Life insurance companies recently faced a shock in the form of a consultation paper from the Insurance Regulatory and Development Authority of India (IRDAI) which proposed increasing surrender value given to policyholders and reducing surrender charges charged by life insurance companies.
Kotak Institutional Equities in its note said that the move could impact the Value Of New Business (VNB) margins for life insurance companies by 140-200 basis points, though the full impact will only be known post implementation.
Sources tell CNBC-TV18 that certain life insurance companies have sought a meeting with IRDAI Chairperson, Debasish Panda to express their concerns around the consultation paper. Also , as per sources, life insurance companies are expected to seek an extension to the deadline of January 3 which by when life insurance companies are expected to submit their views on IRDAI’s consultation paper.
The major change suggested by IRDAI has been to ask life insurance companies to pay adjusted surrender value to policyholders which would be surrender value along with refund over threshold. Life insurance had sought the threshold limit to be a percentage of total premium paid which could remove any arbitration.
Sources tell CNBC-TV18, that IRDAI is not in the favor of granting life insurance companies the provision of setting the threshold as a fixed percentage of premium paid. The insurance regulator feels that the threshold limit for calculation of surrender value should be set as the fixed expenses done by an insurer on that policy along with some nominal charge over it.
(Edited by : Anshul)
First Published: Dec 26, 2023 3:43 PM IST
