LIC has urged regulator IRDAI for a review of the surrender value changes that were unveiled in June as part of the IRDAI (Insurance Products) Regulations, 2024 and followed by a master circular on the implementation of the same.
The new regulations were designed to increase the payout to the policyholder when they surrender their policies.
Under the new regulations, which come into effect from October, IRDAI has proposed a guaranteed surrender value ranging 30-90 per cent depending upon the year of surrender of the policy as well as a special surrender value which shall be benchmarked with the prevailing yield on 10 year G-Sec with a spread not exceeding 50 basis points.
Moreover, according to the master circular for individual savings products, the minimum policy term has been kept at five years and the special surrender value shall become payable immediately after the receipt of the first full-year premium.
LIC along with other life insurers has been in discussion with the IRDAI on various aspects of the implementation of the surrender value changes.
According to sources, a key concern area for insurers is to maintain persistency while also balancing the interest of the continuing policyholders and distributors. There has also been a proposal to reconsider using a fixed rate benchmark such as 10 year G-Sec for all life insurance plans.
LIC officials had indicated that there is a need to strike a right balance when it comes to implementing the proposed changes to surrender value.
“We intend to provide the services in a manner that our policies continue to remain persistent. Therefore, we are still engaged, industry is also engaged in how to assure smooth and orderly implementation so that we can strike the right balance for the continuing policyholders and all the stakeholders vis-a-vis the people who are surrendering their policies for whatever reasons during the term of the policy,” said Dinesh Pant, appointed actuary and executive director, actuarial, LIC, at the Q1 FY25 earnings call of the company earlier this month.
LIC scrips at ₹1,079.30 were up 2.68 per cent at the BSE on Tuesday.
