New Insurance Rules From Today, April 1, 2024: E-Insurance Accounts And Surrender Charges

Beginning April 1, 2024, insurance policyholders will face the impact of two new guidelines. The first regulation mandates the adoption of e-Insurance policies for new policyholders. Similar to how investors hold shares in a demat account, these policies will be electronic and stored in an e-Insurance Account (eIA).

This move aims to streamline processes, enhance security, and reduce paperwork for both insurers and customers. Additionally, it provides policyholders with a centralized platform to manage all their insurance policies seamlessly. The process of opening an e-Insurance Account is simple and free, with the insurer covering the associated costs, as reported by Economic Times.

New Insurance Rules From April 1

However, policyholders still have the option to receive policy documents in physical format if preferred. It's important to note that this rule applies exclusively to new insurance policies, and existing policyholders are not affected by this change.

All that is required is for an e-Insurance Account to be opened from any of the four repositories - CAMS Insurance Repository, Karvy, NSDL Database Management (NDML), and Central Insurance Repository of India. This will lead to a significant reduction in paperwork.

"This initiative ensures that policyholder information is secured and accessibility is enhanced by eliminating complex paperwork, thereby streamlining processes for both insurers and customers," says Shashank Chaphekar, Chief Distribution Officer at ManipalCigna Health Insurance, as per Economic Times.

Additionally, all insurance policies - life, health, and general insurance - will be consolidated in one place. Policy details can be easily viewed, managed, and updated through the e-Insurance Account. The process of opening an e-Insurance Account is effortless and free, with the associated costs covered by the insurer. It's important to note that one eIA will be assigned for all insurance policies.

"This measure will further enhance customer experience and provide a centralized platform for seamlessly managing all insurance policies. It signifies a significant step forward in serving customers better in the digital age," adds Chaphekar.

The option to receive policy documents in physical format will still be available if desired. This rule applies exclusively to new insurance policies. There has been no mention of existing insurance policyholders in the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI). Effective from April 1, 2024, surrender charges have been announced for non-linked or linked life insurance products, specifically traditional endowment policies, by the Insurance Regulatory and Development Authority of India. as per media reports.

Surrender value percentages proposed for traditional endowment policies:

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.

Although advantageous for insurance companies, customers may not experience substantial relief. According to Emkay Global, this maintenance of the status quo provides significant relief to life insurers, who would otherwise have had the challenging task of balancing the impact of increased surrender value for lapsing customers.

Emkay Global further stated that the IRDAI, in its latest Gazette Notification issued in March 2024, maintained the status quo after raising hopes for policyholders through a consultation paper on increasing surrender value for life insurance policies in December 2023. Therefore, customers will continue to receive minimal surrender value in the initial years if they opt to surrender the policy, as stated by Abhishek Kumar, a SEBI registered investment advisor (RIA) and Founder of SahajMoney.