The annuity products of the Life Insurance Corporation of India (LIC) -- Jeevan Dhara, Jeevan Suraksha and Jeevan Aksha -- will be reintroduced on February 1, 2002, at a reduced interest rate varying between 200 and 250 basis points.
LIC will also offer term assurance rider to those taking the revised Jeevan Dhara product, wherein the policyholder would get life cover through term assurance during the deferment payment period.
The slash in the assured rate of returns on LIC's annuity products factors in further reduction in interest rates when the cash reserve ratio (CRR) falls to three per cent.
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"With more funds made available in the banking sector, it will be difficult for us to get a high rate of return. Hence, we have decided to take care of this in the revision of our annuity products," said LIC senior management officials.
It is important for LIC to reintroduce the annuity products, which have been off the shelve since December 24.
This is because it experiences maximum sales during the last three months of the fiscal when policyholders choose to buy insurance products for tax benefits.
Prior to discontinuation, Jeevan Dhara offered an assured rate of interest varying between 10.7 per cent and 11.3 per cent in accordance to the period of deferment.
This is the period prior to which the actual pension payments commence for the policyholder. LIC does not wish to approach the Insurance Regulatory and Development Authority (IRDA) every time interest rates take a hit.
"We expect interest rates to fall further and have revised our assured return products accordingly," said officials.
The pension products of LIC were discontinued on December 24 when the state-owned life insurer found it difficult to meet the high rate of assured returns, given the sharp fall in the rate of returns on government papers.
The revised annuity products have been approved by the IRDA, said LIC chairman G N Bajpai. There was a delay in obtaining the IRDA approval on the revised annuity products.
It may be recalled that LIC was forced to revise its assured rate of returns twice last year on its single premium product -- Bima Nivesh -- following the dip in government security yields.
The next on the hit list of LIC's assured insurance products is Jeevan Shree on January 31, 2002. Currently, the product offers an assured return of Rs 75 per Rs 1,000 sum assured.