From April: Demat type account must to buy policies

There are two guidelines that are going to impact insurance policyholders, starting from April 1, 2024. One is mandatory e-Insurance policies for new policyholders and the other is regarding the surrender charges of the life insurance plans such as endowment policies. Here’s what policyholders need to know:

e-Insurance mandatory for new policyholders from April 1, 2024

It is mandatory to hold insurance policies in electronic format from April 1, 2024. It is very similar to how investors hold shares in a demat account. You have to buy electronic insurance policies which will be held in a demat account termed an e-Insurance Account, or eIA. All you need to do is open an e-Insurance Account from any of the four repositories – CAMS Insurance Repository, Karvy, NSDL Database Management (NDML), and Central Insurance Repository of India.

It will reduce paperwork. “This development ensures the security of policyholder information and provides greater accessibility by eliminating the complex paperwork, hence streamlining processes for both insurers and customers,” says Shashank Chaphekar, Chief Distribution Officer, ManipalCigna Health Insurance.

Further, all your insurance policies — life, health, and general insurance policies — will be kept in one place. You can view, maintain, and update details of your policies through your e-Insurance Account. Opening an e-Insurance Account account is easy and free. The insurer will bear the cost of opening of an e-Insurance Account on your behalf. Do keep in mind that there will be one eIA for all your insurance policies.

“This step will also enhance customer experience and provide a centralized platform for managing all insurance policies seamlessly. The development marks a pivotal moment towards serving customers better in this digital age,” Chaphekar adds.

Read More: Insurance new rule: e-Insurance in demat like format mandatory for all new policies from April 1, 2024; what is going to change?

You will still have an option to get the policy documents in physical format if you want.

This rule is only applicable when you buy new insurance policies. The Insurance Regulatory and Development Authority of India (IRDAI) guidelines have not mentioned anything about the existing insurance policyholders yet.

These surrender charges are effective from April 1, 2024: Policyholders must know

The Insurance Regulatory and Development Authority of India has announced the final set of surrender charges in non-linked or linked life insurance products — traditional endowment policies. These charges are going to be effective from April 1, 2024.

Here are the proposed slabs for the surrender value percentages:

1) 30% of total premiums paid if surrendered during the second year.

2) 35% of total premiums paid if surrendered during the third year.

3) 50% of total premiums paid if surrendered between the fourth and seventh years.

4) 90% of total premiums paid if surrendered during the last two years.

While this move is good news for insurance companies, the customers will hardly get any major relief

“This status quo provides a big relief to the life insurers, who otherwise had the tough task of balancing the impact of increased surrender value to the lapsing customers by tinkering with the distributor’s payout, providing benefit to the persistent policyholders, and maintaining shareholders’ profitability (VNB margins),” says Emkay Global.

“IRDAI in its latest Gazette Notification issued in March 2024 has maintained the status quo after building hope for policyholders by floating a consultation paper on increasing the surrender value for life insurance policies in December 2023. So customers will continue to receive paltry surrender value in the initial years if they decide to surrender the policy,” says Abhishek Kumar, a SEBI registered investment advisor (RIA) and Founder of SahajMoney.

Harry Byrne

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