![Unhappy with your non-linked policy? Consider early surrender Unhappy with your non-linked policy? Consider early surrender](https://cdn.magzter.com/1547192204/1713120370/articles/bijrIXI9MTxneHX7XbCsys/UNHAPPY-WITH-YOUR-NONLINKED-POLICY-CONSIDER-EARLY-SURRENDER.jpg)
In December 2023, the Insurance Regulatory and Development Authority of India (Irdai) issued an exposure draft on the surrender value of non-linked insurance policies.
Had those proposals been implemented, they would have made surrendering of life insurance policies less painful for policyholders.
The guaranteed surrender value (GSV) rates that apply to non-linked policies from April 1, 2024 (see box) have not changed. "The regulator has maintained the status quo on rates," says Abhishek Kumar, a Sebi-registered investment advisor (RIA) and founder, SahajMoney.
According to Alok Rungta, managing director (MD) and chief executive officer (CEO), Future Generali India Life Insurance Company, "The revised surrender value guidelines issued by Irdai are a reiteration of the regulator's intent to ensure that customers stay invested in life insurance policies for the long term." These GSV rates are linked to holding period.
"If a policyholder surrenders his policy before it completes three years, the GSV will be lower than if he surrenders it between the fourth and the seventh policy year,” says Naval Goel, CEO, PolicyX.
Insurers' perspective
An insurance company creates longterm liabilities for itself upon selling non-linked, traditional plans (moneyback and endowment). To meet them, it creates long-term assets by investing in long-tenure instruments, usually government securities and equities. When a customer surrenders the policy, the insurer has to unwind these investments and could have to take losses if interest rates are up or equity markets are not doing well. Insurers argue that making surrendering of policies painless and easy would lead to an asset-liability mismatch for insurers.
Diese Geschichte stammt aus der April 15, 2024-Ausgabe von Business Standard.
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Diese Geschichte stammt aus der April 15, 2024-Ausgabe von Business Standard.
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