IRDA Clarification on the Guidelines for Pension Products: ORDER No. IRDA/ACTL/ORD/PRD/013/01/2012, dated 5-1-2012

The IRDA had issued guidelines for pension products vide its circular dated November 8, 2011 and insurance companies were required to withdraw all insurance products which do not conform to the guidelines with effect from January 1, 2012. In accordance with this circular, insurance companies had filed 22 revised products as on date out of which 21 products were filed only in the month of December 2011 and of which the largest number were filed in the last week of December 2011. During examination of the products, certain insurers have sought clarifications and in that context, the IRDA issues clarification on clause (17) of the Circular dated November 8, 2011 as follows:
1. Assured benefit referred to at clause (2) shall mean all of the following:
(a)  The insurer shall guarantee either a non-zero rate of return on premiums paid from the date of payment to the date of vesting or an absolute amount (which shall result in a non-zero return). In both cases, this shall be disclosed at the time of purchase of the policy.
(b)  Death benefit: In the event of the death of a policyholder during the term of the contract, the successors to the policyholder shall be entitled to receive a sum equal to the premiums paid at the guaranteed rate of return as specified in (a) above.
(c)  Surrender Value: If the insurance product is on a ULIP platform the surrender value shall be the higher of fund value and premium accumulation at a guaranteed rate on the date of surrender less the discontinuance charges as per the Guidelines on IRDA (Treatment of Discontinued Linked Insurance Policies) Regulations, 2010. In all non-linked products, the surrender value shall be in conformity with the provisions of the Insurance Act.
2. It is further clarified that the provisions of the Circular dated November 8, 2011 do not apply to Group Gratuity and Group Leave Encashment products.

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