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Central Office, 'Yoga,kshema', Jeevan Bima Marg,P.B. 19953, Mumbai 400021. Phone: EPABX: 022-66598000.. E-mail: soaduarial@licindia.com

Ref: Actuarial/PS

7th May 2010

To,

All Region

LIe 0 dia,

alOffice.

a nag e rs (Actu ar~ I) I

Sir/Madam,

Re .: Revision of surrender factors under Jeevan Akshay plans/annuities in payment

This is further to our earlier letter Ref: ActljPS 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 calculatlnq 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 app.licable for calculating surrender value for policies under the following plans having the option "Annuity for life with .return of purchase price on death" :

L New Jeevan Akshay rePlan 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.

We request you to ensure the following before payment of the surrender value:

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.

1

5) The annuity cheques already issued and faHing 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 launderingguidel.ines 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 pol.icy so that no further annuity payments are made under the policy.

8) All other instructions regarding surrender of policles should be adhered to.

The surrender value shall be calculated as ------

(Fl x Annuity per annum + F2 x Amount payable on death) x F3

OR

95% of the amount payable on death, whichever is lower

Where,

Fi - 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 Fi, F2 and F3 are given in Annexure I. We are also enclosinq .Annexure II illustrating the surrender value calculation.

We are separately advising' SOC regarding revision in surrender value factors.

We request you to inform the offices under your jurisdiction not to refer to us in future, any cases for surrender of policies under these plans. You may please write to us in case you need further darifications.

Yours faithfully,

J \Q._...v-- ,__

~ef(Actuarial)

Copy to : ~xecutive Oirector{CRM), c.o - For information.

The Executive Oirector(IT/SOC), e.O - For necessary action.

2

Annexure II

Illustrative Examples ---Surrender of policies under Jeevan Akshay plans (Annuity type "Life annuity with return of purchase price on death of the annultant")

. Please ensure before calculations-

• The annuity payments are up to date

• The post dated cheques after the date of surrender are collected back for cancellation

The Surrender Value calculated shall be the lower of the two methods as given below-

1) {F(l)* Annuity per annum + F(2)* Amount payable on death} * F(3) OR

2) 95% of the amount payable on death, whichever is lower.

Where,

F (1) = ann ui ty factor for age last birthday as on the date of surrender for the mode of annuity payment

F (2) = Risk factor for age last birthday at surrender.

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.

We are enclosing herewith iUustrativeexamples to explain the method of calculation: ~

1)

Plan 189 (Jeevan Akshay VI)
Mode Monthly
Basic Annuity Rs.863/- per month.
Purchase Price Rs.l ,50,000/~
,DOC/ Date of Vestin::&_ 15.02.2008
Date of Birth 10.12.1963
Age at Vestin_g_ (lbd) 44y_ears
Date of surrender 25.10.2009
Ag_e as on surrender (lbd) 45 years
L_Tl~e arumi!y has been _Qaid up to 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.I ,36,293/~ (lower of the two methods)

2)

Plan 183 (J eevan Akshay V)
Mode Yearly
Basic ArulUity Rs.228601- per year
Purchase Price Rs..3,OO,OOO/-
DOC I Date of Vesting 10.03.2008
Date of Birth 08.11.1929
Age at Vesting (Ibd) 78 years
Date of surrender 10.12.2009
Ag_e as on surrender (lbd) 80 years
The annuity has been paid up to 28.02.2009 Surrender Value = {22860*5.0655 + 300000*0.5461}* 1.05574 = 295214

OR

Surrender Value = 95% of Purchase Price = 95% of300000 = 285000

Therefore, SV payable = Rs.2,85,0001- (lower of the two methods)

3)

Plan 189 (Jeevan Akshay VI)
Mode Quarterly
Basic Annuity Rs..266811- per quarter
Purchase Price Rs.l5,00,0001-
DOC I Date of Vesting 28.06.2009
Date of Birth 02.10.1965
Age at Vesting (lbd) 43 years
Date of surrender 15.06.2010
Age as on surrender (lbd) 44 years
The annuity has been paid up to 30.04.2010 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. 1 3,99,989/- (lower of the two methods)

4)

Plan • 169 (Jeevan Nidhi) converted to T 189
on vesting
Mode Half_yearly
Basic Annuity Rs.2181/- per half year
NCO at vesting Rs.62,5001-
Purchase Price at Vesting · Rs,62,5001-
DOC 28.11.2004
Date of Vesting · 28.11.2009
Date of Birth 11.03.1944
Age at Vesting (lbd) 65 years
Date of surrender 10.08.2010
Age as on surrender (lbd) 66 years
The annuity has been paid up to 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)

-----

~ \JZJ.J·-- '-- ~

~ief (Actuarial)

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