Life insurers told to streamline pension payments, cut delays
08 August 2015
The Insurance Regulatory and Development Authority of India has issued a directive to life insurers to streamline processes to ensure timely payment of pension to policyholders who have bought such products from them.
The IRDAI has asked life insurers to start sending communications from September onwards to all policyholders who have bought pension products from them and whose payment is due from 1 April 2016.
Through these communications the companies will ask the policyholders what payment option they have chosen for their pension.
"It is noticed that the life insurers are obtaining annuity options from the policyholders prior to vesting date in the case of deferred annuity plans. Non-receipt of annuity option from the concerned policyholders is leading to delay in the commencement of annuity on vesting date and consequent inconvenience/loss to annuitants," an IRDAI circular said.
By having an annuity in the pension product, the policyholder, on maturity, receives a lump-sum amount which can be given as a regular income for the rest of his / her life.
It can be an immediate annuity, which starts giving returns from the very first month, or it could be a deferred annuity where payment is made after a certain period, it said.
"The insurance companies should write to their policyholders well in advance to know their options of pension payment. They must be informed at least six months in advance and then settle pension according to policyholders' choice. The initiative has been taken to ensure better corporate governance in the industry.
"In case a policyholder has not indicated a particular option, the life insurers can go as per what he/she had mentioned in the form (at the time of buying the product). It should be applicable to all those policyholders whose pension is due from April 1, 2016. These forms must be sent across to such policyholders by September," it added.
IRDAI has also told insurers they have to provide an opportunity to the policyholders to review their decision based on the latest information and select an annuity option they had not mentioned earlier]