Keeping in mind the sharp fall in equity markets, IRDAI has asked insurance companies to give their investors an option to opt for settlement payment in ULIPs maturing till May 31. Settlement payment offers policyholders an option to receive maturity proceeds in a staggered way just like SWP in mutual funds.
The move is expected to ensure that policyholders do not convert their notional loss into actual loss.
Typically, staggered payment lasts till five years in ULIPs under this option. However, investors can redeem their maturity proceeds at any given time. Also, investors will have to bear expenses towards fund management, mortality and allocation.
Agents and brokers will have to obtain consent from their clients to exercise this option.
In a circular issued today, IRDAI said, “Where unit linked policies mature and fund value is to be paid in lump sum, life insurers may offer settlement options in accordance with Regulation 25 of IRDA (Linked Insurance Products) Regulations, 2013. This onetime option is regardless of whether such option exists or not in the specific product. The life insurers however have to exercise all due care and diligence to explain clearly the possible downside risk of continued fluctuation of fund value based on daily NAV and clear consent has to be obtained from the policyholder. This is allowed for unit linked policies maturing up to May 31, 2020.”
In another development, IRDAI has asked insurance companies to give another one month grace period on policies due for renewal between March and April. That means, policyholders will get two months over and above the due date to renew their existing insurance policies.