cent of the fund, with a maximum cap of rupees five lakh (Rs. 5,00,000/-), if the policy is surrendered within the third renewal of the policy.

5.        Minimum benefit:

No life insurer shall pay or undertake to pay an amount of benefit excluding any profit or bonus on policy of insurance, which is less than the following:

i.         annuity of rupees one thousand (Rs. 1,000/-) per month, for policies for other than Government sponsored insurance scheme and National Pension Schemes where annuity shall be as per respective scheme;

ii.        gross sum of rupees ten thousand (Rs. 10,000/-) except under micro-insurance;

iii.       gross sum of rupees five thousand (Rs. 5,000/-) for micro-insurance.

Provided that this shall not prevent any insurer from converting any policy into a paid-up policy of any value or payment of surrender value of any amount.

The Competent Authority may, however, approve annuities and other benefits lower than the amount mentioned in this clause under extraordinary circumstances.

Schedule-II: Specific provisions applicable to general insurance products (refer regulation 4)

(1)     Definitions:

(a)      "Commercial product" is a general insurance product that is designed for other than individuals or households.

(b)      "Known accumulation" shall mean the combined exposure of insured risks or insured interests that would in all likelihood be impacted by a loss occurrence. "Known accumulation" shall bear the same meaning as may be expressly stated or may be inferred from the underwriting guidelines of the insurer and/or relevant reinsurance treaty agreement defining or setting general guidelines on single risk and/ or one accumulation.

(c)      "Large risk" is a single exposure (Single risk or Known accumulation) that exceeds the Underwriting capacity of the insurer.

(d)      "Retail product" is an insurance product designed for individuals or households as also for micro or small businesses.

(e)      "Single risk" shall mean one risk assessed as such and shall include one Known accumulation of risks as defined by the underwriting guidelines of the insurer and which definition shall be aligned to that specified in the terms and conditions of the Treaty Reinsurance protection arrangement of the insurer applying to the Line(s) of Business and/or Product.

(f)       "Underwriting capacity" means the largest monetary amount of a Single risk that an insurer can assume with the support of Treaty Reinsurance protection.

(2)     Classification of Products:

General insurance products shall be classified into two categories viz. Retail products and Commercial products.

(3)     Large Risks:

Any large risk shall be underwritten only with the prior approval of the Risk Management Committee (RMC).

Schedule III: Specific provisions applicable to health insurance products (refer regulation 4)

(1)     Definitions:

1.1. "AYUSH treatment" refers to the medical and / or hospitalization treatments given under Ayurveda,

Yoga and Naturopathy, Unani, Siddha and Homeopathy systems.

1.2. "Break in policy" means the period of gap that occurs at the end of the existing policy term/installment premium due date, when the premium due for renewal on a given policy or installment premium due is not paid on or before the premium renewal date or grace period.

1.3. "Grace period" means the specified period of time, immediately following the premium due date during which premium payment can be made to renew or continue a policy in force without loss of continuity benefits pertaining to waiting periods and coverage of pre-existing diseases. Coverage need not be available during the period for which no premium is received. The grace period for payment of the premium for all types of insurance policies shall be: fifteen days where premium payment mode is monthly and thirty days in all other cases.

Provided the insurers shall offer coverage during the grace period, if the premium is paid in instalments during the policy period.

1.4. "Migration" means a facility provided to policyholders (including all members under family cover and group policies), to transfer the credits gained for pre-existing diseases and specific waiting periods from one health insurance policy to another with the same insurer.

1.5. "Portability" means a facility provided to the health insurance policyholders (including all members under family cover), to transfer the credits gained for, pre-existing diseases and specific waiting periods from one insurer to another insurer.

1.6. "Pre-existing disease (PED)" means any condition, ailment, injury or disease:

a)        that is/are diagnosed by a physician not more than 36 months prior to the date of commencement of the policy issued by the insurer; or

b)        for which medical advice or treatment was recommended by, or received from, a physician, not more than 36 months prior to the date of commencement of the policy.

Provided that the definition of the pre-existing disease shall not be applicable for Overseas Travel Policies.

Life insurers may define norms for applicability of PED at reinstatement.

1.7. "Specific waiting period" means a period up to 36 months from the commencement of a health insurance policy during which period specified diseases/treatments (except due to an accident) are not covered. On completion of the period, diseases/treatments shall be covered provided the policy has been continuously renewed without any break.

(2)     Classification of products:

For the purpose of these regulations, health insurance products shall be classified into either indemnity or benefit based products and may be offered to individual or families or groups.

2.1. Types of policies:

2.1.1 Indemnity based health insurance policy means an insurance policy that compensates an insured for the loss due to occurrence of an insured event as specified in the policy.

2.1.2 Benefit based health insurance policy means an insurance policy that pays fixed amount on the occurrence of an insured event as specified in the policy.

(3)     Scope of health insurance business:

3.1. General insurers and health insurers may offer individual and group health insurance products on either indemnity and/or benefit basis.

3.2. Life insurers may offer individual and group health insurance products on benefit basis. Life insurers may also offer health insurance product under unit linked platform.

Provided that a life insurer shall not offer indemnity based products either individual or group.

3.3. Credit linked products can be offered up to the loan period not exceeding five years.

3.4. Overseas or domestic travel insurance policies may only be offered by general insurers and health insurers.

3.5. Health insurance products of life insurers shall also be subject to the provisions in the Schedule I of these regulations, wherever applicable.

(4)     Pricing:

4.1 Premium shall remain unchanged for the policy term. Insurers may offer facility of premium payment in instalment.

4.2 Insurers may devise mechanism(s) or incentive(s) to reward policyholders for early entry, continued renewals, favourable claims experience, preventive and wellness habits and disclose upfront such mechanism or incentives in the prospectus and the policy document. Provided that what is proposed to be covered as part of wellness and preventive habits be clearly defined in each and every product.

(5)     AYUSH coverage:

Insurers shall have a Board approved policy for providing AYUSH coverage, which interalia, shall include their approach towards placing AYUSH treatments at par with other treatments for the purpose of health insurance so as to provide an option for the policyholders to choose treatment of their choice.

(6)     Product design:

6.1 Insurers shall ensure that they offer health insurance products to cater to all the age groups.

6.2 Insurers may design products specifically for senior citizens, students, children, maternity and any other group as specified by the Competent Authority.

6.3 Insurers shall endeavor to offer coverage for persons with all types of existing medical conditions.

(7)     Pre-existing diseases and specific waiting period:

Waiting period for pre-existing diseases disclosed by the persons to be insured, shall be maximum up to 36 months of continuous coverage under the Health Insurance policy. Insurers may endeavor to have lesser preexisting disease waiting period and specific waiting period in the health insurance products.

Provided that the above waiting period norm of pre-existing disease shall not be applicable for Overseas Travel Policies.

(8)     Moratorium (applicable for health insurance policies issued by general and health insurers):

After completion of sixty continuous months of coverage (including portability and migration) in health insurance policy, no policy and claim shall be contestable by the insurer on grounds of non-disclosure, misrepresentation, except on grounds of established fraud. This period of sixty continuous months is called as moratorium period. The moratorium would be applicable for the sums insured of the first policy. Wherever, the sum insured is enhanced, completion of sixty continuous months would be applicable from the date of enhancement of sums insured only on the enhanced limits.

(9)     Renewal of health policies issued by general insurers and health insurers (not applicable for travel and personal accident policies):

9.1 A health insurance policy shall be renewable except on grounds of established fraud or non-disclosure or misrepresentation by the insured, provided the policy is not withdrawn and also subject to conditions stated at clause 8 of this schedule.

9.2 An insurer shall not deny the renewal of a health insurance policy on the ground that the insured had made a claim or claims in the preceding policy years, except for benefit based policies where the policy terminates following payment of the benefit covered under the policy like critical illness policy.

9.3 The insurer shall condone a delay in renewal up to the grace period from the due date of renewal without considering such condonation as a break in policy.

9.4 For individual products, the loadings on renewal premium shall be at portfolio and not based upon any individual policy claim experience. However, discount in premium may be provided by insurers to individual policyholders for good claims experience.

9.5 No insurer shall resort to fresh underwriting by calling for medical examination, fresh proposal form etc. at renewal stage where there is no change in sum insured offered.

Provided that where there is an improvement in the risk profile, the insurer may endeavour to recognize that for removal of loadings at the point of renewal.

(10)   Migration and portability of health insurance policy:

10.1 General insurers and health insurers offering indemnity based health insurance policy except Personal Accident and Travel Policies, shall provide an option of migration to an alternative health insurance product to the extent of the sum insured and the benefits available in the previous policy. The insurer may underwrite the proposal in case of migration, if the insured is not continuously covered for 36 months.

10.2 All indemnity based health insurance policies issued by general and health insurers except Personal Accident and Travel Policies, shall allow the portability of policies to the extent of the sum insured and the benefits available in the previous policy, irrespective of individual or group policy subject to the Board approved underwriting policy of the insurers.

10.3 Life insurers may allow portability, wherever possible, as per the policy terms.

(11)   Special provisions for senior citizens:

All insurers shall establish a separate channel to address the health insurance related claims and grievances of citizens. The details of such channel shall be available in the website of the insurers.