New Delhi. New guidelines related to surrender of insurance policy are going to come into effect from Tuesday. It is estimated that this will increase the insurance premium. There may be a reduction in the commission of insurance agents. Earlier this year, the Insurance Regulatory and Development Authority of India (IRDAI) had introduced revised guidelines on ‘surrender value’ to provide better returns to policyholders who exit their life insurance policies early.
‘Surrender value’ in insurance means the amount that is paid by the insurance company to the policyholder if the policy is surrendered before the maturity date of the policy. If the policyholder decides to return the policy while it is in force, he will be given a share of the income and savings.
The regulator has stressed the need for insurance companies to ensure ‘fairness and value for both exiting and continuing policyholders’ while deciding the amount to be returned at the time of ‘surrender’. A senior official of a private sector insurance company said that to compensate for the revised ‘surrender’ fee, life insurance companies will either increase the premium amount or cut the commission of their agents.
Gaurav Dixit, Director, CareAge Ratings said, “Significant changes may be seen in insurance products and commission structure. Due to this, there may be fluctuations in premium in the second half of the current financial year. Most of the insurance companies have made preparations to change their policies to meet these provisions. Most of these companies have a limited number of policies compared to life insurance giant LIC. At the same time, LIC has to do a big job of changing its policies to meet the instructions of the regulator.