Five days from now, on 1^st October 2013, new IRDA guidelines regarding issue of insurance policies would come into effect. Though most of the leading Insurance companies are still in the process of designing new products in accordance with these guidelines, here are some of the basic changes which are likely to get incorporated-

• Traditional Insurance plans will not see much change except for a mandatory higher Insurance cover. The minimum sum assured for a person aged below 45 years has to be 10 times the regular annual premium, and 7 times for those aged 45 and above.
• To protect the policy holders’ interest, all traditional insurance plans will have to guarantee a surrender value after three years for all policies with a term of 10 years and above; and after two years if the policy term is less than 10 years. The new rule also proposes to raise the surrender value, which currently stands at 30 % of all the paid premiums excluding the first year’s premium.
• The biggest change would be with regard to Unit Linked Insurance Plans – the most mis-sold product by agents and advisors. Insurance companies will now have to provide monthly statements to clients detailing the gross and net yield on the policy and all the costs, taxes and charges.  An annual certificate too will have to be issued. A basic minimum rate of return will have to be guaranteed even for index linked policies. The minimum death benefit has to be equal to the fund value of the policy.
• The commissions paid to the insurance advisors and agents would be reduced, and will be directly proportional to the premium payment period of the policy. So, agents would be paid more and hence motivated to get clients to take longer term policies which would also be beneficial to the client. The subscriber will also have the option of buying a policy online directly from the company without involving any agents and the benefit of the reduced cost would be passed on to the former.
• IRDA also aims at standardizing the mediclaim and health insurance policies by making all such policies renewable over the lifetime of the individual.  The maximum age of entering into such a policy has to be at least 65 years.