Irda may set minimum cover for all life products

All life insurance products may soon have to offer a minimum amount of cover, as mandated by the Insurance Regulatory and Development Authority (Irda).

Currently, only unit linked insurance plans, or Ulips, are required to offer minimum covers — ranging from 7.5 to 10 times — the annual premium paid.

That rule is set to be extended even to traditional products, though the exact multiple is yet to be decided, industry officials said after a meeting with the regulator on Tuesday. Some of these products currently offer covers barely 3-4 times the premium paid, leaving policyholders really underinsured.

As such, only life insurance products where the sum assured is at least ten times the annual premium paid will be eligible for tax deductions, the finance minister had announced in his Budget speech. The move is expected to ensure people are adequately insured.

Meanwhile, the industry has been grappling with delay in product approvals.

In their meeting with the regulator on Tuesday, the insurance companies recommended that the regulator fast-track the process of approval by setting up two different channels.

“While one channel can be kept for complex products such as pension plans and other income related products, the other channel can deal with pre-cuts such as health insurance to make sure that the clearance is speedy,” said a senior official, requesting anonymity.

Irda, on its part, has asked insurance companies for better product detailing to help weed out the delay.