The insurance regulator has said that partial withdrawals would now be available under pension products from life insurance companies to meet certain specific financial needs of the policyholders.

Typically pension and retirement plans offered by life insurers have low liquidity and may also have a long gap between accumulation and payment periods, making it difficult for policyholders to meet urgent financial needs.

The IRDAI, in its master circular on life insurance products released on Wednesday, said that policyholders would now be able to make partial withdrawals in individual pension products during deferment of up to 25 per cent of total premiums paid as on the date of the partial withdrawal and such withdrawals will not result in termination of the policy contract.

Withdrawals will be allowed only three times during the deferment period and only against stipulated reasons.

“Facility of partial withdrawal under pension products is now allowed, enabling the policyholders to meet their specific financial needs for important life events such as higher education or marriage of children, purchase/construction of residential house/flat, medical expenses, treatment of critical illness,” IRDAI said in a statement.

The other options available to the policyholders include the mandatory facility of policy loan in all life insurance savings products, more choices on premium payment terms to facilitate financial planning, free look-in period of 30 days, reasonable surrender value among others.

The regulator has also asked insurance companies to put in place robust systems of grievance redressal and the complainant has to inform the escalation mechanism to the insurance ombudsman. “In case the insurer does not appeal against the award of the insurance ombudsman and does not implement the same within 30 days, a penalty of ₹5,000 per day shall be payable to the complainant,” IRDAI said.

The regulator has also outlined measures to strengthen corporate governance by directing insurers to put mechanisms in place to improve consistency of policies, curb mis-selling and avoid financial loss to the policyholders and offer periodic training to intermediaries, distribution channels and employees.

IRDAI said the customer information sheet (CIS) has been introduced to provide policy-related information in simple language. “This is in addition to the improved benefit illustration of products,” the regulator said.

“These measures align with our commitment to offer comprehensive coverage while maintaining high standards of and efficiency in our operations,” said Rakesh Jain, CEO, Reliance General Insurance.