Soon, get discount for paying life insurance premium in advance
Soon, you can pay your insurance renewal premiums in advance and get a discount. The Insurance Regulatory and Development Authority of India (Irdai) has issued draft guidelines proposing to allow life insurance companies to offer discounts for renewal premiums paid in advance.
According to the draft circular, the discount should be equal to the interest rate on savings account deposits of State Bank of India (SBI) as of April 1 of each financial year, plus at least 100 basis points. This should be applicable to all advance premiums during the entire financial year.
Currently, SBI offers an interest rate of 2.7 per cent on savings account deposits.
“The facility of discounts shall be offered to all existing policyholders and prospective policyholders under current on-sale products (to those) who want to pay renewal premiums in advance,” the draft norms stated.
The regulator has asked the insurers to inform Irdai in writing within seven days of offering the facility.
Insurance companies said feedback had been sought from them, and the regulator might issue the final norms shortly.
In the case of the occurrence of insured event during the period of receipt of advance renewal premium and the next due date, advance premium along with interest accrued as on date of settlement of claims should be refunded to the policyholder or beneficiary, as the case may be, along with other benefits in accordance with the terms and conditions, the regulator said.
Insurers said this was their long-pending demand, and was aimed at ensuring policyholders renew their policies in time.
“The benefits of insurance can be passed on to customers when they renew their policies. There are various ways in which we try to ensure that the customer continues with the policy,” said Atri Chakraborty, chief operating officer at Indiafirst Life Insurance Company, explaining the rationale behind the move.
“One of the things we thought was a good idea is that if there is a customer who wants to pay the renewal premium but forgets at the time of renewal or if the customer today receives a lump sum amount of money which he does not know where to invest, the advance premium can be paid by the customer. And he gets a discount,” Chakraborty told Business Standard.
The facility will also be available to customers who opted for auto-debited facility, but the insurance company has to deactivate that facility once the premium is received in advance, insurers said.
Life insurance penetration rose from 2.15 per cent in 2001 to 4.60 per cent in 2009. Then it declined up to 2014. From 2015 to 2017, it was increasing. After a small decline in 2018 to 2.74, it increased to 2.82 per cent in 2019. India’s insurance penetration is much lower than developed nations like the UK, and US, but higher than Russia, Indonesia, according to Irdai data.