IRDAI to insurers: lower expenses and give consumers the gains

The insurance regulator in India has urged insurers to cut costs and send those savings to their clients, which could help lower policy costs.

In its most recent set of published instructions, the Insurance Regulatory and Development Authority of India (Irdai) instructed insurance providers to develop detailed strategies for cutting costs and passing those savings along to policyholders in the form of lower premiums.

Irdai is looking for a "well-documented policy" that outlines how benefits from cost savings and business that is sourced directly will be distributed to customers. This "policy" must be yearly approved by the board of each insurer.

Higher Limit

EOM caps must be connected to merchandise categories, according to the most recent guidelines. For instance, the expenses of management ceiling will be 100% of the first-year payment and 25% of renewal premiums in following years for pure-risk products like regular premium term insurance policies with tenures of over 10 years.

The upper limit is 80% of the first-year regular premiums for all other individual groups aside from pension products. The limit for deferred annuity products is 15% in the first year.

For regular life insurance policies that are linked to the period of payment of the premium, higher EOM will be permitted. For policies with a premium paying term of 10 years or more, insurers are permitted to charge 80% of the first year's payment; however, for policies with a premium paying term of less than 10 years, the EOM will be determined by multiplying the premium paying term by 7.5.