Use our Portfolio Manager
 to generate:

    - Insurance Chart
    - Cash Flow Chart
    - Premium Calendar

  Insurance Counsellor
  Calculators
   Log in

   Need for Insurance
  Insurance & Tax
  Retirement Planning
  Insurance as Investment

Home / Important Guide / Servicing of NRI Policies

Servicing of NRI Policies

Life insurance policies are regarded as securities in terms of Section 9 (5) of Foreign Exchange Regulation Act,1973 . Export of a life insurance policy, therefore, requires special permission of the Reserve Bank of India. A policyholder cannot take the policy document out of the country without the permission of the Reserve Bank. 

An export of a policy without permission is a violation of Exchange Regulations. An application for issue of export license is to be made to Reserve Bank giving full particulars of the policy, person to whom the policy is to be sent and reasons therefore.

Export of Policies

Export of policies by LIC has been permitted in the following cases without specific license from the Reserve Bank of India.

• Export of life insurance policies to foreign residents outside India provided the policyholders are permanent residents of the countries to which the policies are exported except where the policyholders have taken permanent residence outside India subsequent to the issue of the policies
  
  
• Re-export of the policies received for endorsement to the foreign countries from where they were sent
  
  
• Export of policies on Indian Register for execution of Nomination or Assignment

Foreign Currency Policies held by residents

Persons resident in India holding foreign currency policies are required to declare them to the Reserve bank of India and obtain licenses for holding them except when they are covered under general exemption. Application for obtaining the license has to be made to the Central Office of Reserve Bank ( Non-residents Foreign Accounts Division). 

While granting holding licenses, Reserve Bank stipulates that the maturity proceeds or any claim amounts due on the policies should be repatriated to India through an authorised dealer.

In terms of Reserve Bank Notification No FERA.118/ 92-RB dated 7th September, 1992, persons who have returned to India after being a non-resident for a minimum continuous stay of one year abroad have been granted exemption from the requirement of obtaining permission of Reserve Bank for holding any life insurance policies taken out of foreign exchange lawfully acquired by them while they were resident outside India.

They are also free to retain the maturity proceeds or any claim amounts received on such policies in their foreign currency accounts in India (RFC accounts) or abroad.

Transfer of Policy Records outside India

Records of rupee life insurance policies cannot be transferred by LIC from an office in India to an office outside India without prior approval of the Reserve Bank as the transfer of records normally involves transfer of the actuarial reserves held against the policies from India and such transfer is treated as a remittance of capital from India. 

Such transfers are authorised only if transfer of actuarial reserves is not involved or Reserve Bank will be prepared to permit a capital transfer on the basis of the eligibility of the concerned policyholders for such remittances from India.

Transfer of Policy Records to India

In such cases, LIC can freely transfer policy records of life insurance policies issued by their offices abroad:

• Transfer from a foreign register, of records relating to foreign currency as well as rupee policies issued by LIC’s overseas offices to non-resident Indian nationals and persons of Indian origin on the policyholders returning to India for permanent residence, provided the policies have been converted into rupee policies in the case of foreign currency policies and actuarial reserves, if held abroad, have also been transferred to India
  
  
• Transfer from a foreign register to Indian register, of records relating to foreign currency as well as rupee policies issued to Indian nationals or persons of Indian origin resident abroad provided
  • all the premiums have been paid in foreign currency abroad and
  • actuarial reserves, if held abroad, have been repatriated to India

Cases which are not covered by these two provisions need prior approval of Reserve Bank.

Transfer of Policy Records from one foreign country to another

Transfer of records relating to foreign currency as well as rupee policies along with actuarial reserves from a register in one country to a register in another country can be made freely. If however actuarial reserves are to be transferred from India, prior approval of the Reserve Bank is required.

Assignment of Rupee Policies in favour of Non-residents

Prior approval of the Reserve Bank of India is required for assignment of Rupee Policies held on Indian Register by a resident of India in favour of any person resident outside India or by a non-resident in favour of another non-resident in a different country except where the assignment is without consideration in favour of the policyholder’s non-resident wife or other dependent relatives.

Rupee Policies may be freely assigned by non-residents in favour of banks or LIC in India for obtaining loans provided the loan amount is paid in Rupees in India to the policyholder or his close relatives or by credit to the policyholder’s Ordinary Non-resident Account with an authorised dealer in India not being a Non-resident External Account or Foreign currency Non-resident (FCNR) Account.

Settlement of Claims

The basic rule for the settlement of claim, surrender value of Rupee Policies held on Indian Register in favour of claimants resident outside India is that the payment of claim or surrender value in foreign currency will be remitted only if

• Claimants are permanently resident outside India
  
  
• All premiums on the policies have been paid in foreign currency or by remittance from abroad through normal banking channels in an approved manner

Where only some premiums have been paid by remittance from foreign currency to India, settlement in foreign currency is allowed by the Reserve Bank of India in proportion which the amount of premiums paid by remittance from abroad bears to the total premiums paid. The settlement of claim outside India is subject to the approval of the Reserve Bank of India.

Claims in favour of Non-resident Indians

Payment of claim amount, surrender value in respect of Rupee Policies issued to Indian Nationals or persons of Indian origin resident outside India can be made freely in India

• to the policyholders themselves during their temporary visit to India
  
  
• to the policyholder’s close relatives in India
  
  
• by crediting the amount to the policyholder’s account with authorised dealer in India whether the account is designated as resident or non-resident

However, to credit the amount to the Non-resident External Account, the permission of the Reserve Bank of India is necessary. Similarly, payments of maturity amount, surrender value, death claims in respect of Rupee Policies issued to Non-resident policyholders other than Indian Nationals or persons of Indian origin can be freely made in India in any of the manners indicated above.

Payment of Loan, Annuity Installments

The rules governing the settlement of maturity, surrender value, death claims to different categories of policyholders also apply to payment of policy loans, annuity installments, etc.

Maintenance of Records

LIC is required to maintain proper records of foreign currency and rupee currency policies issued to non-residents and foreign nationals not permanently resident in India to facilitate quick disposal in any matter connected with the policies requiring reference to Reserve Bank. 

Nationality, country of permanent residence, currency and exact manner of payment of premiums over the years (whether made by direct remittance from outside India in any convertible currency or by debit to policyholder’s Non-resident (external) rupee account or FCNR account or ordinary non-resident rupee account etc as evidenced by bank certificates), details of loans granted, loan recoveries and the manner in which loans/loan recoveries were paid/received etc. need to be recorded.

Commission to Overseas agents

LIC is allowed to pay commission to their agents who are permanently residing outside India out of their foreign currency accounts in respective countries, regardless of the fact that part of the business booked by them may be on the lives resident in India and relative premiums have been paid in rupees in India.

Remittance of commission from India to such agents abroad requires the approval of the Reserve Bank of India for which application has to be made through an authorised dealer.

If the agent is temporarily resident abroad, payment of commission can be made only in rupees locally to him or his close relatives in India or by credit to his bank account in India. Commission can also be settled locally in rupees in cases where the agents are Indian nationals or persons of Indian origin permanently resident abroad or they wish to have their commission dues settled in rupees in India.

| Back | Top | Home |