The policy called ‘Saral Jeevan Bima’ has been designed by the Authority as a non-linked, non-par protection policy with stipulated pay out in the event of death of the sum-assured. Insurers have been mandated to file their products by December 2020 and then market them starting 2021.
The Insurance Regulatory and Development Authority said on Thursday that the standardization of term policies was necessitated due to complex wordings on existing policies and the lack of awareness among a large section of population to make informed choices.
“Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product,” said Irdai in a circular. “To take care of this situation and to make available a product by all Life Insurers that will broadly meet the needs of an average customer, it is felt necessary to introduce a standard, individual term life insurance product, with simple features and standard terms and conditions.”
The insurance regulator also said that such a standardized product would also reduce mis-selling and potential disputes at the time of claim settlement. It was a long-standing objective of Irdai to offer a standard term life policy. According to industry executives, this will help in making term covers easier for less affluent sections of the society.
According to Bharat Kalsi, Chief Financial Officer of Bajaj Allianz Life the latest circular is in line with the requirements of the industry.
“… (The move) will surely help increase the awareness of protection plans, especially during these uncertain times. A product of this construct will also help in insurance penetration within the country,” said Kalsi.
According to the product features the Saral Jeevan Bima will provide payment of sum assured in lump sum to the nominee in the case of the life assured’s death during the policy term and will be available for those in the age group of 18-65 years.
Additionally, the term has been set of 5 to 40 years with a maximum maturity age of 70 years. Irdai has set a sum assured limit between Rs 5 lakh and Rs 25 lakh. Insurers offering the policy will have an option to stretch the limit given that all the terms remain unchanged.
Irdai has recently introduced standardized health covers too. Experts say that the standardized term covers will also be similar in several aspects.
“Just like the standard health insurance product ‘Arogya Sanjeevani’, the individual term life insurance product will also be the same across all insurers,” said Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.
“The product across insurers will have the same features, benefits, inclusions and exclusions. Though the prices, service level, claim settlement rate may differ. While product is just one aspect, customer service, brand trust and solvency ratio play the most important role while making a long-term decision,” said Agarwal.
The premium payment options include both regular and limited payment terms for 5 years and 10 years and single premium. However, there is set to be no maturity benefit and suicide will be excluded as per the broader regulations. There will also be no surrender value nor loan facility under the policy, Irdai said.