In a bid to prevent misuse of riders by life insurers, sector regulator IRDA has made it mandatory for them to get its prior approval for offering new add-on features to policy holders for determining premium.
“Unless the rider is cleared by the Authority, it should not be attached to any of the base products,” Insurance Regulatory and Development Authority said in a circular issued to life insurance companies. The decision comes into operation with immediate effect.  However, it would not affect existing policies and riders. Riders are add-ons to the basic policy to supplement the insurance cover provided. It includes benefits on death in accident, partial or total disability and critical illness. Insurers charge high premium for such riders stating they would provide additional insurance cover to policy holders.
Industry observers said some companies were charging high premium from policy holders for offering additional insurance cover through riders. Since IRDA has so far not deregulated the price on life insurance products, some companies charge differential rates through these riders, they said.
Apart from state-owned LIC, there are more than 10 private companies in the life insurance business, including ICICI Prudential, Aviva, Tata AIG, Bajaj Alliance and HDFC.