Last year, the IRDAI notified the "Guidelines on Standard Individual Health Insurance Product" of 1 October 2020 with the objective of providing basic health insurance covers to customers. Towards this end, all General and Health Insurers are required to mandatorily offer a standard individual health insurance product offering a fixed set of covers to customers termed, "Aogya Sanjeevani Policy" in accordance with the directions issued by the IRDAI.
Similarly, perhaps in recognition of the rising 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 (Guidelines). The Guidelines aim at making available a plain vanilla, individual term life insurance product, with simple features and standard terms and conditions that would meet the requirements of an average customer.
Saral Jeevan Bima – Product Overview
All Life Insurers are now mandatorily required to offer the prescribed standard product named as, 'Saral Jeevan Bima' (Standard Product) on or before 1 January 2021 with the requisite approval of the IRDAI. 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 life assured's death during the policy term, the sum assured will be payable as a lump sum to the nominee.
The Guidelines stipulate, inter alia, the following features and parameters for the Standard Product:
- Age at Entry: 18 years or above.
- Prospects: The Standard Product shall be available to individuals without restrictions on the basis of gender, place of residence, travel, occupation or educational qualifications.
- Policy Term: 5 to 40 years.
- Sum Assured: While the minimum sum assured begins at Rs.500,000 and maximum sum assured up to Rs.2,500,000, Life Insurers also have the option of offering a sum assured above Rs.2,500,000 under the Standard Product with no modifications to all other terms and conditions.
- Death Benefit: For regular and limited
premium payment options, the death benefit would be the highest of:
- 10 times of annualized premium;
- 105% of all the premiums paid as on the date of death;
- Absolute amount assured to be paid on death. For single premium policies, higher of:
- 125% of single premium;
- Absolute amount assured to be paid on death.
- Other Benefits: 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 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. It is relevant to note that this benefit will not be available under regular premium policies.
- Exclusions: Suicide is the only exclusion permitted under the Standard Product.
- Waiting Period: A waiting period of up to 45 days from the date of commencement of risk can be applied. In this regard, Insurers are required to 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/Add-ons: Only approved 'Accident' benefit and 'Permanent Disability' benefit riders can be attached to the Standard Product.
- Policy Document: 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 any other riders/benefits/options/variants, other than the ones stipulated in the Guidelines, they are permitted to suitably modify the definitions and other clauses of policy contracts prospectively based on the regulations or guidelines that may be issued by the IRDAI from time to time.
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 condense the time required to be spent by customers in making a choice on cover. Further, the Guidelines also recognize that a uniform product in the market would aid in enhancing 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 all Life Insurers to offer the Standard Product on or before 1 January 2021, and the same may be filed with the IRDAI by 1 December 2020.
It appears that customers feedback towards the standard health insurance product, "Aogya Sanjeevani Policy" has been broadly positive thus far, so it will be interesting to see how such a standard life insurance product, 'Saral Jeevan Bima', will be received in the market going forward.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.