How would you react if your bank kept half your money when you withdrew a fixed deposit before the maturity date? There would be huge depositor angst and the regulator, the Reserve Bank of India, would step in to stop this money gouging. However, in another part of the financial sector, the insurance regulator has just signed off on rules that allow life insurance companies to continue to gouge investor money for an early exit. In a gazette notification on March 22, the Insurance Regulatory and Development Authority of India (IRDAI) released an updated list of product regulations that continue with the old structure of surrender values. In December 2023, IRDAI proposed a re-haul of the surrender value regulations in an effort to make the product a bit more investor-friendly. In a shocking move, IRDAI has abandoned this draft and seems to have given in to lobbyists from the insurance industry to continue with the high-cost-to-investor route. For a government that is focused on the average citizen, this is a very regressive step — to allow a regulated product to loot trusting investors just because they want to exit a policy earlier than they signed up for.
