IRDA may defer Implementation of Product Design Norms to 1st April 2013

It is expected that Insurance Regulatory and Development Authority (IRDA) may defer the effective date for the implementation of product design guidelines to first April 2013.

As per IRDA’s revised draft guidelines, final guidelines were to take effect from first October 2012. All products had to comply with the new guidelines by that date.

Insurers have expressed their concern on the time required for implementing new set of norms. It will be difficult for insurers to comply with all new norms soon after the guidelines take effect. Hence, IRDA is mulling to defer the implementation date, as IRDA has said that insurers will get reasonable time to adapt to new guidelines.

IRDA is also expected to come up with revised guidelines before announcing the final guidelines.Insurers have also sought some changes in draft guidelines. Insurers have asked to make the commission structure of agents more rational. The current draft regulations on commission suggest that the premium amount should be made proportional to the commission being paid on long-tenure policies. This means ten-year policy should be made benchmark and the commission should be decided in a decreasing order from the tenth year.

Insurers are concerned that if draft guidelines get implemented, then agents will push long-term policies rather then considering the need of the customers. Take for instance, an agent may push ten-year product where he gets 28 % commission instead of nine-year product where he gets 14% commission.

Hence, it is expected that IRDA may change commission structure by reducing the wider gap in specified commissions depending on the tenure.

IRDA is also considering bringing in changes in the proposed life cover. People of higher age brackets say 50 and above, may get option to choose the life cover. The current draft guidelines mandate minimum life cover of ten times the annualized premium. As per insurers it will be a big blow for people in higher age bracket, who will need to shell out more premiums. And also people who fall in higher age bracket do not need the specified life cover as the need for life cover decreases with age.