Life insurers get 3 months to phase out old products
in major relief to life insurance companies that did not have adequate products in their bouquet, the Insurance Regulatory and Development Authority (Irda)
has extended the deadline for phasing out old products in the
traditional segment to December 31. The earlier deadline was October 1.
Not extending the deadline would have meant limited new products for
customers to choose from.
However, the sale of highest net asset value (NAV) products and index-linked products in the life insurance segment has been banned from October 1.
T S Vijayan, chairman of Irda, said in a circular that products with
highest NAV guarantee and fund level guarantee and products for which
benefits were linked to any external index (index-linked products) would
have to be withdrawn from October 1. “It is also clarified that all
individual products filed after September 30, 2013, shall be considered
for approval in due course along with all other products received,” he
said in the circular. Hence, old products will have to be completely
phased out from January 1, 2014.
Irda had brought out a new set of guidelines for life insurance products
in February. While the minimum death benefit and surrender value was
altered for traditional product customers who stayed invested in a
policy for a longer period, in the case of unit-linked products (Ulips),
insurers had to intimate customers about the changes in the yield of
the Ulip every month. The rules had also banned the sale of highest NAV
products on the grounds that these were not in the customer interest.
In Monday's circular, Irda has asked insurers to submit within one week,
the details of products withdrawn, in line with the guidelines.
Further, insurers have been asked to submit a weekly statement with
details of products launched and the products withdrawn in accordance
with the guideline, by end of first week of October. A final statement
indicating details of total products withdrawn will have to be submitted
by the companies within a week from December 31, 2013.
After getting a representation by life insurers,
the Life Insurance Council sought an extension in the deadline. V
Manickam, secretary-general, Life Insurance Council, had earlier said
insurers expected a positive outcome on this front from the regulator.
“Though larger companies have got approvals, there have been only four
to five products, on an average, with each one. Hence, the extension
enables them to launch all their crucial products in the market within
the next three months,” said the CEO of a private life insurance firm.
According to industry officials, the companies would have ideally liked
more time to re-launch the entire portfolio, as training, back-end
processes and marketing material development requires a lot of time.
Anup Rau, CEO of Reliance Life, explained this extension would enable
the transition from the old product regime to the new one to be
smoother.
Irda had also extended the deadline for phasing out group products.
Group products which were not compliant with the new guidelines were to
be withdrawn from July 1. Later, this deadline was extended to August 1.
Sandeep Ghosh, managing director and CEO of Bharti AXA Life Insurance,
said the three-month extension was more than sufficient. “From our
perspective, it is a positive move. While approvals had been pushed
through, testing, deployment and training would have required some time.
Though we already have launched some products compliant with the new
norms, we will keep launching other key products. While December 31 is
the deadline, we will aim to have all products entrenched and embedded
in the system before the January to March peak season,” Ghosh explained.
Though Irda had earlier said that life insurers had to be compliant with
the new norms by October 1, 2013, companies were apprehensive of
launching a new product portfolio within the stipulated deadline. While
some firms had begun refiling in June, others did so only in August.
Hence, the approval process for the companies was delayed .
If the guidelines came into force from October 1, at least five
companies would have been left with no product to sell. Further,
customers would also have had lesser products to choose from, because
larger insurers had only limited products in place. Even the Life
Insurance Corporation of India (LIC) did not have approvals for all the
re-filed products and, hence, it had sought an extension.
Irda, too, had made special arrangements for this process. The regulator
had geared up for the product refiling process by engaging additional
staff in product approvals.
The traditional product guidelines, termed as the most ambitious project
of the insurance regulator, was on the drawing board at the Irda office
in Hyderabad since early 2012 during the tenure of former chairman J
Hari Narayan.
LIFELINE
* Insurers to submit the details of products withdrawn in line with the guidelines within one week
* Insurers to submit weekly statement about products launched and
withdrawn, in accordance with the guidelines, by first week of October
* Final statement showing details of all products withdrawn to be submitted within first week of January 2014
* If the deadline was not extended on Monday, it would have meant
limited new products for customers to choose from. At least five
companies would have been left with no product to sell
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