IRDAI notifies regulations, tweaks one on surrender charges

NEW DELHI: Insurance regulator IRDAI has notified a host of regulations, including on surrender charges wherein insurers have to disclose such charges upfront.

IRDAI (Insurance Products) Regulations, 2024, merge six regulations into a unified framework aimed at enabling insurers to swiftly respond to evolving market demands, enhancing the ease of conducting business, and boosting insurance penetration.

These regulations promote good governance in product design and pricing, including strengthening the principles governing guaranteed surrender value and special surrender value along with disclosures, IRDAI said in a statement. It also ensures that the insurers adopt sound management practices for effective oversight and due diligence, it said.

These regulations, which will be effective April 1, stipulate that the surrender value is expected to remain the same or even lower if policies are surrendered within three years of the purchase.

A surrender value in insurance refers to the amount paid by the insurers to the policyholder upon terminating the policy before its maturity date. If the policyholder surrenders during the policy tenure, the earnings and savings portion will be paid to him or her.

For policies that have been surrendered from the fourth to the seventh year, the surrender value may see a minor increase, it said.

The Insurance Regulatory and Development Authority of India (IRDAI) at its meeting held on March 19 approved eight principle-based consolidated regulations, following the comprehensive review of the regulatory framework for the insurance sector.

These regulations encompass pivotal domains such as safeguarding policyholders’ interests, rural and social sector responsibilities, electronic insurance marketplace, insurance products and operation of foreign reinsurance branches, as well as aspects of registration, actuarial, finance, investment and corporate governance.

This comes after the notification of the first consolidated regulation on Expenses of Management of insurers in January 2024.

“It marks a significant milestone in regulatory governance which has replaced 34 regulations with six regulations and introduction of two new regulations enhancing clarity and coherence in the regulatory landscape, “ the IRDAI said.

The process involved consultations with stakeholders, including the insurance industry, experts, and the public at large ensuring a comprehensive consideration of varied perspectives in shaping the revised framework, it said.