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03 November 2020
In 2019 the Insurance Regulatory Development Authority of India (IRDAI) issued guidelines for a Standard Individual Health Insurance Product of 1 January 2020, aiming to provide a basic health insurance product to customers. Consequently, all general and health insurers must offer the standard individual health insurance product which provides a fixed set of cover to customers (ie, Arogya Sanjeevani Policy) in accordance with the IRDAI's directions.
Similarly, perhaps in recognition of the increasing customer demand for pure-risk term insurance products, the IRDAI has issued the Guidelines on Standard Individual Term Life Insurance Product (Saral Jeevan Bima) of 15 October 2020. The guidelines aim to introduce a plain, individual term life insurance product with simple features and standard terms and conditions that would meet an average customer's requirements.
All life insurers must now offer the prescribed standard product, Saral Jeevan Bima (the standard product), on or before 1 January 2021 with the IRDAI's requisite approval. The standard product will be a non-linked, non-participating, individual, pure-risk premium life insurance plan. Under this product, in the event of the assured's death during the policy term, the sum assured will be payable as a lump sum to the nominee.
The guidelines stipulate, among other things, the following features and parameters for the standard product.
Age at entry
Policyholders must be 18 years or older.
The standard product will be available to individuals without restrictions based on:
The policy term is between five and 40 years.
While the minimum sum assured begins at Rs500,000 and the maximum sum assured is Rs2,500,000, life insurers can also offer a sum assured above Rs2,500,000 under the standard product with no modifications to other terms and conditions.
For regular and limited premium payment options, the death benefit will be the highest of:
For single premium policies, the death benefit will be the highest of:
While there will be no maturity benefit or surrender value payable under the standard product, where a policyholder wishes to cancel the policy before the maturity date (in case of single premium policies) or at the end of the revival period if the policy is not revived (in case of limited premium policies), a policy cancellation value computed in accordance with the guidelines will be payable. This benefit will not be available under regular premium policies.
Suicide is the only exclusion permitted under the standard product.
A waiting period of up to 45 days from the date of commencement of risk can be applied. In this regard, insurers must expressly specify the waiting period and benefits payable during the waiting period in the welcome letter of the policy document and the first page of the sales literature in the prescribed manner.
Riders and add-ons
Only approved accident benefit and permanent disability benefit riders can be attached to the standard product.
The format for the policy document and terms and conditions of the standard product is annexed to the guidelines.
While insurers are not permitted to attach other riders, benefits, options or variants other than those stipulated in the guidelines, they can suitably modify the definitions and other clauses of policy contracts prospectively based on the regulations or guidelines that may be issued by the IRDAI.
With the wide-ranging pool of innovative protection products with different features, variants, riders and sum assured options, the guidelines seek to provide customers with a standard product to be offered on a uniform basis by all life insurers to reduce the time that customers typically take when choosing cover. Further, the guidelines recognise that the existence of a uniform product in the market would help to improve trust between insurers and their insureds, thereby reducing potential mis-selling and plausible disputes at the time of claim settlement.
To this end, the IRDAI has mandated that all life insurers must offer the standard product on or before 1 January 2021, and the same may be filed with the IRDAI by 1 December 2020.
Customer feedback towards the standard health insurance product (ie, the Arogya Sanjeevani Policy) has been broadly positive thus far, so it will be interesting to see how such a standard life insurance product (ie, the Saral Jeevan Bima) will be received in the market going forward.
For further information on this topic please contact Celia Jenkins or Swathi Ramakrishnan at Tuli & Co by telephone (+91 11 2464 0906) or email (Celia.Jenkins@tuli.co.in or firstname.lastname@example.org). The Tuli & Co website can be accessed at www.tuli.biz.
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