Tokio Marine Paused Southeast Asia Operation

Japanese general insurance giant Tokio Marine has paused the sale of its $1bn Southeast Asia life insurance business, partly due to a dispute with a Malaysian partner over an expiring bancassurance agreement. 

The sale has attracted interest from Japanese and Middle Eastern buyers, said the first source. Tokio Marine last month filed a lawsuit against RHB Bank in Malaysia, seeking to enforce its right of first refusal over the 10-year that is due to expire by 31 December 2024

.
Tokio Marine also asked RHB for details of the final bid that RHB has agreed to accept from other parties for a new deal, and applied for an interim injunction to prevent RHB from finalizing an agreement with other parties.

Given the pending dispute, buyers were unable to make offers that would meet Tokio Marine's valuation expectations. Some buyers had separately offered to buy only part of Tokio Marine's Southeast Asia life insurance business, but the insurer insisted on selling it as a whole.

The paused sale comes as Tokio Marine has been reviewing its businesses to boost profitability. The Tokyo-headquartered company divested its Tokio Marine Highland's U.S. construction division to Intact Insurance Group in August 2022.

Founded in 1879, Tokio Marine was Japan's first non-life insurance company and it has since expanded into life insurance and now has a presence in 46 countries besides. International businesses contribute 75% of its profits and Japan 25%, its website shows.

Consumers Disrupting Unilever Indonesia

Unilever will make "drastic" changes in Indonesia as Indonesian consumers boycott multinational brands in response to the war in Gaza and exacerbate the business' existing distribution problems.

Unilever, which makes Dove soap, Knorr stock cubes and Ben & Jerry's ice cream, said in February that fourth-quarter sales growth in Southeast Asia had been hurt by shoppers in Indonesia boycotting brands of multinational companies "in response to the geopolitical situation in the Middle East."

Unilever would aim to make its brands "more contemporary" given the "significant societal change" going on. He said he expected to see an improvement in the next six months. Unilever Indonesian business has underperformed for nearly a decade. Investors are unlikely to believe the turnaround this time will be any different storms we've seen in the past?

Unilever's Indonesia unit reported an 18% revenue drop in the third-quarter, driven by a decline in volumes. A revamp of the distribution system was underway to stabilize prices and the group's efforts were already yielding some results.

Automated Underwriting

The Harel Group continues to invest in innovative solutions to meet the diverse needs of insurance agents and policyholders. The new and exclusive tool within the "Optiweb" system provides agents with an innovative solution that delivers immediate online responses regarding the acceptance conditions for the requested insurance and the personal premium the client will need to pay, including any medical additions if applicable. This occurs immediately upon completing the sales process and answering the health declaration.

Acceptance conditions for the insurance candidates are confirmed at the time of signing the proposal, all in a single process. Additionally, if a candidate needs to submit documents based on their personal medical situation to determine acceptance conditions, feedback is provided, detailing the required documents, along with an option to attach these documents within the same process. This development enhances the professionalism of the agent and significantly shortens the proposal handling time until policy issuance, allowing agents to allocate additional resources to customer service.

Harel representatives noted that the automated underwriting relies on existing underwriting capabilities within Harel's core system. The core process can weigh the various declarative and historical underwriting characteristics of insurance candidates, combined with business logic and agent benefits, thus enabling precise underwriting pricing during the sales process.

Furthermore, the system allows Harel's underwriting department to construct and update underwriting rules to improve automation rates without relying on additional developments. The externalization of core engine rules to digital channels is facilitated by a middleware layer based on MULE SOFT products, allowing real-time traffic through secure APIs to Harel's innovative production simulator, Optiweb, developed using cutting-edge technologies (React/Node) and implemented on AWS cloud technologies.

Strategic Planning - Be Organized

Many business leaders feel like they come close to drowning every day in a never-ending flood of emails, paperwork, meetings, and last-minute demands. Just trying to keep up with it all keeps them from the projects they’re supposed to be leading to move their companies forward.

It would be beneficial to change your tactics and adopt an organized approach. You will find yourself not only getting more things done but getting the right things done. "Being organized” is just another way of saying you’re on top of everything, which determines much of your success—from big issues like forecasting company growth and executing company initiatives to small tasks like calling someone who can help you get the big jobs done.

1. SMART GOAL SETTING
Most people in business have goals, but not everyone sets them effectively. Goals are mostly vague and poorly defined, with no sense of why they matter or how to measure them to determine success. The worst mistake is just having too many goals. Three is the perfect number. Fewer than that lacks challenge, and more than that is little more than a “to do” list.

Be sure to give each goal a series of actionable items—we call them “lead measures” because they lead to the ultimate goal. These are the actions you take daily and make yourself and staff accountable for.

2. STRATEGIC PLANNING
Every company needs a strategic plan—a vision that declares where they want to be in one year, three years, five years, and beyond. It is recommended to have a one-year and a three-year plan. If it’s over one year, it goes on the three-year list and we do it all over again.

The plan should include the goals (and lead measures) that support the strategic plan and make it happen. Do both goal setting and strategic planning each year, spending weeks with our entire staff and figuring out what needs to be delegated and to whom. Success is predicated on the distribution/deliveries being successful. Without clear direction, training, owner manuals, ongoing support, and other organizational tools, it doesn’t happen.

3. DELEGATING ADVERTISEMENT
Hire people who excel at it to help keep me on track. If you’re more of a big-picture thinker, this is essential. But even if you’re good at keeping up with the details, you still need to delegate some of the work to others. First, you simply can’t do everything, no matter how hard you try. Also, there may be others on your team who are better at certain projects than you are. They deserve a chance to show leadership, and the company will probably benefit when you utilize them.

4. TAKING ACTION
It’s possible to be too organized; some people spend all their time planning and outlining every little thing when they should go out and do it. This is a sign of fear, or at least uncertainty. The more you plan because you “just want everything to be perfect,” the longer you can delay putting yourself and your work out front for everyone to see—and judge.

Clear the clutter. Get everything off your desk except the project you’re working on now; piles of paperwork are a nagging reminder of everything you have to do. Focus on one thing at a time, and don’t keep everything else where it’s a constant distraction.

Who Is Judy Faulkner

Epic Founder and CEO Judy Faulkner signed a pledge to give away the majority of her money to charitable causes. Ms. Faulkner joined "The Giving Pledge," a commitment by some of the world's wealthiest individuals to donate the bulk of their fortunes to philanthropy. Through this pledge, Ms. Faulkner plans to donate 99% of her assets estimated to be $7.7 billion.

However, much of Ms. Faulkner's wealth is tied up in Epic stock, where she holds nearly half the company's shares. To prevent a large sell-off from destabilizing the company, she created a trust to oversee the gradual sale of her shares. Epic repurchases approximately $100 million worth of stock each year, which is then distributed to employees, while the proceeds are directed to her charitable foundation, Roots & Wings.

Launched in 2020, Roots & Wings is run by Ms. Faulkner's daughter, Shana Dall'Osto, and has quietly donated $200 million to 320 organizations over the past five years. The foundation operates on a model called trust-based philanthropy, which offers nonprofits unrestricted, multi-year grants with minimal reporting requirements, allowing them to pursue their own missions without strict oversight.

In 2020, Roots & Wings granted $15 million to 115 organizations. By 2024, Ms. Dall'Osto projects the foundation will donate $67 million to 305 organizations, with plans to increase that amount to $100 million annually by 2027.

Changes In Distribution - Kills American Tire Distributors Inc

American Tire Distributors Inc., which sought bankruptcy protection in 2018 after the defection of two major manufacturers, has filed for Chapter 11 again as it considers a sale process to cut debt.

The company made the voluntary filing in Delaware with $1.9 billion of debt, according to a court document. It has entered into a restructuring support agreement with lenders “that contemplates transitioning ownership of the company through a competitive sale process".

The lender group, which represents 90% of the company’s term loan, is providing a so-called stalking horse bid, meaning that it’s subject to better offers, should any materialize, according to the filing. The cohort includes Guggenheim Partners Investment Management, KKR & Co. Inc., Monarch Alternative Capital, Sculptor Capital Management Inc. and Silver Point Capital.

American Tire will continue to operate across its nationwide network. It has received commitments for $250 million in new financing from the lender group, and access to $1.2 billion from lenders under an asset-based lending facility, according to the release.

The company was thrown into disarray in 2018 when the makers of Goodyear and Bridgestone tires decided to deal directly with consumers through their own networks. In what a company executive at that time described as an almost simultaneous blow, Sears Holdings Corp.’s auto centers agreed to install tires bought on Amazon.com.

Profits got a temporary boost after the pandemic, as a sharp decline in auto sales triggered a surge in demand for used cars and replacements parts, such as tires. But margins rapidly narrowed and the company suffered as customers moved toward lower-priced products, the company’s chief restructuring officer said in a court filing.

Bamboo Spirit & Management

Bamboo spirit and Chinese management philosophy have helped many Chinese companies stay resilient and grow rapidly like bamboo. However, the effectiveness of this approach has largely depended on the decisiveness and personal charisma of the business leaders deploying these philosophies and strategies.

Here are some steps all business leaders can take to make Chinese management philosophies work for their organizations:

1. Think about the long-term, while constantly developing new short-term tactics. The external environment is complex and ever-changing, so make sure long-term vision and strategic direction are clear. Prioritizing flexibility and rethinking short-term tactics can help companies maintain vitality and competitiveness – even in the face of a crisis.

2. Build flexibility and resilience. Flexibility and resilience should not rely on a few individuals, but should be built upon an effective organizational structure, management mechanisms and corporate culture. Firms that establish flat, agile and platform-based organizational structures can respond quickly to market changes. Scenario planning can also help to identify uncertainties and create contingency plans, spreading a mindset of flexibility across the organization.

3. Foster continuous learning. CEOs and top executives must be open to the Confucian idea of maintaining a zeal for learning. In addition to learning from leading companies in your field, others with strengths in specific domains can also offer great benchmarks for analysis.

4. Value collaboration. Avoid dictatorial decision-making by being open to diverse viewpoints. Be ready to relinquish power and use collective decision-making. This can also help to avoid errors of personal judgment.

5. Shoulder social responsibility. Finally, Chinese management philosophy suggests companies should promote the harmonious growth of both the business and of society.

All business leaders should consider thinking about these management philosophy ideas and keep the bamboo and its strengths in mind when making important decisions or changes. Using the metaphor to nudge your thinking might help you approach business and leadership issues more effectively.

High Policy Surrender - Restructuring Agent Commission

Private-sector life insurers are preparing to adjust commission structures for distribution channels, following regulations that came into effect on 1 October requiring insurers to offer higher surrender values for endowment policies.

Leading life insurance firms are set to meet next week with the Life Insurance Council, an industry association, to establish a uniform commission framework. Options under consideration include clawbacks, commission deferrals, and outright reductions.

The objective is to maintain consistency in commission payments or sales remuneration across the industry and mitigate disruption for distributors. With clawbacks of commissions from agents if a policy is reduced early, insurers wish to discourage mis-selling and to ensure that they explain insurance policies fully to prospective buyers.

India’s biggest insurer, the only state-controlled Life Insurance Corporation of India, has reduced the first-year commission rate on its policies to 20% from 25% and the bonus rate to 8% from 10%.

Insurance For Aging Population

One in five elderly are not keen on life insurance ownership , yet nearly a third of East Asia’s population and almost a fifth of Southern and Western Asia’s population is projected to be aged 65 years old and up by 2060 – about 1.2 billion people.

Asian market regards public health care very high, however, some aged markets (South Korea, Japan and Taiwan) had lower confidence, mainly due to the already weak public systems.

Life insurance had the lowest overall level of interest (83%) for ageing populations, compared to private health (97%) and critical illness (CI) insurance (96%). In terms of previous habits, over a third (35%) of Asians said they owned life insurance, whilst 29% owned private health and 35% had CI insurance.

On a per-market basis, Japan and India have the largest share of life insurance ownership (58% and 54%, respectively).

many procrastinated on purchasing in life insurance due to portions of the coverage being excluded or declined based on pre-existing conditions. On top of that, a third of respondents indicated that premium prices were unaffordable for all three types of plans.

Icon Group Pyramid Scheme

Thai police have arrested 18 people, including three celebrities, and seized luxury sports cars and millions of dollars in connection with a pyramid scheme selling health and dietary supplements, officers said today. The arrests came after more than 1,000 people filed online fraud allegations against The iCon Group, a company they said had lured them into buying products and making financial commitments.

The company’s founder and CEO, Warathaphon “Boss Paul” Waratyaworrakul, was detained on Wednesday along with a top TV host and an actress who had allegedly helped convince victims to join the scheme.

Authorities said they had frozen 125 million baht (RM16 million) held in the bank accounts of the company’s four executives and confiscated luxury vehicles including Porsches and Ford Mustangs. Police were looking into bank accounts and cash transfers linked to the suspects to find out if any more people were involved.

The company allegedly lured its victims by offering cheap online sales courses. Once enrolled, it coerced them into making further purchases and financial commitments ranging from 2,500 baht (RM320) to 250,000 baht (RM32,000), which was used to advertise for new recruits.

Some of the victims — who ranged from low-income workers to a high-earning footballer — had paid more than 600,000 baht (RM77,000) to the company, according to local media. Police are yet to tally the total amount swindled.

Thailand is no stranger to public fraud cases. A “Forex-3D” scheme last year tricked thousands into investing in a fake foreign exchange trading platform. The world’s longest non-life sentence, according to the “Guinness Book of Records”, was imposed on Thai pyramid scheme fraudster Chamoy Thipyaso, who was jailed for 141,078 years in 1989. However, she was released after only eight years behind bars despite having conned some members of the royal household.

CEO Of New China Life Insurance - Arrested

Li Quan, former chairman of New China Life Insurance Co Ltd has been arrested for suspected embezzlement and bribery, marking him as the latest high-profile figure caught in a sweeping anti-corruption campaign targeting China’s financial industry.

Li is accused of serious violations, including severe breaches of Communist Party discipline and abuse of power, following an investigation by the National Supervisory Commission that concluded in late September.

Li is accused of ignoring regulations by accepting invitations that could compromise his impartiality, breaching organisational principles to benefit others in hiring processes, and profiting from inappropriate financial activities through his position at a state-owned enterprise.

 Li was expelled from the Communist Party and his illegal gains have been confiscated, according to the statement.

Who Is Li Quan - Born in 1963, Li held various senior roles in the financial sector after obtaining a master’s degree in economics from the People’s Bank of China Graduate School in 1988.

From 1988 to 1990, he served as a business manager in the banking department of China Rural Trust and Investment Corporation. Between 1991 and 1998, he worked at Charoen Pokphand International Finance Co, where he held positions including general manager of the funding department and assistant general manager.

He spent 12 years at Bosera Asset Management Co before moving to NCL in 2010. At NCL, he took charge of the asset management branch, according to mainland media outlet Caixin.

In 2019, Li became president of NCL in charge of day-to-day operations. He was appointed chairman in 2022. However, he abruptly resigned in August 2023, citing age-related reasons, just before the allegations surfaced.

Crackdown On Systemic Corruption - Li’s case is part of a broader crackdown on systemic corruption within China’s financial sector over the past few years, which has seen a handful of senior officials ensnared in similar scandals.

In 2022, the Central Commission for Discipline Inspection (CCDI), China’s top anti-corruption watchdog, published a report that listed “relying on finance to exploit finance” as one of six major problems found during an inspection tour of 25 financial institutions.

The phrase “relying on finance to exploit finance” describes unethical practices by financial sector professionals or institutions who leverage their status for personal gain through illegal activities. This behavior, characterized by rent-seeking and irregular operations, undermines the fairness and development of financial markets.

The CCDI report identified integrity risks – and credit risks in particular – in several Chinese financial institutions, including China Development Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China.

On Thursday, former central bank deputy Fan Yifei was sentenced to death with a two-year reprieve for bribery. He was found guilty of illegally accepting gifts and property worth over 386 million yuan (US$54.55 million) by leveraging his senior roles at the central bank and other financial institutions, including China Construction Bank.

Last year, Zhang Huayu, the former vice-president of China Everbright Bank, was sentenced to 12½ years for taking bribes and misusing his position of influence.

Cai Esheng the former vice-chairman of the now-defunct China Banking Regulatory Commission, was handed a death sentence with a two-year suspension for charges of bribery and power abuse.

In 2021, Lai Xiaomin former chairman of China Huarong Asset Management, one of China’s top four state asset managers, was sentenced to death for accepting 1.79 billion yuan in bribes as well as corruption and bigamy.

The same year, Hu Huaibang, former Communist Party secretary and chairman of China Development Bank, was sentenced to life behind bars for taking a total of 85.5 million yuan in bribes between 2009 and 2019.

Public Bank Buys LPI Capital

Public Bank Malaysia’s second-largest lender by market value will buy a 44.15% stake in LPI Capital from the family of its late founder Teh Hong Piow for 1.72 billion ringgit ($400 million).

LPI Capital Bhd (LPI) is an investment holding company. The company underwrites a range of general insurance products for individuals and businesses through its subsidiary, Lonpac Insurance Bhd (Lonpac).

The bank will pay 9.80 ringgit for each LPI Capital share held by Teh’s family and their investment vehicle Consolidated Teh Holdings, representing a 25% discount to the last traded price of Lonpac Insurance’s parent before trading was suspended on Wednesday. The transaction will require Public Bank to buy the rest of LPI Capital. PBB shares dropped 4.8% to 4.35 ringgit, while LPI shares slipped 3.2% to 12.58 ringgit in late morning trading on Friday in KuaLa Lumpur.

Separately, the estate of PBB’s late founder (who passed away in 2022 at the age of 92) plans to sell a portion of their shares in Public Bank shares over a five-year period, his daughter, Teh Li Shian, was quoted as saying in local media reports.

The family along with its investment firm Consolidated Teh Holdings, owns about 22% stake of the bank. That accounts for the bulk of their net worth of $5.4 billion, making them the third richest family in Malaysia.

Singapore Oppose Allianz-Income Deal

The Singapore government plans to stop a proposed deal by Allianz SE to buy a majority stake in a homegrown insurance firm, three months after the transaction sparked a backlash from the public. The government assessed the proposal and decided it wouldn’t be “in the public interest” for the Income Insurance Ltd deal to proceed in its current form.

The government isn’t satisfied that Income can fulfil its social mission as a co-operative after the acquisition and is open to any new arrangement which Income may wish to pursue, whether with Allianz or any other partners, so long as the concerns highlighted are fully addressed.

In July, the German company said it planned to buy at least 51% of Income from NTUC Enterprise Co-operative Ltd to strengthen its presence in Asia. The proposed S$2.2 billion (US$1.7 billion) transaction drew criticism after it was announced.

TEMU Barred From Indonesia

Indonesia will uphold its ban on e-commerce platform Temu due to fears it could disrupt the country’s micro, small and medium enterprises. The global online marketplace is operated by PDD Holdings, which also owns the popular Chinese online retailer Pinduoduo. 

Indonesian authorities have been on alert for Temu’s entry into Southeast Asia’s largest economy in recent months. Its business model of selling products directly from factories to consumers goes against Indonesia’s trade regulation requiring an intermediary or distributor. Ministry prefers the digital space to be filled with things that make society more productive and profitable. If it is detrimental , our micro, small and medium enterprises will be destroyed if left unchecked.

Ministry of Cooperatives and SMEs - claimed that - allowing Temu in Indonesia could hurt the economy and society. Temu cannot enter because it damages the economy, especially Indonesian micro, small and medium enterprises. The Ministry of Cooperatives and SMEs previously said Temu had thrice tried to register to operate in Indonesia.

Since September 2022, it has tried to register with the Ministry of Law and Human Rights for trademark rights, said Mr Fiki Satari, Special Staff for Creative Economy Empowerment at the Ministry of Cooperatives and SMEs, in August.

Its registration was not approved because there was already a business using the name. Temu’s application became a topic of discussion after the company appeared at the 2024 E-commerce Expo held on Sep 24 and 25 in Greater Jakarta.

Temu, which is available in about 60 countries, entered Southeast Asia last year, beginning with the Philippines last August and Malaysia last September. It expanded into Thailand in July this year.

In October last year, Indonesia also banned TikTok Shop, citing the need to protect smaller merchants and user data. But the short-form video giant bought 75% stake in Indonesia ecommerce player Tokopedia in January, marking its re-entry into the market.

Singapore Wealth Planner Duped Customers

A man has been charged after he allegedly duped four people into transferring $348,000 in total to his personal bank accounts, and tried to cheat two others of $240,000.

Wealth Planner - Pang Yu Heng, 27, who was a wealth planning manager with DBS Bank at the time of the alleged offences, was charged on Sept 5 with four counts of cheating and two counts of attempted cheating. The Singaporean is accused of cheating each of the four victims of between $24,000 and $190,000. His employment was terminated in June 2023.

Pang allegedly promoted fictitious fixed deposit products to his customers, promising high interest rates. In June 2023, officers received a report from a local bank about his alleged offences. He is accused of cheating his first victim of $74,000 over two occasions between early March and April 11, 2022.

He allegedly used a similar method to cheat three others from around March 15, 2022, to March 1, 2023. In addition, he is said to have tried but failed to cheat two people of another $240,000 in total in January and March 2023.

He is expected to plead guilty on Oct 17. For each count of cheating, an offender can be jailed for up to 10 years and fined.

Prudential Singapore Duped in $470,000 Claim

An insurance agent allowed a friend, who was then working with a similar company, to make fraudulent claims, and the company was then duped into paying out more than $1.88 million in total.

3 Counts Of Cheating $470,000 - Benjamin Song Junde, 40, who was working with Manulife (Singapore) at the time, was sentenced to a year, six months and two weeks’ jail on Oct 3. He had pleaded guilty to three counts of cheating and a money laundering charge. Eight other charges were taken into consideration during sentencing.

Song derived nearly $470,000 in personal gain from the offences linked to the three proceeded cheating charges.At the time of the offences, his friend, Charn Sze Choong, 38, was working as a claims assessor with Prudential Assurance Co Singapore. His case is pending.

Bookie - Song acted as a “bookie” for Charn’s gambling activities. Charn would place online poker and soccer bets through the accused, and would settle his gambling winnings and debts with the accused on a net basis each week.

Song was also insured by Prudential under five policies which his wife held, and Charn was aware that Song was insured under them. Charn started entering fictitious outpatient insurance claims (FOICs) under the policies in Prudential’s Life Asia claims management system. Charn would then approve the FOICs in the system in his capacity as a claims assessor.

Prudential was deceived into believing that the claims were legitimate, and the company then made payouts into various bank accounts. These included Charn’s own bank accounts and those linked to Song, said the prosecutor. 

Singapore Insurance Agents Barred

Three former insurance agents from Prudential Assurance Company were on Friday (May 24) issued prohibition orders by the Monetary Authority of Singapore (MAS) for obstructing the course of justice, falsifying records and providing false information to MAS.

These orders, issued under the Financial Advisers Act (FAA), bar them from providing financial advisory services, and from taking part in the management of any financial advisory firm, acting as a director or becoming a substantial shareholder of such firms.

Eunice Yuen Pui Leng received a prohibition order lasting five years, while Grace Tan Zhen Zhi was issued an order for three years. They were convicted of offences under the FAA in 2023. The pair have also been prohibited from carrying on business as, and from taking part in the management of, any insurance intermediary under the Insurance Act (IA).

The third individual, Benny Lim Hee Loon, was handed a prohibition order for a year. He was also given a stern warning for providing false information to MAS, in lieu of prosecution. Lim was formerly an agent with Prudential. His most recent employer, Manulife Financial Advisers, confirmed on May 27 that Lim was no longer at agent at the financial advisory firm effective May 24.

It will be mandatory for petty traders and hawkers to contribute to the Social Security Organisation (Socso) from Jan 1 next year. Socso said the contributions would be made under the social security scheme for the self-employed (SKSPS), and that this was aimed at ensuring they could get financial support if they suffered employment injuries.

The statutory body said this would also apply to those who operated kiosks as part of their own business. This is the third sector where mandatory contributions are to be made under the SKSPS, after the transport services and the food and package delivery sectors in 2017 and 2022, respectively. 

Socso said it would work with local governments nationwide in the three months prior to the deadline to raise awareness about the mandatory contributions by traders and hawkers.

India Introduce Higher Surrender Value

Starting October 2024, a policyholder will get a higher refund if he exits his life insurance policy during the initial years. The Insurance Regulatory and Development Authority of India (Irdai) has asked the insurance companies to offer a higher special surrender value (SSV) for traditional endowment policies from October 1, 2024. This is expected to provide greater flexibility and liquidity for life insurance customers who want to switch policies.

There have been several reports that the insurers, including the Life Insurance Corporation of India (LIC), urged Irdai to revise the surrender value regulations and extend the deadline to comply with the norms. However, there is no official communication or notice from Irdai stating that the regulator has accepted their request. In absence of any extension, the insurance companies will have to comply with the special surrender value regulations that will come into effect from October 1, 2024.

Surrender value - So as a life insurance policyholder, you must know what the new surrender value rule is and how it will be calculated. If you terminate your life insurance policy after one year, how much money will you get back? ET Wealth Online decodes the new special surrender value rule proposed by Irdai to answer all your queries.

Life insurance new rule: How is the special surrender value calculated?In a master circular for life insurance business dated June 12, 2024, the Irdai has said that the special surrender value should be at least equal to the present value of
(a) paid-up sum assured on all contingencies covered and
(b) paid-up future benefits (such as income benefits), if any, and
(c) accrued/vested benefits, duly allowing for survival benefits already paid (whatsoever name called), if any

Paid-up Value - is calculated as per a formula: number of premiums paid X sum assured/total number of premiums payable. To arrive at the expected present value of the paid-up sum assured and paid-up future benefits, Irdai has specified a maximum spread of 50 basis points (bps) over 10-year G-Sec. The applicable special surrender value shall be reviewed annually based on the prevailing yield on 10-year.

According to the earlier rules, 50% of total premiums must be paid if a policy surrendered between the fourth and seventh years. You would have got Rs 1.2 lakh back (50% of the total premium of Rs 2 lakh and a bonus of Rs 40,000) if you had left the policy after four years, according to previous surrender value norms. With this special surrender value norm now, you will get back Rs 1.55 lakh."

If you exit life insurance after one year, you will get higher surrender valueTill now, if a policyholder exits a life insurance policy after one year, he would have lost his entire premium. With the new special surrender value norm, policyholders will be eligible to get a refund even if they leave after the first year. 

SSV calculated as above shall become payable after completion of first policy year provided one full year premium has been received. Provided for policies with limited premium payment term of less than five years and single premium policies, SSV shall become payable immediately after receipt of first full year premium or single premium, as applicable.

Let's consider another example. A policyholder bought a 10-year policy with a sum assured of Rs 5 lakh. He pays a hefty premium of Rs 50,000 in the first year. Now if he leaves the policy after one year, he would not have gotten any refund from the insurer. He would have lost Rs 50,000. But according to the latest norms, he will be eligible for a refund even if exits the policy after a year. If the insurer has received the premium for the full year, they have to return Rs 31,295 to the policyholder.

Policyholder Benefits - The regulator has asked the insurer to mention policy-wise guaranteed surrender values (GSV), special surrender value (SSV) and payable surrender values separately in the benefit illustration. It is now mandatory for the insurers to provide a customized benefit illustrations to prospective policyholders along with a prospectus while selling a policy. The benefit illustration must be signed by both the potential policyholder and the insurance agent, intermediary representative, or insurer employee involved in the sales process. This signed document will become part of the policy document.

So, you need to check the policy benefit illustration carefully to understand guaranteed surrender values (GSV), special surrender values (SSV) and surrender values that will be paid when you return the policy.

Irdai asked insurers to implement this special surrender value rule by September 30, 2024.
Life insurance new rules: Who gets the benefit of special surrender value norms?This move is in favour of the policyholders. Those who are stuck with the wrong product due to rampant mis-selling that has become quite prevalent in the insurance sector will get a higher amount back now.

The new surrender value norms introduced by Irdai will apply primarily to new endowment policies issued after the implementation of the guidelines.