Big annual bonuses on endowment insurance plans could be a thing of past. The Insurance Regulatory and Development Authority (Irda) has proposed a minimum death benefit on endowment plans, which means a larger part of the premium may go towards insuring the life of the policyholder.
For regular premium plans, the minimum death benefit proposed for entry age less than 45 years is 10 times the annual premium, or half of annual premium multiplied by the policy term, or 105 per cent of all the premiums paid, whichever is higher.
For entry age over 45 years, the same is higher of seven times the annual premium, one-fourth of annual premium multiplied by the policy term and 105 per cent of all premiums paid.
"For customers, this would mean higher protection cover, higher mortality cost and higher premiums," says Pavan Dhamija, managing director and chief executive, DLF Pramerica Life Insurance.
The guidelines also link commission paid to agents with the policy tenure. For policies with a tenure of five-nine years, the first-year commission cannot be more than 14 per cent of the annual premium, 28 per cent for 10-14 year tenure, and 40 per cent for 15 years or more (35 per cent for insurers more than 10 years old).
Irda has also proposed to make policies eligible for surrender value if premiums have been paid for two years instead of the current three years.
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