IRDA plans to introduce maturity benefits term plan

In order to boost the sales of term insurance policies, which is showing a decline trend since past 3 years, market regulator Insurance Regulatory and Development Authority (IRDA) want insurance companies to sell term plans having maturity benefit. For this, IRDA will also bring a new set of guidelines in two months time and is also planning to allow business correspondents of the banks to sell these policies in the rural area of the country.

 

Adding to the above, IRDA said that at present, under term plan fixed, contractual amount is given to the policy holder or its nominee only at the time of death / hospitalization of policy holder, else the amount gets lapsed. Without any maturity profit and returns poor people are not inclined to buy the risk cover.  According to statistics there were 14.80 million terms plans sold in previous year ending March 2012 which did not carry any maturity benefits.

 

Agreeing on the above move by IRDA, Mr. Sudhin Roy Chowdhury, member (life), IRDA said that there is a need for cheap term plan having guaranteed return so as to increase its sales. Further increasing number of chit fund companies and money circulation scheme has also got in the way of expansion of insurance business. He also said that Insurance companies should make stringent laws to ensure that its agents do not get engage in activities of selling unconvinced collective investment schemes.

 

However, Mr. Shashwat Sharma, Partner – KPMG India, did not agree to the steps proposed by IRDA stating that it will be difficult to implement. He also said that, by bringing this change, IRDA intends to sell only endowment and withdraw term policies and offer homogeneous package covering different benefits.