CRM Department, Central Office. 5th Floor (Link), “Yogakshema”, Jeevan Bima Marg, P.O.Box No.19953, Mumbai – 400 021. Tel : 66598353, Fax : 22825829 E-mail
[email protected] -------------------------------------------------------------------------------------------Ref: CO/CRM/901/23 May 2, 2013 To, All Zonal Managers, All Regional Managers (CRM) All Sr/Divisional Managers, M.D.C., Audit & Inspection Re: Revised guidelines for surrender of Immediate and Deferred annuity policiesOn and After vesting
gu
ru .in
This has further reference to our circular dt. 1/12/2012 Ref: CO/CRM/881/23 , regarding withdrawal of Surrender Value facility under LIC’s Jeevan Akshay Plan-189 (modified) and deferred annuity Plans vested w.e.f. 16/05/2012. We have received representations to reconsider the decision of withdrawing surrender value facility under annuity policies (after vesting) on merit of the cases.
A) Immediate Annuity plans:-
su
re
Taking into account the representations received and new IRDA guidelines issued in respect of pension products; it has been decided in respect of surrender of Immediate and deferred annuity policies as follows:-
w
w
w .in
1. Surrender of policies will be allowed under all Immediate Annuity plans except under LIC’s Jeevan Akshay – VI (Table 189- modified) issued w.e.f. 16/05/2012 and onwards. 2. The surrender value will be allowed under plan nos- 97, 115, 144, 146, 163, 170, 176,183,189-(issued upto 15/5/2012 only) where life assured has exercised annuity option “Annuity for life with return of purchase price on death”. 3. As per provisions of circular dt. 22/5/2003 Ref: CO/ACTL/1876/4, the surrender value under plans 97,115 and 144 will be 100% of the purchase price/ cash option. For policies issued under plan 97, wherein 30% of the purchase price has been paid to annuitant at the end of 7 years from date of commencement, surrender value will be 100% of purchase price less the amount already paid. On receipt of application for surrender of policies under these plans, Branch will send the surrender request after obtaining surrender requirements from policyholder to respective IPP cell for taking surrender action in annuity master. 4. Under other immediate annuity plans like 146,163,170,176,183,189(issued upto 15/5/2012); the surrender value will be calculated as per provisions and surrender value factors given in the letter dt. 7/5/2010 Ref: Actl/ PS issued by Actuarial Dept to Regional Managers ( Actl). The surrender under above plans will be allowed only “on merit” of the case and for genuine reasons only. Copy of the letter issued by Co/Actl to RM-Actl is attached for information. 5. It is to be noted that surrender will be allowed only where the policyholder had opted for annuity option “ F”. please note that surrender will not be allowed if annuity option opted is other than ‘ F”.
1
6. Surrender under plan 161- Varishtha Pension Bima Yojana ( VPBY) will be allowed for treatment of self or spouse as per circular no CO/Act/1877. The amount of surrender value will be 98% of the purchase price as per letter dt.23/11/2004 Ref: Actl/ PS. B) Deferred Annuity/ Pension plans – on and after vesting :-
w
w
w .in
su
re
gu
ru .in
1. Surrender of policies will be allowed in case of Deferred annuity/ pension plans (both linked and non-linked) which have been converted to immediate annuity after vesting with annuity option- F “ Annuity for life with return of NCO/ purchase price on death”. Surrender of the policies will be allowed irrespective of date of vesting. These are the policies where life assured has exercised annuity / pension option and Annuity master has been created at IPP cell. 2. As per provisions of circular dt. 22/5/2003 Ref: CO/ACTL/1876/4, the surrender value under plans 96,116,145 will be 100% of the GIVE amount/ cash option. On receipt of application for surrender of policies under these plans, Branch will send the surrender request after obtaining surrender requirements from policyholder to respective IPP cell for taking surrender action in annuity master. 3. Under other Deferred annuity/ pension plans no-122, 147,148,169,172,181,191 which have been vested and converted into immediate annuity; surrender value will be calculated as per provisions and surrender value factors given in the letter dt. 7/5/2010 ref: Actl/ PS issued by Actuarial Dept to Regional Managers( Actl). The surrender under above plans will be allowed only on merit of the case and for genuine reasons only. 4. It is to be noted that surrender will not be allowed if the policyholder has opted for any annuity option other than “ F”. 5. Under deferred annuity/ pension plans mentioned under item 3 above and under plan 145 where annuity has vested but life assured has not exercised any annuity option and submitted surrender request on and after date of vesting, then surrender of such policies will be allowed. In such cases, it may be presumed that the policyholder has opted for option F:-“ Annuity for life with return of NCO/ purchase price on death” with quarterly mode of annuity payment. The surrender value will be calculated as per provisions and surrender value factors given in the letter dt. 7/5/2010 ref: Actl/PS issued by Actuarial Dept to Regional Managers (Actuarial). The policyholder must be intimated in writing about the amount that will be payable to him and payment will be made on receipt of the duly signed discharge form. Surrender value along with annuity which has fallen due, if any; will be payable as full and final settlement under the policy. Under above type of deferred annuity plans where annuity has vested but not ratified, if policyholder applies for surrender, then Branch should refer first the request of surrender to Divisional office Dispute Redressal Committee or Regional Manager ( CRM) as per amount of surrender value payable under the policy. If competent authority approves the surrender payment, then only Branch should ratify the annuity record with annuity option – F and Quarterly mode of payment. IPP cell will merge the annuity record and then take surrender action. 6. Needless to add that under Deferred annuity/ pension plans, if policyholder submit the surrender request before date of vesting, then same may be processed immediately and surrender value should be settled as per provisions of the respective plan. 7. Under plan 114- LIC’s Jeevan Aadhar, Plan 117- LIC’s Jeevan Sarita, Plan 136- LIC”s Jeevan Vishwas, the surrender on and after vesting of the policy will not be allowed under any circumstances.
2
8. As per IRDA’s guidelines issued in respect of pension products, surrender value under plan no 803 – LIC’s pension plus and plan no 812- LIC’s New Jeevan Nidhi will not be payable in lump sum at the hands of policyholder but surrender value will be utilized as per policy condition of surrender printed in policy document. Other conditions to be followed for surrender of Immediate and Deferred annuity/ pension policies:-
w
w .in
su
re
gu
ru .in
1. It has been decided that the competent authority for sanction of surrender value as mentioned above will be Divisional office Dispute Redressal Committee in Division and Regional Manager (CRM) in the zonal office as per financial powers. 2. Surrender of Immediate and deferred annuity policies will be allowed on merits of the case and genuineness of the reason given for surrender. 3. The policyholder should give a written request for surrender of annuity/ pension policy in the servicing Branch office. After receipt of request for surrender, quotation for surrender should be generated through IPP module and consent for surrender amount should be invariably obtained from life assured on the quotation. Then the matter should be referred along with request of life assured which should include the need / reason for surrender of the policy to CRM dept of zonal office for considering the case on merit. 4. If Divisional office Dispute Redressal Committee OR Regional Manager ( CRM) approves the surrender request , then CRM Dept of Division / zonal office should advise IPP cell for taking surrender action in annuity master under advise to Branch. 5. If policyholder is agreeable for accepting the surrender value and Zonal office has approved the surrender request then other requirements like surrender discharge form, policy document and NEFT mandate should be obtained. 6. If annuity is being settled through cheque mode of payment, then annuity cheques already issued and falling due after the date of surrender should be collected from the annuitant and to be forwarded to IPP cell along with surrender request. The cheques should be forwarded to respective IPP cell after affixing ‘cancelled’ stamp across the cheques. 7. Before making surrender payment, Branch should verify the Annuity master for confirming the surrender status of said policy number and then only make the surrender payment. 8. Annuity/ Pension policy once surrendered cannot be reinstated under any circumstances. This fact should be made clear to policyholder while giving the surrender quotation.
w
Kindly, take note of the above instructions carefully and inform all the offices under your jurisdiction accordingly.
EXECUTIVE DIRECTOR (CRM)
3
Copy of letter issued by CO/ Actuarial Dept revising surrender value factors in respect of Jeevan Akshay plans and Deferred annuity plans CO/ACT/PS DT 7/5/2010 Re : Revision of surrender factors under Jeevan Akshay plans/annuities in payment
gu
ru .in
This is further to our earlier letter Ref : Actl/PS dated 13th January 2007 allowing surrender of policies on merits under Jeevan Akshay plans (Plan Nos. 146,163,170,176 and 183) and deferred annuity plans which become converted to immediate annuities on vesting issued under the option “Annuity for life with return of purchase price on death”. We also provided the method of calculating surrender value and the factors to be used for calculating the same. It has now been decided by the competent authority to extend this provision to the plan Jeevan Akshay VI (Plan No. 189) with the option “Annuity for life with return of purchase price on death”.It has also been decided to revise the factors for calculating surrender value under all these plans. The revised factors are given in the annexure. The revised factors are applicable for calculating surrender value for policies under the following plans having the option “Annuity for life with return of purchase price on death” : 1. New Jeevan Akshay I(Plan No. 146), LIC’s Jeevan Akshay plans II to VI(Plan Nos. 163,170,176,183 & 189). 2. Plans which were issued as deferred annuities but subsequently converted to immediate annuities on vesting with the option “ROC on death” such as New Jeevan Suraksha (plan 147), New Jeevan Dhara (plan 148), Jeevan Nidhi (plan 169), Future plus(plan 172), Market plus(plans 181 & 191) etc.
re
We request you to ensure the following before payment of the surrender value :
w
w
w .in
su
1) Surrender may be allowed only under those policies where the annuitant has opted for “Annuity for life with return of purchase price on death”. 2) The policyholder should give a written request to surrender the policy. 3) Surrender is to be allowed on merits, say if the money is required by the annuitant for expenses incurred or to be incurred on his/her medical treatment or for the treatment of his/her spouse. You must be satisfied about the genuineness of the reason given for surrender. 4) In case surrender is to meet emergency medical expenses, documentary proof in support of the illness and the related expenses, are to be called for. 5) The annuity cheques already issued and falling due after the date of payment of surrender value should be collected from the annuitant and cancelled. Similarly, ECS credits after payment of surrender value should not be allowed. 6) Anti-money laundering guidelines should have been complied with by the policyholder at the time of taking the policy. 7) It should be ensured that IPP Cell of the Zonal Office have taken a note in their records regarding surrender of the policy so that no further annuity payments are made under the policy. 8) All other instructions regarding surrender of policies should be adhered to. The surrender value shall be calculated as -----(F1 x Annuity per annum + F2 x Amount payable on death) x F3 OR 95% of the amount payable on death, whichever is lower Where,
4
F1 - Annuity factor for age last birthday at the date of surrender for the mode of annuity payment F2 – Risk factor for age last birthday at the date of surrender F3 – Accumulation factor depending on the period elapsed in completed months from the date of last payment of annuity till the date of surrender. If the said period comes to less than 1 month, it should be treated as 0 month and the factor F3 in such case will have value 1. The factors F1, F2 and F3 are given in Annexure I. We are also enclosing Annexure II illustrating the surrender value calculation. Illustrative Examples ---Surrender of policies under Jeevan Akshay plans (Annuity type “Life annuity with return of purchase price on death of the annuitant”) Please ensure before calculation:• The annuity payments are up to date • The post dated cheques after the date of surrender are collected back for cancellation
ru .in
The Surrender Value calculated shall be the lower of the two methods as given below:1) {F(1)* Annuity per annum + F(2)* Amount payable on death} * F(3) OR 2) 95% of the amount payable on death, whichever is lower.
re
gu
Where, F (1) = annuity factor for age last birthday as on the date of surrender for the mode of annuity payment
su
F (2) = Risk factor for age last birthday at surrender.
w .in
F (3) = Accumulation factor from the date of last payment of ANNUITY instalment up to the date of surrender calculation (in completed months) For F (1), F (2) and F (3), please refer Annexure I.
Plan Mode Basic Annuity Purchase Price DOC / Date of Vesting Date of Birth Age at Vesting (lbd) Date of surrender Age as on surrender (lbd) The annuity has been paid up to
w
1)
w
We are enclosing herewith illustrative examples to explain the method of calculation: 189 (Jeevan Akshay VI) Monthly Rs.863/- per month. Rs.1,50,000/15.02.2008 10.12.1963 44 years 25.10.2009 45 years 30.09.2009
Surrender Value = 863*12*11.8152 + 150000*0.0929 = 136293 OR Surrender Value = 95% of Purchase Price = 95% of 150000 = 142500 Therefore, SV payable = Rs.1,36,293/- (lower of the two methods)
5
2) Plan Mode Basic Annuity Purchase Price DOC / Date of Vesting Date of Birth Age at Vesting (lbd) Date of surrender Age as on surrender (lbd) The annuity has been paid up to
183 (Jeevan Akshay V) Yearly Rs.22860/- per year Rs.3,00,000/10.03.2008 08.11.1929 78 years 10.12.2009 80 years 28.02.2009
Surrender Value = {22860*5.0655 + 300000*0.5461}* 1.05574 = 295214 OR Surrender Value = 95% of Purchase Price = 95% of 300000 = 285000 Therefore, SV payable = Rs.2,85,000/- (lower of the two methods) 3)
gu
ru .in
189 (Jeevan Akshay VI) Quarterly Rs.26681/- per quarter Rs.15,00,000/28.06.2009 02.10.1965 43 years 15.06.2010 44 years 30.04.2010
re
Plan Mode Basic Annuity Purchase Price DOC / Date of Vesting Date of Birth Age at Vesting (lbd) Date of surrender Age as on surrender (lbd) The annuity has been paid up to
4) Plan
w .in
su
Surrender Value = {26681*4*11.8135 + 1500000*0.0872}* 1.00604 = 1399989 OR Surrender Value= 95% of Purchase Price = 95% of 1500000 = 1425000 Therefore, SV payable = Rs.13,99,989/- (lower of the two methods)
w
w
Mode Basic Annuity NCO at vesting Purchase Price at Vesting DOC Date of Vesting Date of Birth Age at Vesting (lbd) Date of surrender Age as on surrender (lbd) The annuity has been paid up to
169 (Jeevan Nidhi) converted to T 189 on vesting Half yearly Rs.2181/- per half year Rs.62,500/Rs.62,500/28.11.2004 28.11.2009 11.03.1944 65 years 10.08.2010 66 years 31.05.2010
Surrender Value = {2181*2*8.6348 + 62500*0.3023}* 1.01213 = 57245 OR Surrender Value = 95% of Purchase Price = 95% of 62500 = 59375 Therefore, SV payable = Rs.57,245/- (lower of the two methods)
6
Annexure I Surrender factors under Jeevan Akshay plans/ Deferred Annuities in payment- to be used after date of vesting
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
11.6566 11.5879 11.5153 11.4385 11.3569 11.2702 11.1784 11.0815 10.9795 10.8725 10.7605 10.6434 10.5225 10.3976 10.2682 10.1338 9.9941 9.8481 9.6957 9.5366 9.3705 9.1979 9.0117 8.8131 8.6036 8.3848 8.1579 7.9246 7.6862 7.4442 7.1998 6.9543 6.7088 6.4643 6.2218 5.9822 5.7461 5.5143 5.2873 5.0655 4.8493 4.6391 4.4351 4.2375 4.0463
re
12.1149 12.0462 11.9736 11.8968 11.8152 11.7285 11.6367 11.5398 11.4379 11.3309 11.2188 11.1017 10.9808 10.8559 10.7265 10.5922 10.4524 10.3064 10.1540 9.9949 9.8288 9.6563 9.4700 9.2715 9.0620 8.8431 8.6162 8.3829 8.1446 7.9026 7.6582 7.4127 7.1671 6.9227 6.6802 6.4405 6.2045 5.9726 5.7456 5.5238 5.3077 5.0975 4.8935 4.6958 4.5046
su
12.0316 11.9629 11.8903 11.8135 11.7319 11.6452 11.5534 11.4565 11.3545 11.2475 11.1355 11.0184 10.8975 10.7726 10.6432 10.5088 10.3691 10.2231 10.0707 9.9116 9.7455 9.5729 9.3867 9.1881 8.9786 8.7598 8.5329 8.2996 8.0612 7.8192 7.5748 7.3293 7.0838 6.8393 6.5968 6.3572 6.1211 5.8893 5.6623 5.4405 5.2243 5.0141 4.8101 4.6125 4.4213
w
w
w .in
11.9066 11.8379 11.7653 11.6885 11.6069 11.5202 11.4284 11.3315 11.2295 11.1225 11.0105 10.8934 10.7725 10.6476 10.5182 10.3838 10.2441 10.0981 9.9457 9.7866 9.6205 9.4479 9.2617 9.0631 8.8536 8.6348 8.4079 8.1746 7.9362 7.6942 7.4498 7.2043 6.9588 6.7143 6.4718 6.2322 5.9961 5.7643 5.5373 5.3155 5.0993 4.8891 4.6851 4.4875 4.2963
Factor F3
Age
Duration
40
0.0677
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
0.0722 0.0769 0.0819 0.0872 0.0929 0.0989 0.1053 0.1120 0.1191 0.1265 0.1343 0.1425 0.1509 0.1596 0.1686 0.1780 0.1878 0.1980 0.2088 0.2200 0.2317 0.2440 0.2572 0.2715 0.2865 0.3023 0.3187 0.3356 0.3530 0.3706 0.3885 0.4065 0.4245 0.4425 0.4604 0.4781 0.4956 0.5128 0.5296 0.5461 0.5622 0.5778 0.5931 0.6078 0.6221
gu
40
Mode of annuity payment Yearly Half-yearly Quarterl Monthly y 11.7212 11.9712 12.0962 12.1796
Age
Factor F2
ru .in
Factor F1
(in completed months) 1 1.00604 2 1.01213 3 1.01824 4 1.02440 5 1.03059 6 1.03682 7 1.04309 8 1.04939 9 1.05574 10 1.06212 11 1.06854
7
