• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

C.R. Sukumar

Hyderabad , Sept. 5

AIMED at significantly minimising the risks of corporate houses going in for group term assurance covering the lives of their employees and at the same time ensuring that the life insurance providers do not suffer losses, the Insurance Regulatory and Development Authority (IRDA) has issued fresh guidelines on profit sharing and experience rating under group insurance schemes.

These guidelines were in addition to the circular earlier issued by the regulator on the subject of `file and use' on the linked and non-linked products. The new guidelines would be effective from September 1.

Further, the guidelines also apply to all the new products filed with the Authority pending for clearance as on the date of the circular. The regulator has informed the life insurance players that the fresh guidelines were formed after having consultations with the Chief Executive Officers and Appointed Actuaries of life insurers, aimed at adopting a standard market practice with regard to profit sharing and experience rating.

Certain instances were brought to the notice of IRDA where the corporate houses with younger employees team finding it unattractive to continue subscribing to the group term assurance schemes. Instances of life insurers finding it difficult to meet the heavy percentage of claims and thereby expressing their inability to offer group term assurance schemes to corporate houses were also looked into before finalising the new guidelines, the IRDA sources told Business Line.

"The new guidelines will help significantly in reducing the losses of both the corporate clients and insurers and also enable them share the profits, if any," an IRDA official said.

As per the new guidelines, minimum number of life years covered under a Group Master Policy should not be less than 1000 for considering profit sharing. Where for a scheme year the available experience is less than 1000 life years, profit sharing arrangement should be deferred until the end of the scheme year in which the minimum number of life years of 1000 in scheme was reached on cumulative basis prospectively.

According to IRDA guidelines, profit sharing should not be allowed other than on a scheme year basis. The Appointed Actuary would decide whether to carry forward losses or not, having regard to related factors such as pricing basis, percentage of profit sharing formula and assumptions for profit sharing.

As per fresh guidelines, profit sharing the percentage should not exceed 75 per cent if number of life years for a scheme was less than one lakh and should not exceed 90 per cent in case the number of life years was one lakh and more for a scheme.

Mortality assumption for this purpose should not be lighter than 60 per cent of the rates under the standard mortality table prescribed for the pricing assumptions.

The regulator has asked the life insurers to furnish the details of experience rating and profit sharing formula and related assumptions at the time of filing the product with the authority.

As regards the existing group policies, IRDA has clarified that new guidelines would apply in case profit sharing arrangement was not yet provided for the first time under existing contracts.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Rupee gains 5 paise — Securities decline

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line