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To All CEOs of Life Insurance Companies
Ref:IRDA/Life/CIR/GDL/044/01/2014 Date:29-01-2014
Guidelines-Process to be followed for filing of Life Products under the CSC Distribution Model
Attention of the insurers is drawn to the meeting of the Authority with the CEOs and IT Heads of the Life Insurance Companies on the ‘CSC Distribution Model’ held at Hyderabad on 16-1-2014. Based on the discussions, the Authority under the powers vested under Section 14 (2) of IRDA Act, 1999, mandates the insurers to comply with the following guidelines: 
1.     The product to be marketed through the CSC Distribution Model shall be prefixed with the word “CSC” to clearly distinguish these products as ‘Exclusive CSC Products’. 
2.     Every insurer shall file the products under the current File and Use procedure for distribution under this channel. The insurer shall take into account the following additional requirements for filing the products under this distribution channel:
                      i.        Name as specified in (1) above
                    ii.        Copy of the on-line e-proposal form to be used in the CSC Center with Aadhaar identification.
                   iii.        Copy of the Policy document to be printed in A4 stationary at the CSC Center with e-policy stamping/ e-signature etc..
                   iv.        Copy of the Policy Servicing Manual along with the forms to be used such as
a.    Nomination Form
b.    Change of Nomination Form
c.    Assignment Form
d.    Revival Form
e.    Partial Withdrawals Form
f.     Survival Benefits Form
g.    Death Claim Form
h.    Maturity Claim Form
i.      Any other form that the insurer will require for servicing the Policy for each of the products filed with the Authority.
3.  The commission or remuneration, if any, to be paid to the CSC shall be as per the bifurcation given below:
                      i.        Commission to the CSC to procure the new business. 
                    ii.        Service charges for post sale service of the policy. 
4.    The maximum commission in the first year i.e. at the time the product is sold shall not be more than 5% of the premiums paid in the first year. There shall not be any commission payable from the second year onwards and also on top-up premiums.
5.    The service charges shall be a fixed amount for every activity that would be undertaken by the CSC-VLEs.
6.    The CSC-VLE shall provide various services to the insurer in accordance with the agreement, where the services shall be in compliance with the outsourcing guidelines issued by the Authority. The File and Use application for each product shall specify the service charges for each of the services applicable to the product.
7.    The insurers shall be allowed to accept the insured’s/ policyholder’s biometric thumb impression on the proposal form instead of obtaining a wet signature on the proposal form, as his/her consent of the proposal form.
8.    The CSCs, on behalf of the insurers, shall be allowed to print the policy document on a plain A4 size paper, as proof of a valid policy for such products, and provide the policy document to the policyholder.
9.    The insurer is encouraged to hold the policy documents i.e. e-policy in the Demat form with any of the licensed Insurance Repositories.
10.Every insurer at the time of filing of the product shall also file the “Policy Service Manual” for policy distributed through CSCs approved by the Board/Board delegated risk committee of the insurer and include:
          i.             Detailing the process to be followed for each of the service to be provided by the CSC,
         ii.             the corresponding process followed by the insurer to complete the policy servicing,
        iii.             the turnaround times for each type of service,
        iv.             Service charge for each type of the service.
         v.             The policy servicing details may include:
a)    Process for printing of the policy
b)    Process for printing of endorsement
c)    Process for collection of premiums and remittance to insurers
d)    Process for change of address
e)    Process for Assignment/ Nomination/ Change of Nomination
f)     Process for assisting in revival
g)    Process for Partial Withdrawals
h)   Process for SB Claims
i)     Process for Death Claims
j)     Process for Maturity Claims
k)    Processes for other Service operations as may be specific for the products.
11.Any amendments to the Policy Service Manual duly approved by the Board/Board delegated risk committee of the insurer shall be filed with the Authority.
12.The insurers shall offer any of the following products under the CSC distribution:
                       i.        Non-Participating Non-Linked Variable Insurance Products with regular premium payment;
                     ii.        Pure Term Insurance Products with regular premium payment;
13.The products referred in the paragraph 12 of this circular shall have the features as prescribed in the Annexure-I.
14.The CEO and the AA shall certify that the product filed is compliant with the above requirements along with the File and Use Application form.
15.The guidelines are issued to study the entire business sourced through the CSC distribution on a pilot basis for a period of at least one year. In this regard, the insurers shall submit on a half yearly basis the returns as prescribed in the Annexure-II. The Authority shall review the business sourced through the CSC distribution on a regular basis and review the guidelines, if required.
                                                                                                        
Member (Life)
Encl: Annexure I, II
Annexure: I
 
I.              Standard Non-Par Non-Linked Variable Insurance Product for CSC Distribution
 
Eligibility and other Conditions:
Minimum / Maximum Age at Entry:
Company specific
Minimum / Maximum Maturity Age:
Company specific
Minimum policy Term
5 years or above
Minimum Premium paying term:
5 years or above
Maximum policy Term
15 years
Minimum Premium:
Company may choose any amount between Rs.1500 p.a. and Rs.3000 p.a. (Both inclusive)
Maximum Premium:
Rs. 20,000 p.a.
Premium Payment Frequency:
Annual and Monthly modes. Other modes may also be offered 
Sum Assured:
Premium/Age
For entry age below 45 years
For entry age of 45 years & above
Regular Premium
10 times Annualized Premium
7 times Annualized Premium
Top-up Premium (age at the time of payment of top-up):
125% of Top-up Premium
110% of Top-up Premium
Grace period
30 days for all modes
Policy Loan
Not available
Revival period
2 years
Lock-in-period
5 years
Commission
Shall not be more than 5% of the premiums paid in the first year
Service charges to CSC-VLEs
A fixed amount for every activity that would be undertaken by the CSC-VLEs.
 
The product shall offer the following benefits, charges and other features:
1.    Guaranteed Death Benefit (GDB): On death of the life assured provided the policy is in force, the highest of the following shall be paid to the nominee/s:
              i.        Sum Assured or
            ii.        105% of total premiums paid including top-up premiums paid till the date of death or
           iii.        Total premiums including top-up premiums paid till the date of death compounded at 1% p.a. or
           iv.        Balance in the IPA
  1. Guaranteed Maturity Benefit (GMB): On maturity, highest of the following shall be paid, provided the policy is in force on maturity:
             i.         Total premiums paid including top-up premiums paid compounded at 1% p.a. till the date of Maturity or
            ii.         Balance in the IPA
  1. Guaranteed Interest Rates: The following interest shall be credited to the Individual Policy Account (IPA) till Maturity or death or surrender whichever is earlier. The insurers shall state specific MFR and AIR at the outset in the file and use application with respect to (i) and (ii) below:
                      i.        Minimum Floor Rate (MFR): Minimum of 1% p.a. of the balance in the IPA credited at the beginning of each quarter to the IPA till maturity or death or surrender whichever is earlier.
                    ii.        Additional Interest Rate (AIR): In addition to the MFR above:
a.    Minimum of 4% p.a. of the balance in the IPA credited to the IPA at the beginning of each quarter for the first 5 years and
b.    Subsequently, minimum of 0.5% p.a. of the balance in the IPA credited to the IPA at the beginning of each quarter for the remaining years.
                   iii.        Residual Addition (RA): In addition to the MFR and AIR above, RA shall be credited from end of 5th policy year and onwards to meet RIY requirement. This Interest will not be applicable for policies which are discontinued within the lock in period of 5 years and are subsequently not revived.
4.    Top-up premiums: Top-up premiums shall be allowed with the following conditions:
                      i.        Only during the policy term.
                    ii.        Provided all the due regular premiums are paid up to date.
                   iii.        Provided the total top-up premiums paid shall not exceed the sum total of the regular premiums at that point of time.
5.    Partial Withdrawal Benefit: Partial withdrawal shall be allowed subject to following conditions:
                      i.        Partial withdrawals are allowed only after completion of 5 policy years.
                    ii.        The partial withdrawal benefit shall be available for a minimum amount not less than Rs. 1,000 and up to a maximum amount equal to 25% of the Individual Policy Account in any policy year, subject to Individual Policy Account after each such withdrawal not being less than 1.5 times the one full years’ annualized regular premium.
                   iii.        Partial Withdrawal shall be allowed only if the policy is in-force and provided the policyholder/life assured in not a minor.
6.    Discontinuance of premium:
 
                      i.        “Discontinuance” means the state of a policy that could arise on account of surrender of the policy or non-payment of the contractual premium due before the expiry of the grace period.
                    ii.        Provided thatno policy shall be treated as discontinued on non-payment of the said premium if, within the grace period, the premium has not been paid due to the death of the insured or upon the happening of any other contingency covered under the policy.
7.    Discontinuance of the premium during the lock-in-period:
                      i.        The life cover shall be lapsed immediately on expiry of the grace period.
                    ii.        The Individual Policy Account shall be continued without any life cover till the end of the lock-in-period or the end of the revival period whichever is later.
                   iii.        During the lock-in-period or revival period, if the policy is not revived, the policy shall be terminated at the end of the lock-in-period or revival period whichever is later by paying the balance in the Individual Policy Account.
                   iv.        In case of death during the lock-in-period, the balance in the Individual Policy Account shall be paid.
                    v.        On revival of the discontinued policies the risk cover shall be restored upon receipt of all due and unpaid premiums without levying any interest or fee or charge as on date of revival.
8.    Discontinuance of the premium after the lock-in-period:
 
                      i.        The Individual Policy Account shall be continued with life cover till the end of the of the revival period.
                    ii.        If the policy is revived, the policy shall continue with life cover upon receipt of all due and unpaid premiums without levying any interest or fee or charge as on date of revival.
                   iii.        If the policy is not revived during the revival period:
a.    The policy shall be converted into paid-up policy immediately on expiry of the revival period.
b.     The paid-up sum assured on death shall be equal to sum assured multiplied by the total number of premiums paid to the original number of premiums payable as per the terms and conditions of the policy. 
                   iv.        On death, higher of the paid-up sum assured or the balance in the Individual Policy Account shall be paid.
                    v.        On surrender or maturity, the balance in the Individual Policy Account shall be paid.
9.    Reduction in Yield- Difference between Gross Yield and Net Yield: 
                    i.        Subject to para (ii) below, the maximum reduction in yield for policies from the fifth policy anniversary shall be in accordance with the Table 9.
Table: 9.
Number of years elapsed since inception
Maximum Reduction in Yield (Difference between Gross and Net Yield (% p.a.))
5
4.50%
6
4.00%
7
3.75%
8
3.50%
9
3.25%
10
3.15%
11 and 12
2.75%
13 and 14
2.50%
15 and thereafter
2.25%
 
                  ii.        The net reduction in yield at maturity for policies with term:
a.    Less than or equal to 10 years shall not be more than 3.00% and
b.    Above 10 years shall not be more than 2.25%.
 
 
10.Benefit illustrations and policy schedule: The policy schedule shall contain the following details of the Individual policy account value at each duration for the first five years and the insurer is not required to provide any additional benefit illustrations to the policyholders:
 
Details of IPA for the first five years:
In the table below, “A “shall represent the actual values and “0” shall be zero from 2nd year onwards.
 
Policy Year
1
2
3
4
5
Premiums payable
A
A
A
A
A
Opening balance in the IPA
A
A
A
A
A
Initial premium allocation charge
A
0
0
0
0
Mortality charge
A
A
A
A
A
Interest credited (MFR)
A
A
A
A
A
Additional interest credited (AIR)
A
A
A
A
A
Death benefit
A
A
A
A
A
Balance in IPA
A
A
A
A
A
 
11.Charges:
              i.        Initial Premium Allocation Charge: There shall be an Initial Premium Allocation Charge of maximum 20% of First Year Premium. It shall be zero from Year 2 onwards. It is a charge that is appropriated from the premium before crediting the premium to the IPA.
            ii.        Mortality Charges: The charges for the Sum at Risk shall be deducted at the beginning of each policy month from the Individual Policy Account. The charges for Sum at Risk shall vary by attained age, gender of the life assured and shall not exceed 125% of the Indian Assured Lives Mortality (2006-08) Ult. The mortality charges shall be guaranteed throughout the contract period of the policy.
           iii.        Discontinuance / Surrender Charges: Nil.
 
 
 
12.Multiple Policies: The insurer may issue multiple policies on a single life, provided all the policies issued on the said life under the CSC distribution, prior to the date of application of the fresh proposal for insurance, are in force. No fresh policy shall be issued under the CSC distribution, if any of the previous policy issued under this distribution is in the lapsed condition.
 
 
 
 
 
 
II.            Standard Pure Term Insurance Product for CSC Distribution
Product Features
The following benefits and features shall be offered:
Minimum / Maximum Age at Entry:
Company specific
Minimum / Maximum Maturity Age:
Company specific
Minimum policy Term
5 years or above
Minimum Premium paying term:
5 years or above
Maximum policy Term
15 years
Minimum Premium:
Based on the minimum sum assured, age and term
Maximum Premium:
Based on the minimum sum assured, age and term
Premium Payment Frequency:
Annual and Monthly modes. Other modes may also be offered 
Sum Assured:
Minimum
Maximum
Between Rs15000/- and Rs. 30000/-(both Inclusive)
R.200,000/-
Grace period
30 days for all modes
Revival period
2 years
Death benefits
Higher of {Sum assured, 10 times of the annualized premium, 105% of the total premiums paid as on the date of death}
Other benefits
NIL
If premiums not paid within the grace period
Policy will lapse without acquiring the surrender value
Surrender Value
NIL
Loan facility
Not available
Commission
Shall not be more than 5% of the premiums paid in the first year
Service charges to CSC-VLEs
A fixed amount for every activity that would be undertaken by the CSC-VLEs.
Benefit illustration
Not required, as the benefits are guaranteed throughout the term
Multiple Policies
The insurer may issue multiple policies on a single life, provided all the policies issued on the said life under the CSC distribution, prior to the date of application of the fresh proposal for insurance, are in force. No fresh policy shall be issued under the CSC distribution, if any of the previous policy issued under this distribution is in the lapsed condition.
 

Annexure: II
 
Due date of the return: 15th November and 15th May every year.
 
Details on the business sourced through the CSC distribution:
 
During the half-yearly period/ Cumulative details during the Year *:
 
Name of the product:
 
Details of the business
 State 1
 State 2**
Total no of policies issued
 
 
Total premium collected
 
 
Total commission paid
 
 
Total service charges paid
 
 
Total no of policies discontinued after the grace period
 
 
Total no of policies revived during the period
Total no of policies surrendered
Total no of claims incurred
 
 
Total no of claims settled
 
 
Total no of claims outstanding
 
 
 
Total no of claims rejected
 
 
 
Total in force at the end of the period
Total charges levied (for VIP)
Total interest credited (for VIP)
Totals amount in the IPAs at the beginning of the year
Total amount in the IPAs at the end of the year
 
 
 
 
*The details shall be given for the half year and for the year also separately.
** The details shall be given for each State separately.
 
 
Signature of the AA
 
 
Signature of the CEO
 
 
Date:
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