Life insurers tweak products, incentives to protect margins after IRDAI's new surrender rules
insurers in India are working on ways to navigate new guidelines from the Insurance Regulatory and Development Authority of India (IRDAI), which mandate paying surrender value from the first year on non-participating policies.
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While all insurers will need to tweak their product offerings to comply with the new rules, insurers are trying to maintain margins at existing levels.
HDFC Life is restructuring distribution payouts with deferrals and clawback provisions to address early surrender impacts. ICICI Prudential Life is focusing on trail-based commission following its ULIP (unit-linked insurance plan) product structure, while SBI Life is maintaining its current commission structure and expects the current ULIP-heavy product mix to minimise margin impact.
Apart from first-year surrender, the new rules allow the discount rate for calculating paid-up values to be up to 50 basis points above the benchmark 10-year government securities yield. Currently, it is the same as the benchmark yield.
Despite the regulatory changes, insurers are confident of sustaining growth and protecting margins through these steps.
HDFC Life is restructuring its distribution payouts with deferrals and clawback provisions to mitigate early surrender impacts, the company's management said during the earnings call. The company has talked about a gross impact of approximately
