Page 10 - Insurance Times May 2024

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Further, in a presentation to the regula-
Red Sea Crisis: RBI, IRDAI asked to help restrict tor, industry officials also explained that
impact on exports these companies invest in longer-tenure
The finance ministry has written to the banking and insurance regulators to government securities, and the proposed
monitor export credit availability and insurance premium increases to help regulations could result in insurers liqui-
Indian exporters deal with trade disruptions in the Red Sea due to Houthi dating these assets to pay policyholders,
attacks on cargo ships. affecting the industry's growth.
In a letter, which was also addressed to state-run export finance institution However, the final regulations by the
Exim Bank, the finance ministry last month told the RBI and Insurance Regu- regulator are mostly similar to the ex-
latory and Development Authority of India (IRDAI) to monitor and look into isting regulations for surrender values.
the concerns raised by exporters with the commerce ministry about these "This status quo provides a big relief to
disruptions potentially inflating India's export costs, officials said. life insurers, who otherwise had the

"After our deliberations with the commerce ministry and other stakeholders, tough task of balancing the impact of
including exporters, it was decided that sectoral regulators will keep a watch increased surrender value on lapsing
and take necessary action wherever possible," a government official said. customers by tinkering with the
Banks have also been briefed separately to factor in such hikes while sanc- distributor's payout, providing benefits
tioning fresh credit limits to exporters and other businesses, the official said. to persistent policyholders, and main-
taining shareholders' profitability (value
In February, financial services secretary Vivek Joshi said the government has
asked state=run banks and insurers to deal with trade financing and insur- of new business margins)," analysts at
ance with sensitivity in view of the crisis. Emkay Global Financial Services said.
In the new norms, the guaranteed sur-
render value (GSV) under the revised
IRDAI surrender value tion, the status quo was maintained regulations for other than single pre-
under the surrender value regulations. mium products is 30 per cent if the
norms optimistic for life The norms will be effective on April 1, policy is surrendered in the second year,
insurers 2024. 35 per cent in the third year, 50 per
IRDAI decision to retain the existing In December 2023, the insurance regu- cent between four years and seven
surrender value norms, amid requests lator proposed to increase the surren- years, and 90 per cent during the last
from life insurance companies, is der value paid by insurance companies two years.
deemed positive for the companies, say to policyholders. For single premium products, the GSV
analysts.
Insurance industry leaders believed will be 75 per cent if surrendered within
In the final surrender value norms in- that higher surrender values could lead three years and 90 per cent if surren-
cluded in the product regulations an- to the premature exit of policyholders dered in the last two years of the policy
nounced by IRDAI in a gazette notifica- from long-term insurance policies. tenure.

10 May 2024 The Insurance Times