INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (TREATMENT OF DISCONTINUED LINKED INSURANCE POLICIES) REGULATIONS, 2010
(1) These regulations may be called the Insurance Regulatory and Development Authority (Treatment of Discontinued Linked Insurance Policies) Regulations, 2010
(2) They shall come into force on the date of their publication in the Official Gazette and shall apply to all products of linked life insurance cleared by the Authority thereafter.
(1) Unless the context otherwise requires,-
i. "Act" means the Insurance Act, 1938 (4 of 1938).
ii "Authority" means the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999(41 of 1999)
iii. "Date of payment of premium" shall in terms of the provisions of Section 64 VB (2) of the Act mean the date on which payment is received by the insurer.
iv "Date of discontinuance of the policy" shall for the purpose of these regulations, be the date on which the insurer receives the intimation from the insured or policyholder about discontinuance of the policy or on the expiry of the notice period provided for in the sub-regulation (1) of regulation 5 of the
The grace period for payment of the premium for all types of linked insurance policies shall be as follows:-
i. Fifteen days, where the policyholder pays the premium on a monthly basis;
ii. Thirty days, in all other cases.
A policyholder shall be entitled to exercise one of the following options upon the discontinuance of the policy:
(i) Revival of the policy, or
(ii) Complete withdrawal from the policy without any risk cover.
Where a policy is discontinued, the insurer shall take the following steps to enable the policyholder to exercise the option as available in terms of regulation 4:
(i) Send a notice within a period of fifteen days from the date of expiry of grace period to such a policyholder to exercise the said options within a period of thirty days of receipt of such notice.
Provided that where the policyholder does not exercise the option within the stipulated period of thirty days, the policyholder shall be deemed to have exercised the option mentioned at sub-regulation (ii) of regulation 4.
Explanation: The fund value of the policy shall be part of the segregated fund chosen till the policyholder exercises his/her option or till the expiry of thirty days of notice period which ever is earlier. During thi
(1) Where the policyholder exercises the options available at sub-regulation (ii) of Regulation 4 or does not exercise the option available in terms of the proviso to sub-regulation (i) of regulation 5, the fund value of the policy shall be credited to the discontinued policy fund. The proceeds of the discontinued policy shall be refunded only upon completion of the lock in period. The income earned on the fund value shall also be apportioned to the discontinued policy fund and shall not be made available to the shareholders.
(2) The insurer shall refund the amount by means of a cheque or demand draft, to be delivered to the insured or the nominee, at his last known address or by any other electronic mode of payment. However, the insurer may deduct discontinuance charges on the date of discontinuance on such policies, which shall, not exceed the charges stated in sub-regulation (v)
The obligations of the insurer in this regard shall be as follows :-
i. To impose discontinuance charges only to recoup expenses incurred towards procurement, administration of the policy and incidental thereto.
ii. To design the discontinuance charges to encourage the policyholder to continue with the contract for the full term;
iii. To ensure that the discontinuance charges reflect the actual expenses incurred
iv. To structure the discontinuance charges within the statutory ceilings on commissions and expenses and
v. To ensure that the charges levied on the date of discontinuance (as a percentage of one annualized premium) do not exceed the limits specified below:-
(1) The funds arising from discontinuance policies shall be shown under a separate head in the Balance Sheet in the following manner:
Funds for discontinued policies
(i) Discontinued on account of non-payment of premium;
(ii) Others
(2) The amount refunded to the policyholders and amount transferred to the "Funds for discontinued policies" during the financial year shall be shown under a separate head.
(3) The following disclosures shall be made in the notes of the accounts
(i) Number of policies discontinued during the financial year;
(ii) Percentage of discontinued to total policies (product wise) during the year;<
Every insurer shall send a statement of account, on a half yearly basis, within fifteen days, in respect of every policy in force including discontinued policies where the proceeds are yet to be paid to the policyholder or her nominee as the case may be, his last known address, which shall contain the following details :-
(i) The total premium paid by the policyholder
(ii) Next due date of the premium
(iii) Pattern of the investment chosen
(iv) Pattern of investment
(v) Status of the policy
(vi) Total fund value
(vii) Total units
(viii) Detail of charges recovered.
(i) The Authority may, at any time, by an order in writing, direct any officer of the Authority to inspect the affairs of any insurer and submit a report on the reasonableness or otherwise of discontinuance charges, treatment of all discontinued policies and the treatment of the proceeds thereof.
(ii) Upon receipt of the report, the Authority shall, after giving an opportunity to the insurer to make a representation in connection with the findings in the report on the, direct the insurer to reduce the discontinuance charges and refund the excess charges so imposed, to the policyholder
(iii) Without prejudice to the above, the Authority may also initiate such action against the said insurer, as deemed appropriate, under the provisions of the Act, the Insurance Regulatory and Development Authority Act, 1999 and the relevant regulations fra
In order to remove any difficulties in respect of the application or interpretation of any of the provisions of these regulations, the Authority may issue appropriate clarifications or guidelines, as and when required.
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