Product Regulations Review and Recommendations Seminar Insights
Gain insights from the 12th CILA Seminar where Bikash Choudhary was appointed as Actuary and Chief Risk Officer, and learn about the IRDAI committee's review of product regulations in the Indian life insurance market, along with valuable recommendations to foster industry growth and flexibility in operations.
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Presentation Transcript
12thCILA SEMINAR 20thFEBRUARY 2017 BIKASH CHOUDHARY APPOINTED ACTUARY AND CHIEF RISK OFFICER FUTURE GENERALI LIFE 21 Feb 2017 1
BACKGROUND IRDAI HAS SET UP A COMMITTEE ON REVIEW OF PRODUCT REGULATIONS LIFE THE TERMS OF REFERENCE OF THE COMMITTEE IS TO REVIEW THE PRODUCT REGULATIONS RELATED TO LINKED AND NON LINKED PRODUCT REGULATIONS 2013 IN RELATION TO: change in economic and insurance market environment change in customer needs and expectations innovation and flexibility in product while ensuring simplicity and transparency and better value of money to policyholders Probability of mis-selling and protection of policyholders interest Payment to intermediaries and innovative way of distributing insurance products Recommendations of Sumit Bose committee report 21 Feb 2017 2
OBJECTIVE THE SURVEY IS INTENDED: TO UNDERSTAND AND REVISIT THE CURRENT PRODUCT REGULATIONS APPLICABLE FOR INDIAN ENVIRONMENT TO PRESENT THE CHALLENGES FACED IN THE INDIAN LIFE INSURANCE MARKET DUE TO REGULATIONS, IF ANY TO FOSTER GROWTH OF THE INDIAN LIFE INSURANCE INDUSTRY TO PROVIDE FLEXIBILITY IN DAY-TO-DAY OPERATIONS OF LIFE INSURANCE BUSINESS 21 Feb 2017 3
DISCLAIMER THE SURVEY AND ITS RELATED QUESTIONS ARE INTENDED FOR SEMINAR PURPOSE ONLY THE VIEWS EXPRESSED ARE IN CAPACITY OF THE PERSON AND DOES NOT NECESSARILY REPRESENT VIEWS OF THE COMPANY AND/OR THE EMPLOYER 21 Feb 2017 4
SURVEY The survey is multiple choice answer to a particular question You have voting pads with you and you have to press your choice of answer to the question Once the question is displayed on the screen, you have 15 seconds to respond to the question by choosing option of your choice 21 Feb 2017 5
Vote Now 1. Cap on charges & reduction in yield help in protecting the interests of policyholders. While upholding this objective what should be modified: 1. Remove the cap on charges as the RIY is already fixed 24% 2. Remove the ratio of maximum to minimum charge to be maintained in the first year and subsequent years 20% 3. Keep cap on charges but remove RIY condition 28% 4. Relax RIY condition to pay commission at similar levels as that of traditional products as it is almost impossible to pay commission as stipulated in regulations due to RIY conditions 11% 5. No change needed 17% 7 30 21 Feb 2017
Vote Now 2. The regulations on discontinuance currently seems bit ambiguous and confusing such as revival or not, notice period, 75 days, pre and post 5 years treatment consistency, revival period, mandatory surrender etc. Do the regulations need to be simplified while upholding the interest of policyholders: 1. Yes 88% 2. No change needed 12% 8 20 21 Feb 2017
Vote Now 3. What modifications, if any, are to be made to the current regulations on discontinuance charges: 1. Remove restriction on discontinuance charges as % of premium 5.5% 2. Remove restriction on discontinuance charges in absolute term 19.8% 3. Remove both restrictions 15.4% 4. Increase term of 5 year for which discontinuance charge is applicable and makes it in line with traditional products. 15.4% 5. Allow some discontinuance charge post 5 years for cost of processing, recoup some expenses etc. 23.1% 6. No change needed 20.9% 9 30 21 Feb 2017
Vote Now 4. IRDA Linked Insurance Products Regulations 2013-Chapter V, section 13b: Discontinuance Charge for Discontinued Policy Fund: 1. Shall be allowed to have maximum FMC of 1.35% p.a. on Discontinuance Fund. 1% 2. Remove the minimum guarantee on fund as the asset allocation is mandated by regulations 36% 3. Both A and B 37% 4. No change needed 26% 10 30 21 Feb 2017
Vote Now 5. Non-negative claw back addition is another form of cap on charges. Given that there is a cap on FMC of 1.35%, the purpose served by non-negative claw back may be limited. 1. Non-negative claw back shall be totally removed as it is a part of F&U demonstration. Further, it is difficult to implement in system given cost 47.2% 2. Non-negative claw back shall be allowed only on maturity. 36.0% 3. Non-negative claw back shall be allowed after 10 years instead of 5 years. 5.6% 4. No change needed 11 30 11.2% 21 Feb 2017
Vote Now 6. Requirement of illustrative minimum maturity value equal to 90% of premiums paid under 4% interest rate scenario. 1. Shall be removed as it restrict the choice of high sum assured multiple for the customers and also restrict the choice of ULIP for higher ages. 37% 2. Should be exclusive of taxes 13% 3. Should be exclusive of any extra underwriting charges and taxes 2% 4. Should be exclusive of any mortality and rider charges and its related any extra underwriting charges and and taxes 21% 5. No change needed 27% 12 30 21 Feb 2017
Vote Now 7. IRDA Linked Insurance Products Regulations 2013- Chapter XII, Section 47: Level premium. 1. Policyholders shall be allowed to vary premium during policy term based on their individual circumstances 38% 2. Premium may be level for say, first 5 years and thereafter may be reduced or increased based on individual s circumstances 45% 3. No change needed 17% 13 30 21 Feb 2017
Vote Now 8. Variable Insurance Products: The requirement to disclose the policy account value of each of the product on a daily basis in the website through a SAIN should be removed. 1. Yes 59% 2. No 41% 14 30 21 Feb 2017
Vote Now 9. Variable Insurance plans Declaration of interest rate 1. Should be declared quarterly in arrear instead of advance with one month lag 60.5% 2. Any other method of declaration of interest rate 22.1% 3. No change needed 17.4% 15 30 21 Feb 2017
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Vote Now 10. Linking of benefits to an external index is prohibited. Should the companies be allowed to link the benefits under a non-par product to an external index 1. Yes 60% 2. No change needed 40% 17 20 21 Feb 2017
Vote Now 11. Shareholder should be allowed to provide loan to participating fund and can charge a cost of loan in the fund and can take it out fully if there is a surplus FFA in the fund: 1. Yes 51% 2. No 49% 18 20 21 Feb 2017
Vote Now 12. The minimum death benefit section/ definition is complex for the customers to comprehend. Should it be further simplified/revisited?: 1. Yes 79% 2. No 21% 19 20 21 Feb 2017
Vote Now 13. As per the current regulations there is no possibility to mitigate the risk through imposing an underwriting lien period. Should there be flexibility to offer restrictive death benefits in the first year of policy or with exclusions as compared to subsequent years to check anti-selections and claim frauds?: 1. Yes 80% 2. No 20% 20 20 21 Feb 2017
Vote Now 14. Currently rider premium for non-health riders is restricted at 30% of base premium and for health riders restricted to 100% of premium for all riders put together and that rider sum assured cannot be higher than base sum assured. Should this be revisited?: 1. Yes, change to some other percentage 30% 2. Yes, remove the cap on premium and sum assured 51% 3. No change needed 19% 21 20 21 Feb 2017
Vote Now 15. Guaranteed Surrender Value as a percentage of total premiums paid?: 1. Should be based on number of number of premiums paid and year of surrender instead of only year of surrender to be consistent with different policyholders. Say, someone surrenders in 4th year start with 3 premiums paid gets 50% whereas someone surrenders in 3rd year end with same number of premiums paid gets 30% 19.5% 2. Should be exclusive of rider premiums and underwriting extra, as regulations says total premiums paid. 8.0% 3. Both A and B 65.5% 4. No change needed 6.9% 22 30 21 Feb 2017
Vote Now 16. Customized benefit illustration to be signed for Micro insurance, term assurance etc. Should this requirement be changed / removed? 1. Removed 26% 2. Simplify 54% 3. No change 20% 23 30 21 Feb 2017
Vote Now 17. Product Planner: What should be excluded as part of the 5 products limits 1. Riders 3% 2. Riders and Minor modifications (including price revision for interest rate sensitive products) / Modifications as resulted by any regulatory changes 91% 3. No change 6% 24 20 21 Feb 2017
Vote Now 18. The requirement of providing surrender value of atleast 90% of asset share after the premium payment term in a limited premium paying participating policy?: 1. Should be removed as it is at cost of reduced maturity benefits 13.6% 2. Should be removed as inconsistent with other participating products and hence affect the bonus philosophy and PPFA and that given sometimes single with-profits fund 35.2% 3. Should be based on number of policy years of the policy, say after 10 years 27.3% 4. No change needed 23.9% 25 30 21 Feb 2017
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Vote Now 18. Group Business. The following is needed 1. The definition of Group under the Regulations needs to be revisited as well as maximum group size 1.3% 2. Widening the definition of Non Employer-Employee homogenous groups 2.5% 3. Flexibility in joining as a member under group policy subsequent to date of commencement for the complete one year under GTL 2.5% 4. Flexibility in cover on monthly reducing basis under GTL 2.5% 5. All of Above 50.0% 6. Both A and B 18.8% 7. Both C and D 10.0% 8. No change needed 12.5% 27 30 21 Feb 2017
Vote Now 19. Cap on payments permitted to be made to Group Policyholders for their services rendered for business procured directly, what should be removed 1. Payments for all services put together shall not in any case exceed 20% of the commission payable 33% 2. For each of the services individually, the payments shall not exceed the rated proportion to the overall limit of 20% of the commission payable 24% 3. None 43% 28 30 21 Feb 2017
Vote Now 20. Objective pricing under group protection products as a part of file and use document 1. Should be removed completely and be left to insurers to decide as group has more bargaining power 26% 2. Should be based on past experience of the group and a range objective criteria over and above 48% 3. Should be based on some ratios e.g. combined ration or loss ratio of the insurer 16% 4. Should be made completely objective with no flexibility 10% 29 30 21 Feb 2017
Vote Now 21. GSLI Group Savings Linked Insurance products were very popular and provides a good value to the customer. Should it be allowed in the earlier format? 1. Yes 74% 2. No 26% 30 30 21 Feb 2017
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Vote Now 22. Minimum guarantee on unit linked pension 1. Should be removed so as to have exposure in market linked real return assets such as equity 49% 2. Should be linked to some benchmark 36% 3. Should be reduced 4% 4. No change needed 11% 32 30 21 Feb 2017
Vote Now 23. IRDA Linked Insurance Products Regulations 2013- Chapter VII, Section 27, 28, 29 purchase immediate or deferred annuity from same insurer. 1. Shall provide flexibility option to the customer of choosing annuity provider instead of buying it from the same insurer 83% 2. No change needed 17% 33 30 21 Feb 2017
Vote Now 24. Should the Pension Products be allowed to offer the customer a flexibility to withdraw from the policy fund in case of any contingency (such as serious illness). Currently, the Regulations restrict the amount to be invested back in a deferred pension plan or purchase immediate annuity plan from the same insurer 1. Yes , flexibility to be provided to withdraw with certain restrictions 79% 2. No change needed 21% 34 30 21 Feb 2017
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