Hyderabad, April 29
IN a significant move, the Insurance Regulatory and Development Authority (IRDA) has directed life insurance companies to sell the `keyman insurance cover' only as term policy for some time.
The decision was arrived at after taking serious note of reports that some life insurers resorted to unhealthy practices in selling the `keyman insurance cover', especially during March.
According to the IRDA Chairman, Mr C.S. Rao, the insurance regulator has also decided to conduct a detailed examination of the policies marketed last month and to come out with detailed guidelines on the sale of keyman insurance at an appropriate time.
"In the meantime, it has been decided that only term insurance policy will henceforth be issued as `keyman insurance cover'," Mr Rao said. Issuing a circular to this extent here on Friday, he advised life insurers to ensure that they follow the latest circular until fresh guidelines were issued.
When contacted, a senior official of Hyderabad-based insurance broking company told Business Line that the IRDA move was expected.
According to him, a good number of corporates were using keyman insurance cover only to enjoy tax benefit on premium.
Corporates usually subscribe to keyman insurance cover to counter huge financial strain on the profitability of the company on account of pre-mature death or critical illness of a key member of their workforce.
However, while term policy does not give any benefit to the keyman or the company that insured him, other policies such as whole life and endowment give substantial tax benefits. "It is here that some insurance companies were reported to have resorted to manipulations," the broking official said.