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IRDA issues circular to insurers on advance premium payments

In a bid to curb money laundering, Insurance Regulatory and Development Authority (IRDA) has banned players in insurance space from accepting premium payments in advance beyond 30 days. In this regard, insurance regulator has sent draft circular to the CEOs of life insurers stating that insurers can now accept premium only 15 days before the renewal date from those paying monthly payments and only 30 days before the due date in the case of non-monthly payments.

As of now, if anyone paying premium via monthly payment mode, will now be allowed to pay merely three months premium in advance on the date of commencement of the policy. The objective of this move is to prevent mis-selling by the intermediaries, asking policyholders to pay more premiums for a nominal interest or discount given by the insurers.

At present, the policyholder can pay chunk of amount as premium before the due date and even get a nominal interest or some reduction on it. In fact, Life Insurance Corporation of India (LIC), for its traditional policies, allows premium payments five years in advance.

As per IRDA, advance premium gathered by the insurers, which is not adjusted with the due dates up till now has to be repaid by them to policy holders within seven days of the date of this circular. Further, the regulator will issue the final guidelines soon, based on the feedback received.

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