However, the adjustment of commission payout on advance premium will be settled after its due date.
IRDA has allowed life insurance companies to collect advance premium in the same financial year when the policy premiums are due.
The life insurers can collect advance premium in both linked and non-linked insurance policies. However, if due date falls in the beginning of upcoming financial year, the advance premium can be collected three months prior to its due date.
So far, life insurance companies were allowed to collect advance premium 30 days prior to the due date in single premium policy. In regular premium mode, insurers were collecting three months premiums in advance only on the date of commencement of the policy.
The insurance regulator has clarified that the adjustment of commission payout of advance premiums will be settled after its due date.
In a circular, IRDA said, “Collection of advance premium shall be allowed within the same financial year for the premium due in that financial year. However, where the premium due in one financial year is being collected in advance in earlier year, insurers may collect the same for a maximum period of three months in advance of the due date of the premium.”
“The premium so collected in advance shall only be adjusted on the due date of the premium. The commission shall only be paid after adjustment of premium on due date,” said IRDA.