IRDAI allows for modification of withdrawn life insurance products to benefit policyholders; 4 key provisions

The Insurance Regulatory and Development Authority of India (IRDAI) has approved changes to withdrawn life insurance policies that will benefit existing customers. The IRDAI‘s circular is a big step towards protecting the interests of existing policyholders.

According to the Irdai circular dated September 1, 2023, “ IRDAI has introduced measures allowing more choices and benefits for policyholders with withdrawn life insurance products. Effective immediately, this applies to products which are no longer available for sale but still have existing policies serviced by insurers”.

The primary goal of this circular is to give existing policyholders more flexibility while protecting their interests.

The key provisions include:

1. Adding Riders: Companies can provide new riders to current policyholders on withdrawn plans.
2. Flexible Payments: Provide the option to modify the premium payment mode.
3. Lower Interest Rates: A reduction in interest rates for policy revivals and policy loans, if any is permitted.
4. More Payment Options: Policyholders can determine how frequently they get certain benefits from their policies through income benefit payments.

According to IRDAI’s circular issued on August 31, 2023, modifications permitted to withdrawn Products of Life Insurers, “Conditions to be satisfied while allowing the above mentioned options: The insurer shall ensure that;

• Withdrawn File and Use applications shall not be altered/amended while offering the above options to the existing policyholders.
• An addendum listing the changes in chronological order as per format prescribed in Annexure I, is maintained in respect of the withdrawn File and Use application, on ongoing basis incorporating all the changes made till the date.
• The policyholders are suitably informed about the options and a specific request has been obtained from policyholders in respect of point 4(i), 4(ii) & 4(iv).
• Changes are appropriately documented in the respective policy document.
• Offering the above options is not detrimental to the interests of the policyholders.

Many insurers withdraw plans due to many reasons. Life Insurance corporation of India (LIC) during the year financial year 2022- 2023 has withdrawn around 12 plans, according to the LIC website. Many major life insurance companies Bharati Axa Life, HDFC Life, Future Generali India Life Insurance, Max Life Insurance and other, have also closed many insurance products for new sale. You can find the list of withdrawn policies on the insurer’s website.