SECP issues directive on life insurance, family takaful
insurance and family takaful sector on product illustrations through a Statutory Regulatory Order (SRO).
Life insurance and family takaful products are long-term financial protection and savings vehicle for the individual policyholders, a statement issued by the SECP said here on Wednesday.
These products are long-term in nature, typically ranging over 10 to 20 years. Life insurers use product illustration to describe the life insurance policy benefits for each future policy year.
Hence, the product illustration is an integral part of the overall sales process for life insurance and family takaful policies.
The existing Guidelines of 2009 brought about significant improvement in terms of standardization of formats and calculation methodologies.
However, certain subsequent developments in the life insurance market have made it necessary to upgrade the existing Guidelines into a directive, among most important, such as bringing enforceability to the requirements to be placed on insurers and compulsory use of Urdu in addition to English in order to enhance policyholders' understanding.
Additionally, the proposed directive will be a landmark step towards using real, i.e inflation adjusted rate of returns in projection of savings products.
The new directive have also brought the investment performance document into the regulatory ambit.
The SECP believes that the new directive will enhance policyholders' understanding about insurance products and appropriately deciding the amount of regular premiums required in relation to identified financial protection needs.
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