← Policy & Regulation: Financial & market regulation (all topics)
Surrender value (SSV) norms for life policies
What it is
IRDAI's master circular of Jun 2024, effective 1 Oct 2024, raising the Special Surrender Value payable to policyholders exiting early. Products had to be refiled and relaunched under the new rules by 31 Dec 2024
The change forces insurers to return more of the premium paid on early exit, transferring value from the insurer's margin to the departing customer
Impact on industries
- A genuine consumer-protection gain - early exit was previously penalised heavily, and mis-sold policies left customers with a fraction of premiums paid
- Direct margin cost: insurers guided to roughly 100-200bps of VNB margin impact, concentrated in non-par savings where the surrender economics were richest
- Forced a rewrite of distribution economics - upfront commission gave way to trail and clawback, since persistency now determines profitability
- FY26 was the first full year under the norms and the sector absorbed them, with product mix shifts, rider attachment and cost control restoring margins at several insurers