Field widened for life insurance in the country

Revised surrender value norms to help life insurers and customers

- AATHIRA VARIER

The customer-centric revision in surrender value norms will strengthen the bottom line of life insurers and boost penetration in the country, industry officials said. The revised surrender value norms came into effect from October 1, 2024.

"The new Irdai (Insurance Regulatory and Development Authority of India) norms provide a higher surrender value on account of certain specific prescriptions that are value-positive for customers. While the margin per policy for insurance companies seems to be impacted in the short term, we believe that this will strengthen the bottom line in the long run by increasing insurance penetration in the market," said Vivek Iyer, partner, Grant Thornton Bharat.

In June 2024, Irdai, the insurance regulator, revised the norms to ensure better payouts for customers who exit their policies prematurely. According to the revised surrender value norms, life insurers have to pay higher special surrender value (SSV) to policyholders after the completion of the first policy year, if the customer has paid one full-year's premium. Previously, companies did not pay such an amount to customers surrendering their policies soon after the first year.

Additionally, the norms state that the discount rate for discounting the paid-up value to calculate SSV will be allowed up to 50 basis points (bps) higher than 10-year G-Sec yield.