Illustrations mandatory, rules IRDAI

Indian insurance industry regulator IRDAI has ruled that life insurers will  issue mandatory benefit illustrations in a drive to curb mis-selling and enhance transparency.

The benefit illustrations will be based on two different assumed rates of return as per a prescribed format. These will then have to be signed by the policy holder and agent/insurer and will become a part of the policy. Insurers have also been cautioned to write a warning-type advisory/alert about the non-guaranteed portion of the returns and ensure that all terms and conditions are displayed on main screen in case of digital sales.

Insurance companies must comply with the instructions by 1 December 2019. The regulator had earlier asked insurers to provide benefit illustrations but there was no deadline set for compliance and hence, most insurers were not following this rule.

According to a circular issued in this regard, life insurers must show the projected rate of return in their traditional insurance policy products (non-linked) as well as unit-linked insurance plan’s benefit illustrations.
From 1 December 2019, IRDAI has made it mandatory for insurers to provide policyholders customised benefit illustrations that project their accumulated corpus at various stages assuming gross investment returns of four percent and eight percent for each policy, i.e., there will be two investment growth scenarios projected for each policy.