Following the decision of the Insurance Regulatory Development Authority (IRDA) to standardise insurance products by December 31, the Life Insurance Corporation of India (LIC) is being compelled to withdraw 30 of its existing products, some of which are popular with customers.
In February 2013, the IRDA brought out a new set of guidelines for life insurance products in an attempt to standardise premiums, commission rates and make insurance products more consumer-friendly.
All insurance products must be revised to comply with the new guidelines, and old products have to be phased out by December 31.
This initiative was taken as a result of complaints of mis-selling and overpricing of products in the private sector.
The guidelines of restructuring of products are being applied uniformly across the industry, as a result of which LIC has to withdraw some of its popular products. Also, after the restructuring, LIC may have to collect service tax from policyholders as private insurance companies do, a move which is being opposed by the unions. Speaking to Frontline, Amanullah Khan, president of the All India Insurance Employees Association, said, “There were a lot of complaints about the mis-selling of insurance products in the private sector. The surrender charges were high. The upfront charges were also high. In most of the products, both unit-linked insurance products and traditional products, the benefits were less than the premium amount paid. The lapsation rate of the policies was also very high. Most private companies made large profits due to high lapsations.”
Amanullah Khan further added, “There were no problems with the LIC products. Still, in line with the directive of the IRDA, LIC has to withdraw the existing products. Accordingly, by December 31, LIC will withdraw over 30 of its existing products.
Some of the popular products like Jeevan Anand, Jeevan Tarang and Bima Bachat are being withdrawn.” LIC has filed a large number of products for approval with the IRDA. Said Amanullah Khan: “It is expected that next year around 15 new products will hit the market. Many of these will have the features of the existing products.”
Sagnik Dutta
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