Page 11 - Insurance Times February 2021

officers) insurance. Cyber risks, involv- dia (IBAI) on January 29. "When over- customers to make an informed
ing unknown developments through all interest rate falls general cost of liv- choice, enhance trust between the
the debit and credit cards, mobile ing also comes down and when the insurers and the insured and reduce
phones and online deals, have raised interest rate goes up the cost of living mis-selling as well as potential
concerns for insurers and the insured. also goes up. disputes, the regulator said while
Further, the working group said many IRDAI is planning to introduce a floating issuing guidelines for the product.
property and liability insurance policies rate annuity option which could be The minimum annuity is Rs. 1,000 per
were designed when cyber wasn't linked to benchmark such as G-Sec or an month and in multiples thereof for
perceived as a major risk. These inflation index," said Khuntia. This type quarterly, half yearly and annual
policies often did not explicitly mention of product will come in handy as the payouts. The minimum and maximum
cyber coverage. While the insurance cost of living has been rising due to purchase price will depend on the
fraternity debated this issue as part of increasing inflation. The benefit of such
regular review of operations, albeit at a product Interest rates change with annuity amount. The plan is targeted
a low volume, the devastating time and often goes through multiple at those aged between 40 and 80
NotPetya attack and other high-profile cycles of ups and downs. years.
cyber security events, in the recent Taking the fixed deposit (FD) rate There is no maturity benefit under the
past, have placed the issue high on the offered by the State Bank of India (SBI) policy. Loan can be availed any time
agenda for the insurance industry. after six months from the
as an indicator for interest rate
"Having recognized the need to avoid movement, the variation has been commencement of the policy.
assumption of unintended exposures or huge during the last decade when the Noting that several individual
losses, insurance regulators have also highest FD rate ranged between 5.4% immediate annuity products are
expressed concerns about lack of and 9.25%. In an annuity investment, marketed by life insurers, with each
certainty in policy coverage and funds are locked in for longer period product having its own features, terms
inadequate risk assessment, in and often for life. In order to give and conditions and annuity options,
response market has engaged a guaranteed fixed income which can be IRDAI said a standard product will
clarification process," it said. sustained over a long period like 20 to broadly meet the needs of an average

The working group said it is neither 30 years, life insurance companies go customer.
desirable nor possible to standardise for the most conservative rate, which
the cover at this juncture. is mostly on the lower side. The best While leaving the pricing to the
"Nevertheless, insurers can build in interest rate offered on a majority of insurers, the regulator stipulated two
certain minimum covers as a part of annuity products has been less than annuity options that can be offered.
individual cyber insurance. The 6%. This leaves investors uninterested Under the Life Annuity with Return of
attached model policy wording can be in buying the product and is the 100% of Purchase Price, the first
considered by the insurance industry as biggest reason for the lack of interest option, the annuity will be paid for life.
a reference point to provide minimum in annuity products in India. In addition, 100% purchase price will
basic coverage," it said. be returned to the nominee / legal
IRDAI mandates standard heirs on death of the annuitant.
Inflation index linked annuity plan In the case of Joint Life Last Survivor
pension schemes in the IRDAI has advised all life insurers to Annuity with Return of 100% of
pipeline: IRDAI mandatorily offer from April 1 a Purchase Price (ROP), the other option,

IRDAI chairman said that a group has standard, individual immediate annuity annuity is first paid to the annuitant for
been formed to come up with product it has developed. life. After death of the annuitant, if the
guidelines for a floating rate annuity The single premium, non-linked, non- spouse is surviving, he/she will
product. Subhash Khuntia, Chairman, participating plan, to be called Saral continue to receive same amount of
IRDAI made this announcement while Pension with the insurer's name annuity for life. On death of the
speaking during a virtual press prefixed, will have simple features and spouse, the purchase price shall be
conference at the 17th Annual Summit standard terms and conditions. payable to nominee/legal heirs.
of Insurance Brokers Association of In- The product would make it easier for

The Insurance Times, February 2021