The Insurance Regulatory and Development Authority (IRDA) has allowed life insurance companies the flexibility to offer variable returns in immediate annuity plans.
Annuity contracts are single lump-sum payments to insurers, who then pay a guaranteed income to the individual, beginning almost immediately and lasting till the end of the individual’s life.
"Life insurance companies will have the flexibility to vary annuity rates in the range of -10 per cent and +10 per cent of the approved annuity rates without taking prior approval of the authority, provided the change is due to changing interest rate scenario," said IRDA in a circular.
According to the circular, for a variation of more than 10 per cent in annuity rates, life insurers will have to follow the file-and-use procedure, whereby insurers will have to seek approval from the IRDA before selling the product.
Industry experts said most private life insurance companies have stayed away from selling immediate annuity plans as they carry long term risk in providing a non-zero guaranteed rate of return as per the earlier regulations.
On group life insurance products, the IRDA observed that there is a variation in premiums approved under file-and-use procedure and the premium quoted by insurers.
The regulator has asked companies to have a board-approved underwriting policy for each group product. "The discounts, if any, all put together shall not become more than 30 per cent of the premiums approved under the file-and-use procedure. Similarly, the loadings shall not be more than 30 per cent of the premiums approved," the circular said.
Source The Hindu Business Line.
No comments:
Post a Comment