IRDAI unveils major life insurance reforms

Key changes focus on clarity, alternative options, and reinforced governance.

The Insurance Regulatory and Development Authority of India (IRDAI) unveiled a master circular calling for changes in the Life insurance business, focusing on three key changes: simplification and transparency; added options for policyholders and; strengthening governance.

This move aims to make life insurance easier to understand, more transparent, and conducive to well-informed decision-making for policyholders. The authority said this change should support innovation and customer satisfaction, and allow insurers to swiftly adapt to market changes. 

The strengthened product governance framework now requires insurers' Product Management Committees to oversee product development, pricing, and design. Insurers must implement end-to-end technology solutions for seamless service throughout the insurance contract lifecycle, offering customers more choices and flexibility.

Key highlights of the Master Circular include:

1. Simplification and transparency

• Introduction of the Customer Information Sheet (CIS) that provides policy details in simple language, and improved Benefit Illustration for prospects.

2. Additional features for policyholders

• Mandatory policy loan facility in all life insurance savings products.
• Health riders for emergencies without surrendering policies.
• Partial withdrawals under pension products for significant life events.
• Ensuring value for money for both surrendering and continuing policyholders.
• Flexible premium payment options.
• Diverse product options, including annuity products with publicly benchmarked payouts and index-linked products.
• Extended free look period from 15 to 30 days.
• Enhanced grievance redressal systems with penalties for non-compliance.

3. Governance measures

• Improved persistency and reduced mis-selling.
• Periodic training for intermediaries and employees on products and regulations.
• Simplified product clearance process with the Board’s Product Management Committee empowered for governance.
• Fair and unambiguous pricing, equitable premium rates, and non-discriminatory practices.

These reforms aim to enhance customer satisfaction, minimise grievances, and boost confidence in insurance products, ultimately improving insurance penetration and providing inclusive, equitable, and diversified insurance coverage for all.