Posted on December 4, 2012 by Akanksha
It is expected that much awaited traditional product guidelines for life insurance companies will be out in next 45 days.
According to revised draft policyholders will get back as much as 50% of their premiums, if a policy is active for three years that means that a policy will have a minimum Guaranteed Surrender Value (GSV) of 50%.
Minimum GSV is a sum of guaranteed surrender value and the surrender value of any subsisting bonus already attached to the policy.
Unit-Linked Insurance Plan (ULIP) already has such guaranteed surrender value.
Insurers say that GSV should have been left for the companies to decide. Minimum GSV will vary from one product to another in a company. So, it is not appropriate to mandate a specific value for it.
Since the cost of acquisition and execution for insurance firms are high, it will be difficult for them to operate, if the latest guidelines are implemented, prompting them to sell more traditional products than ULIPs.
These guidelines will also pave the way for Index Linked Insurance Plans (ILIPs). It will have similar structure as ULIP.
The draft has also given detailed specification on all products, death benefits and charges.
It is expected that almost all products would have to be re-filed when these guidelines will come into force.
Insurers will be given time till 31 March 2013 for group policies and 30 June 2013 for individual policies, to enable them to withdraw products from the market and re-file them, as per the new guidelines.
vinay mohanty
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