The Insurance Regulatory and Development Authority of India (IRDAI) has retained most of the provisions related to higher special surrender value (SSV) for endowment policies proposed last month, despite life insurers’ concerns, Moneycontrol reported.


SSVs are the payouts made to policyholders for prematurely exiting. This amount will be higher now.

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“While we anticipate a gross impact of approximately 100 bps on the company’s new business margin (NBM) due to higher surrender value on early exits, we are confident in our ability to largely mitigate this impact without compromising the value proposition for our customers,” an HDFC Life spokesperson told Moneycontrol. “We expect these measures to positively impact the long-term growth prospects for the industry.”

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“Given that substantial number of policyholders surrender their policies in early years, this regulation would immensely benefit those policyholders in particular,” an anonymous source at a private life insurance company told Moneycontrol. “The increase will also be applicable to surrender in latter years, albeit the quantum of such increase will be comparatively lower.”

IRDAI has said that the SSV should be equivalent to at least the present value of the paid-up sum assured and paid-up future benefits (such as regular income payouts, if any).

Life insurers had earlier opposed the move stating that these products are not meant to ensure liquidity, but long-term goals, according to Moneycontrol.

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“Reserving will have to go up and more capital will be required,” the CEO of a large private life insurance company told Moneycontrol. “Our alternative solution was to allow complete refund of premiums in case of mis-selling rather than offering higher surrender values.”

“The upfront charges are high and it is difficult to recoup the commissions paid in the initial years,” the CEO added.

Apart from this, The insurance regulator made it mandatory for life insurers, just like health and general insurers, to issue a Customer Information Sheet (CIS) for customers which gives information on clauses, policy benefits, premiums, and terms and conditions in simple and concise language.

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It also allowed insurers to design a host of products including index-linked plans, and variable annuity payout options, while also introducing additional penalties on insurers for customer grievances.

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