Mumbai: Unlike health insurance, there was no significant change in the life insurance segment this year, besides reduction in death benefit and increase in withdrawal limit in pension plans. Here is a look at whether you will benefit from these moves this year:
Change in minimum death benefit
In life insurance, the regulator has reduced the minimum death benefit requirement for younger age brackets to 7 times your premium from 10 times, for regular premium products. This will need tax change as well.
For example, say you pay an annual premium of ₹ 10,000. Earlier, the insurer was mandated to give you at least ₹ 1 lakh as death benefit. As per the key changes proposed to the current regulations, the insurer may give you a minimum death benefit of ₹ 70,000.
“The only suggestion for this change is that there should be some sync between income tax regulations and IRDAI," said Rushabh Gandhi, deputy chief executive officer of India first Life Insurance Company Ltd.
The Income Tax Act allows you a tax benefit if the minimum death benefit is 10 times your premium, but if IRDAI’S change is implemented and the relevant change is not done in the income tax regulations, customers will not benefit," explains Gandhi.
In case of pension plans, the regulator has allowed the insured to withdraw 60% of the amount on maturity and convert the rest into annuity. Earlier, the customers were allowed to withdraw an amount up to 33% of the maturity corpus.
In case of traditional plans, the regulator has raised the surrender value for the customer. The value has been raised from 30% to 35% of the policy value, he added. Also, in a traditional participating plan, if a customer has paid the premium for at least two years, she will get some amount even if the policy lapses owing to non-payment, said Gandhi. Earlier, the required payment period was three years.
Impact on digital plans
Like the banking and mutual funds industry, the Supreme Court rule which barred private companies from using Aadhaar for know your-customer (KYC) has also impacted insurance sector.
“The discontinuance of online Aadhaar based KYC has a significant impact on digital plans of insurance companies," said Abhijit Gulanikar, president of business strategy, SBI Life Insurance Co Ltd.
The insurers will soon start monitoring your health wearables. “The draft regulations have also proposed that the insurer may provide a discount to the customer on the back of good health habits," said Gandhi.
Meanwhile, life insurance companies are using chatbots for customer service. Another digital initiative is the premium payment facility through apps.