Two insurance rules from April 1, 2024: Demat type e-Insurance Account must to buy new policies, latest surrender charges

There are two guidelines starting from April 1, 2024 that are going to impact insurance policyholders. One is mandatory e-insurance policies for new policyholders and the other is in respect of surrender charges for 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 keep insurance policies in electronic format from April 1, 2024. This is very similar to the way investors hold shares in a demat account. You have to buy electronic insurance policies which will be maintained in a demat account called 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.

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

Additionally, 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. E-Insurance Account Opening an account is easy and free. The insurer will bear the cost of opening the e-insurance account on your behalf. Keep in mind that there will be an EIA for all your insurance policies.

Chapekar says, “This move will also enhance the customer experience and provide a centralized platform to manage all insurance policies seamlessly. This development is an important moment towards providing better service to customers in this digital age. “

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 the option to receive the policy documents in physical format if you prefer. This rule applies only when you buy a new insurance policy. The Insurance Regulatory and Development Authority of India (IRDAI) guidelines have not yet mentioned anything about existing insurance policyholders.

These surrender charges are effective from April 1, 2024: What 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 surrender value percentage:

1) 30% of total premium paid on surrender during the 2nd year.
2) 35% of the total premium paid on surrender during the 3rd year.
3) 50% of total premium paid on surrender between 4th and 7th year.
4) 90% of the total premium paid if surrendered during the last two years.

While this step is good news for insurance companies, it will hardly provide any major relief to customers.

“This status quo provides a huge relief to life insurers, who have the task of balancing the impact of increased surrender value on lapsing customers by mandating distributor payouts, continuously providing benefits to policyholders and maintaining shareholder profitability. It was tough work (VNB margin),” says MK Global.

“IRDAI in its latest Gazette notification issued in March 2024 has maintained status quo after generating hope for policyholders by issuing a consultation paper on increasing the surrender value for life insurance policies in December 2023. Hence customers would have received a nominal surrender value. “Initial years if they decide to surrender the policy,” says Abhishek Kumar, Sebi-registered investment advisor (RIA) and founder of Sahajamoney.

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