In a major relief to life insurance companies who did not have adequate products in their bouquet, Insurance Regulatory and Development Authority (Irda) has extended the deadline for phasing oout the old products in traditional segment till December 31. The earlier deadline was October 1 and this would have meant that customers would have limited new products to choose from. However, the sale of highest net asset value (NAV) products in the unit-linked product segment has been banned from October 1 onwards.
"The deadline for phasing out the products under the new product guidelines in linked and non-linked segment has been extended till December 31. However, guaranteed highest net asset value (NAV) products in the unit-linked segment will have to be withdrawn from October 1," said a senior Irda official.
The Insurance Regulatory and Development Authority (Irda) had brought out a new set of guidelines for life insurance products in February. While the minimum death benefit and surrender value was altered for traditional product customers who stay invested in a policy for a longer period, in the case of unit-linked products (Ulips) insurers had to intimate customers about changes in the yield of the Ulip every month. The rules had also banned the sale of highest NAV products, since they were not in customer interest.
Life Insurance Council had sought an extension in the deadline, owing to a representation made by the life insurers to the council. V Manickam, Secretary General of Life Insurance Council had earlier said that they expected a positive outcome on this front from the regulator. "Though larger companies have gotten approvals, there have been only 4-5 products on an average with each one. Hence, the extension enables them to launch all their crucial products in the market within the next three months," said a chief executive of a private life insurance firm.
Industry officials said that the companies would have ideally liked more time to re-launch the entire portfolio as training, back-end processes, marketing material development requires a lot of time. Anup Rau, CEO, Reliance Life explained that this extension will enable the transition from the old product regime to the new regime to be more smoother.
The regulator had also extended the deadline for phasing out of group products. The group products which were not compliant to the new guidelines were to be withdrawn from July 1. Later, this deadline was extended to August 1.
Sandeep Ghosh, MD & CEO of Bharti AXA Life Insurance said that the 3 month extension was more than sufficient. "From our perspective, it is a positive move. While approvals had been pushed through, testing, deployment and training would have required some time. Though we already have launched some products compliant with the new norms, we will keep launching other key products. However, while December 31 is the deadline, we will aim to have all products entrenched and embedded in the system before the January to March peak season," Ghosh explained.
Though Irda had earlier said that life insurers had to be complaint with the new norms by October 1, 2013, companies were apprehensive of launching a new product portfolio within the stipulated deadline. While some companies had begun refiling in June itself, others did so only in August. Hence, the approval process was delayed for the companies.
If the guidelines came into force from tomorrow, there could have been 5-6 companies without any products to sell. Further, customers would also have had lesser number of products to choose from, since the larger insurers also had only limited products in place. Even Life Insurance Corporation of India (LIC), which is looking to have a similar number of products as its present portfolio did not have approvals for all the re-filed products and hence an extension was sought.
Irda, also, had made special arrangement's for this process. The regulator had geared up for the product refiling process by engaging additional staff in product approvals.
The traditional product guidelines, termed as the most ambitious project of the insurance regulator, was on the drawing-board at the Irda office in Hyderabad, since early 2012 during the tenure of former Irda chairman J Hari Narayan.