News 115 views March 27, 2019

New Revival Norms to Benefit Both Insurers and Policyholders

How Will Increased Revival Period Benefits Both Policyholders and Insurer?

Increase in policy revival period from two years to five years means more insurance premiums for insurers and lesser chances of policy lapse for policyholders

Insurance policyholders are on a roll after the Insurance Regulatory Development Authority of India (IRDAI) has proposed significant changes in the revival of policies by advancing the idea of raising the revival period to five years from the currently followed norm of two years. The current revival period of two years means that if the policyholders wish to reinvest and continue with the same policy, they have to get the same revived within a timespan not exceeding two years. The IRDAI has currently sought recommendations from all existing market players and stakeholders regarding changes in the revival period concerning all non-market linked products.

Policyholders have a lot to benefit from this change. For example, if a customer has bought an insurance policy with the policy period extending to 15 years, but has paid premiums only for the first five years. As per the current insurance regulations, the existing policyholder has only two years, to reinstate the policy, from the date of the last premium paid by paying the predetermined premium amount in addition to a specified interest rate.

This means that the proposed five years window will have a reducing impact on the lapse percentage ratio, thus, aiding insurers in their growth strategies. Also, reinstating the policy within the newly proposed revival period will allow policyholders to continue their payments towards long-term protection, and thus, benefit from the insurance product they had bought initially.