RBI Issues Circular On Levying Unfair Interest Charges On Customers

A discount offer on paying your life insurance renewal amount ahead of time is in the pipeline. The Insurance Regulatory and Development Authority of India (IRDAI) has proposed draft guidelines to allow insurance companies to offer a special discount to the policy holders for paying their renewal premiums in advance, Business Standard reported.

IRDAI’s circular mentioned the discount should be equal to the interest rate on State Bank of India’s saving account deposits as on April 1 of every financial year. Currently, SBI offers interest rates of 2.7% on saving account deposits.

“The facility of discounts shall be offered to all existing policy holders and prospective policy holders under current on-sale products (to those) who want to pay renewal premiums in advance,” the circular stated. The insurance companies have been instructed to alert IRDAI within 7 days of offering the facility.

The regulator, however, clarified that incase the insured event occurs during the period of receipt of advance renewal premium, advance premium along with interest shall be refunded to the beneficiary in accordance with other terms and conditions.

Insurers awaited this announcement since it is believed to ensure that policyholders pay their premium well within time.