Insurance · Group Credit Life Insurance Guidelines
When evaluating the technical specifications of a Group Credit Life Insurance product typically offered through bank partners to cover home loan borrowers, which of the following provisions regarding the 'Morbidity and Mortality experience' adjustments and the 'Profit Sharing' mechanism is most accurate according to the prevailing IRDAI guidelines for products where the master policyholder is a Scheduled Commercial Bank?
- 1The insurer is prohibited from offering any profit sharing or experience rating to the Master Policyholder, and all surplus generated must be compulsorily transferred to the Policyholders Protection Fund.
- 2The insurer can incorporate an experience rating provision where the total refund or profit sharing to the Bank can never exceed ten percent of the total premium collected under the master policy.
- 3Profit sharing or experience accounts are permitted provided that the terms are clearly defined in the Master Policy, and any amount paid back to the Master Policyholder must be used for the benefit of the individual members or for administrative expenses related to the scheme.✓
- 4The Bank as a Master Policyholder is entitled to a fixed commission of twenty percent plus a variable profit share of fifty percent of the technical surplus because the Bank performs underwriting functions.
Correct answer
Profit sharing or experience accounts are permitted provided that the terms are clearly defined in the Master Policy, and any amount paid back to the Master Policyholder must be used for the benefit of the individual members or for administrative expenses related to the scheme.
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