New Regulations Announced by the IRDAI

Effective 1st October 2024, the Insurance Regulatory and Development Authority of India (IRDAI) has set two major developments on the surrender value of insurance policies. These special surrender value regulations are highly beneficial to the customers, who previously, were at a huge loss when a situation of policy surrender arose, or if they wanted to switch to a new insurance provider. These regulations will provide flexibility and ensure a substantially higher value on the surrender of a policy. This is a customer-centric move that will encourage more people to buy insurance.

Special Surrender Value
Under the previous regulations, if a customer paid a premium for the first year and wanted to surrender the policy, they would not get back a single rupee. However, under the special surrender value regulations, the moment the first premium is paid, they will become eligible for a certain surrender value, which can range between 60% and 70% of the premium paid. This is a much-needed development that protects the interests of the customers.

Higher Surrender Value
Furthermore, the surrender value increases with each passing year when the premiums are paid on time. Previously, only after paying a premium for 4 to 7 years would the customer be eligible to get a 50% surrender value on the premiums paid till now, but this figure will now range anywhere between 75% to 95% of the value of the premiums paid.

But how will the policyholder know about this?
One cannot expect customers to stay updated on all the news and developments in the country’s insurance sector. Some insurance agents and advisors, like Money with Mansy, do proactively inform their customers of the latest developments, but this number is rather small. Therefore, IRDAI has stated that the insurer has to state in writing the guaranteed and special surrender value in the benefits section of the policy.

Figures have to be accurately calculated and stated in separate columns in the benefits sections. A separate page or section has to be created in the policy with accurate illustrations of the surrender values of the policy through each year of the term. This page has to be signed by all the parties involved to ensure that the customer is aware of the values that they are entitled to receive while surrendering or switching policies.

Why was this regulation so important?
One of the biggest factors the IRDAI may have considered for bringing in this regulation is unforeseen financial loss. Financial situations can change anytime owing to job loss, illness, or even death. Such situations may render a person unable to pay the next premium. So, should they lose all the money they have paid till now? Should they not get back a substantial amount from their paid premiums that would actually help them in this financially difficult situation?

That’s why, this regulation has come about to protect such customers who are going through a financially difficult situation. They can voluntarily surrender the policy and receive more than 60% of their premiums paid depending the number of annual premiums paid. The new special surrender value regulations protect and empower customers.

The IRDAI is listening to the customers but customers also have to be smart when they buy insurance. Rather than buying from agents who are only interested in selling high-commission policies, get in touch with certified insurance advisors like Money with Mansy. Here at Money with Mansy, we deeply analyse all insurance policies and only recommend products that match the needs and requirements of the customers. We are not commission-motivated. We are interested in building lifelong relationships with our customers. Get in touch with us to know more about the latest and future developments outlined by the IRDAI.